Data Pricing: What A Difference Fours Years Make

As I write this, we're putting the final touches on a new research report called Database Subscription Pricing Benchmarks, based on InfoCommerce Group's Subscription Price Index database. The SPI database allows us to examine how the marketplace has changed between 2000 and 2004, and that change is fascinating.

What's particularly noteworthy is the shift in attitudes in just four years. In 2000, publishers were being relentlessly pressured by a marketplace that honestly believed it could find anything it needed on the Web for free. With so many ill-fated Web start-ups, along with a lot of established publishers, indeed offering their content for free, the move toward a world of free content seemed inexorable. Needless to say, it wasn't a happy time for subscription-based publishers.

Those that continued to charge for their content were certainly in no position to seek premiums for their Web offerings, and the trend at the time was towards "parity pricing," with print and Web versions priced identically. Indeed, many publishers were having such difficulty with their sales that the idea of the bundled offering -- buy the print version, get the Web version for free -- became a marketing staple. This bundled offering neatly sums up the thinking at the time: I can't charge for my Web content, but I can give it away in order to spur sales of my print version, which is tangible and still has value.

But look at where we are now. By the end of 2004, the situation had flipped: publishers still market the bundled offering, but now it is buy the online version and get the print version for free. No difference in economics, but a huge difference in perception. Publishers have realized that the market is moving to the Web, so they are increasingly putting the emphasis on their online products. Even more importantly, people are increasingly willing to pay for Web-based information.

This change has reflected itself in pricing. Publishers are moving away from parity pricing to charging significantly more for their Web products, reflecting their inherently higher value. With solid evidence now that users both want Web products and are willing to pay for them, we're seeing more and more publishers starting to invest in their Web products, adding new features, functionality and content, which allows them to charge even more. It's a new virtuous circle: users are willing to pay more for higher quality Web products, spurring publishers to keep rolling out ever more sophisticated and powerful products. But while we stand at the threshold of a new golden age in database publishing, many would say it's been a long four years.

Aggregation or Aggravation?

The New York Times this week noted a raft of new start-ups with names like Indeed.com, SimplyHired.com and WorkZoo.com, each offering job listings aggregated from the big job boards like Monster.com, CareerBuilder.com and HotJobs.com, as well as hundreds of smaller job sites. By now, the idea of aggregating other people's content is a fairly tired one, but in this area, it actually makes sense. It also portends real trouble.

Meta-search engines were perhaps among the first aggregators, and they flourished in the early days of the Web because at the time, all the major search engines were largely solo acts, and none even began to approach comprehensiveness. In that environment, a consolidated search of multiple search engines provided real benefits. Today, however, with the major search engines all providing much better coverage, and with many of them actually licensing their indexes to each other, the results are far more homogenous. Consequently, a meta-search engine such as DogPile.com doesn't yield you much more than you would get using Google directly. And with the major search engines working tirelessly to improve relevance of search results while also rolling out new features, meta-search simply feels far less compelling.

In the area of business content, the list of quality content suppliers is limited, and most were smart enough not to enter into exclusive deals with any one aggregator. As a result, the big business content aggregators began to look very similar in terms of content offered. That left them to compete on price, an unattractive way to do business, which is why they've largely shifted their strategy to focus on value-added tools.

But aggregation does actually make business sense in the area of job boards. This remains a balkanized market with lots of players of all shapes and sizes. Given the costs involved, it's a rare company that would place a job listing on more than one of the big job boards at a time. Relatively high costs have therefore allowed specialty and regional job boards to thrive, offering the benefits of more targeted markets and lower prices. Since job listings are scattered over a large number of both well-known and obscure job sites, this is a market ripe for aggregation, especially since the recent boom in online advertising provides a source of quick and easy revenue for these aggregators. Users of these aggregation sites get both comprehensiveness and convenience.

At the moment, the major job boards are regarding these aggregators as just added distribution for their listings. But, as other information providers have learned, as these aggregators grow and develop their own brands, the brands of the job boards will very likely get diminished as job hunters increasing tell employers they saw the job listing on, say, SimplyHired rather than Monster. And if history is any guide, as these aggregators grow more successful, there will be enormous pressure for at least a few of them to try to sell job listings directly. And if they've got the traffic, what's to stop them?

