European Union Investigating Standard & Poor's
According to media reports, European Union regulators are investigating Standard & Poor's to determine if the credit rating agency broke monopoly abuse rules by collecting fees from banks and investment funds to use S&P's identification codes.
S&P apparently requires these financial firms to pay a fee each time they use an international securities identification number to access financial information from content service providers such as Thomson Reuters and Bloomberg. S&P manages the CUSIP Service Bureau for the American Bankers Association. It serves as the only agency to receive first-hand information from all U.S. securities issuers and licenses the data to market information services.
The EU says that investors are paying to access a database they don't use and are being charged to access a code that they need to conduct their daily business activities. The EU also says that it has received complaints that S&P is ordering information providers to cut data feed access on U.S. securities to financial institutions if they didn't pay to use the codes.
S&P has responded through the media by saying that its licensing practices and charges follow industry practices and are fair. It is likely that this investigation will continue for a while as the EU more closely examines S&P's business model to determine if the company is acting improperly. It will be interesting to see how this will be resolved and if it will lead to changes in business practices for S&P and similar information providers.
More Risk, Less Reward
I noticed in a small blurb this morning that LexisNexis had spent over $2 million on acquiring an interest in a company called RocketLawyer described as a lead generation site for lawyers. There are lots of good reasons LexisNexis might make a move like this, notwithstanding its ownership of lawyers.com, which is, surprise, a lead generation site for lawyers. This did get me thinking though that lead generation offerings are becoming ubiquitous.
We're evolving, rather quickly, from a model where advertisers purchased access to our audiences. We've spent the last several years enmeshed in a pay-per-click model, where advertisers only paid if some particular action, usually a click-through, was taken against an online advertisement. Now, the ante is rapidly being raised once again, to one where publishers are delivering screened, qualified and active prospects to advertisers.
For several years now, I've been saying that the pay- per-click model was really all about a shift in risk from advertisers to publishers. Technology and a lot of innovation by the search engines helped advertiser rapidly evolve from "you pay your money and you take your chances" to "I'm not going to pay unless something happens." Publishers were put in the position of proving that their audiences were as engaged and responsive as they had always claimed them to be. Advertising risk was being shared, like it or not.
With a business model based on sales leads, I would argue that risk may be shifting totally from the advertiser to the publisher. That's because in most sales lead models, the advertiser only pays, on a per-lead basis, for qualified leads, delivered conveniently to his doorstep while still fresh and hot. What's not to like ... if you're an advertiser?
My problem with this historic shift in advertising risk from advertiser to publisher is that as far as I can see, it's largely de-coupled from reward. In the old days, advertisers did indeed assume all the advertising risk, but at least they were allowed to keep the full benefit of the results. If a $100 advertisement yielded a $1 million order, the advertiser kept the $1 million. The publisher took no risk, but received only a small benefit. There was some balance of risk and reward.
With the sales lead model, the publisher is essentially working on spec, and effectively assuming all the advertising risk because the publisher has to invest to identify sales leads for the advertiser, and is only paid for results. If a sales lead developed by the publisher yields a $1 million order however, it is the advertiser who keeps the $1 million, paying the publisher a flat fee only if and when a lead is delivered. In short, risk and reward are anything but fairly balanced.
Perhaps most significantly, it seems clear to me we're on a slippery slope with advertisers who are finding they can ask for increasingly unreasonable performance on increasingly unreasonable terms and publishers will deliver. While it may seem laughable, the next logical step in this evolution is for advertisers to decide they only want to pay when a lead turns into a sale. Even if the publisher were to share meaningfully in the sale revenue this really puts a publisher's success in the hands of strangers. Do you really want your revenue to depend on whether or not the owner's brother-in-law at one of your advertisers is a skilled salesperson or not?
I'd suggest that before the lead generation business spirals totally out of control, publishers should take a breath and think about their revenue models. It's great if you can get, say, $200 for a qualified lead. But if you can truly deliver qualified leads to your advertisers, you're worth a lot more. Further, it's not sensible or good business to get your advertisers used to a risk-free business relationship. Perhaps adding a monthly "program participation fee" on top of per-lead fees is a way to re-balance risk and reward while reminding advertisers that there is no free lunch.
Labels: lawyers.com, lexisnexis, rocketlwayer.com
Morningstar Acquires 10-K Wizard
Independent investment research provider Morningstar Inc. last week acquired 10-K Wizard, a provider of SEC EDGAR (Electronic Data Gathering, Analysis and Retrieval) filing research and alert services. The purchase price was $12.5 million (subject to working capital adjustments).
10-K Wizard offers users full-text searching capabilities for real-time and historical SEC EDGAR filings either through subscription or a custom data feed. Users can search companies by ticker symbol, company name, industry type, SIC code, financial form type or by specific industry keywords that appear within the filings. Users can also access global company profiles that include hyperlinks to annual reports and peer companies in addition to stock quotes, news and charts.
This is a very smart acquisition by Morningstar. The ability to more easily search SEC filings will be an ideal addition to Morningstar's functionality and will enable Morningstar customers to gain an even more complete look at companies they research. This deal should certainly help further position Morningstar as a one-stop shop for investment-related information.
For 10-K Wizard, the acquisition will provide more exposure to its capabilities and its relationship with Morningstar should also provide the resources it needs to further develop these tools.
Expert Connections
There's been a bit of press recently around a new start-up called Abrams Research, the eponymous creation of Dan Abrams, until recently the chief legal correspondent for NBC News. The goal of Abrams Research is to build a global database of journalists, bloggers and other media professionals who were willing and able to consult to corporations on media-related issues, but also to do such things as investigative reporting or related background research on behalf of clients.
Abrams Research immediately brought to mind another firm called the Gerson-Lehrman Group, which has been enormously successful in bringing together subject matter experts with investors. Investors tap into the Gerson Lehrman network to get quick brain dumps from top experts in virtually any field to get up to speed quickly on specific industries, or to validate a more general investment thesis.
My own personal experience with Gerson Lehrman offers some useful cautions about this type of business. Gerson Lehrman started with a very personalized approach. Clients would communicate their needs by phone or email to staffers who would search their in-house database for a qualified expert, or go recruit one if needed. A fabulous business able to charge huge fees for its bespoke services was the result.
I got enlisted into the Gerson Lehrman network only about a year ago by a breathless recruiter who said he had an investment bank that urgently wanted to pick my brain. That assignment never materialized, but the recruiter urged me to become a formal part of the network. I agreed and quickly found that Gerson Lehman had morphed from a highly personalized service into an automated "web platform." I dutifully created an elaborate profile for myself and waited to see what would happen.
I've received a number of email inquiries since then, always indicating a client with an urgent need for my expertise. I was supposed to respond to not only indicate my interest, but to sell myself to the client as to why I was the best expert on the topic at hand. That's all fine and dandy, but since these