So, if I ran a major job board, I'd be far less sanguine about this new crop of companies. Because over time, aggregators become a source of aggravation for information providers. They get a free ride off our content, allowing them to build front-ends to original sources of information, and siphon off traffic from our own sites, with the potential to become competitors should they choose. That's why I suggest you keep your eyes peeled for aggregation activity in your market, especially if your content is involved. These free riders can put a real dent in your business.

Mis-Fortune Cookies

A new study out from Jupiter Research suggests that as many as 39% of Internet users delete cookies from their machines at least once a month, and 58% of Internet users have deleted their cookies within the past year. This has significant consequences for online publishers, the majority of whom use cookies to generate some of the key metrics for their Web sites, including unique visitor counts, and number of returning visitors.

Cookies, for those of you not familiar with Web browser minutiae, are small computer files that Web sites can be programmed to download to the computer of everyone who visits them. These files usually contain a unique random number of some sort. The Web site can also check every visitor's computer to see if it has previously downloaded a cookie, and that's how it is determined if a visitor should be counted as unique, and if a visitor has visited previously. More sophisticated Web sites track how a visitor moves through the site by checking and recording the cookie for every Web page that is requested. In a one-to-one relationship between one user and one Web site, cookies are anonymous, harmless and useful.

Where cookies got a bad reputation is that some of the online ad networks figured out that they could plant their own cookies on user's computers, and then check for that cookie at every site in their network, allowing them to build a profile of a specific user's interests and surfing habits. The user might still be anonymous, but the ad network now has powerful information on what ads to target to that user. There's a fierce ongoing debate as to whether this is harmless, or some low-grade version of spyware, and with the growing awareness and concern over spyware, more users than ever are deleting cookies -- just to be safe.

Right on the heels of this study is a press report that Yahoo may be teaming with a company called Almond Net, an online ad network that allegedly is striking secret deals with ISP's to capture information on the Web searches performed by users, to better target advertising to them. Lycos has already inked a deal with Almond Net.

I see this as one more example of search engine hubris, because sensitivity over privacy -- even if misplaced, has killed more than a few promising Web start-ups. Yet in the mad rush to cash in on the online advertising boom, these companies risk getting caught with their hands in the cookie jar and paying a significant penalty for it in the marketplace. The lesson for all of us is that playing fast and loose with one's users, even if it's all technically aboveboard, is simply too dangerous in the current environment.

Yesterday's News

According to published reports, newspaper executives at their annual conference received what was described as "startling" news from a team of McKinsey & Company executives - - their classified advertising businesses have eroded noticeably, and are poised to drop as much as 20% more by 2007. The cause of this steep decline: Internet competitors such as Monster.com, Craigslist and RealEstate.com.

I want to empathize with these newspaper folks -- we're in different wings of the same business after all -- but for people whose business is gathering and reporting news, they always seem to be the last people to know what's going on. Of course, this may be some form of denial as well. In either case, it's worth taking a closer look at one type of classified advertising, help wanted ads, because what's driving this decline isn't unique to newspapers.

In many markets, newspapers are effectively monopolies, and their pricing tends to reflect that. I've placed more than a few newspaper help wanted ads, and if you're not careful, you can easily drop close to $1,000 for a few lines of type that would generally appear only once. It's not surprising, then, that the McKinsey study quotes a newspaper executive as saying that, "Classified advertising is more profitable than printing dollar bills."

Along comes the Internet, and suddenly the reach of newspapers can be duplicated, and even expanded upon, without the infrastructure costs. It's been open season on newspaper classifieds ever since. Just as significantly, these online competitors realized that without paper, ink and delivery vans they could charge a fraction of the price and still make boatloads of money, a development that McKinsey refers to as "price destruction."

But there is more going on with these online job sites than just lower prices, and therein lies what I consider the most important point of all: these online job sites aren't just competitive businesses; they are better businesses because they've streamlined the hiring process and integrated themselves into their customer's workflow.

Consider the improvements. With newspapers, you would often wait for the big Sunday edition to advertise. Online, you're receiving responses within minutes of posting your ad. With newspapers, your ad is forced into a category, which may or may not be where people are looking (newspaper solution: buy cross-reference ads!). Online, your ad is accessible by category and by keyword, improving discoverability. Online, you reach a national if not global audience, and your ad stays visible longer. These are all what I'd call the "built in" advantages of Web information products. But there is still another level of benefit.

The job sites allow job hunters to post detailed resumes for free, and they sell access to these vast databases so that companies could search for candidates as job hunters were searching for open positions. The job sites built workflow applications for their customers to help them screen, filter and organize incoming resumes. Credit, of course, must also be given to the job boards for turning paper resumes into a digital stream that can be more easily forwarded, stored and archived. The sites offer automated screening tools to pre-qualify candidates, and will even manually screen and select candidates for an employer. On the job hunter side there has been workflow improvement as well. Job seekers can get real-time alerts of new job postings matching their criteria, and can even forward their pre-stored resume to a prospective employer with a few mouse clicks.

In short, the business of help wanted advertising hasn't just been digitized, it's been revolutionized by these new players. And now a new breed of players, companies like, ZoomInfo, Linked-In and Ziggs are bringing still another level of innovation to this business.

And newspapers? High overheads, declining circulations, slow-moving bureaucracies, and a penchant for trying to wish away uncomfortable business changes. Given that it's 2005, what should be startling to the newspaper industry isn't that their classified businesses are in decline, it's that they have any classified business left at all.

Google: Racing Toward Irrelevance?

Google's recent decision to introduce advertising options not tied to keywords is a watershed event for the company. In one fell swoop, it is moving beyond the formula that made it unique and exciting -- relevancy coupled with pay-for-performance pricing -- and crossing over into the traditional world of cost-per-thousand advertising. What's driving this move? On quick inspection, it can be dismissed as nothing more than a quick grab for cash. But to me, it's a sign that Google is poised to lose its direction. Indeed the New York Times reports that some stock analysts are now suggesting that Google's advertising network will become more important to its business than its search engine.

This belies Google's origins. Its early success was driven by a pure focus on doing search better than anyone else, and keeping far, far away from the dot-com gold rush. You may recall that in its early years, it was a point of honor with Google that it accepted no advertising at all. When it finally introduced advertising, it was in discrete ads set off to the side of search results to avoid any chance of intrusion or confusion. Now, Google plans to enter the bazaar, offering graphics, animation and other elements that will let advertisers more aggressively clamor for your attention. In short, Google plans to become just like everyone else. Relevancy, the cornerstone of all its advertising programs, is now optional. After decrying the inefficiency of cost per thousand advertising for years, Google is now embracing it.

What's perhaps most worrisome in Google’s decision to even more intensely focus on advertising is that this may well lead to a reduced emphasis on its search engine. This is the mistake Yahoo! made a few years ago when it decided its Web index was nothing more than a "site feature," and actually started licensing its index in part from Google, and in doing so, fueling Google's growth. Users (a/k/a those valuable eyeballs Google wants to expose to advertising) go to Google because it is perceived to produce more relevant results than anyone else. If Google fails to deliver on this promise, or if people even start to believe Google is no longer delivering, its users will start to move to the next, new hot thing in search engines (and there are no shortage of them out there), and Google's distinction -- and traffic -- will decline.

If Google decides that its primary business is distributing advertising to its network of publisher sites, then it becomes nothing more than one of dozens of online advertising networks, focused on delivering the highest number of impressions with only a passing nod to relevance or quality. That's a huge departure for a company that built itself on being different and better.

There have been more than a few companies that found initial fame and fortune as search engines, then repudiated their roots in the race for even bigger dollars only to find themselves in much more competitive markets with little to distinguish them. Google is now at risk of repeating history. Search will remain a good and profitable business, but only for those search engines that remain committed to it. Those that treat search as a means to an end often arrive at a dead end.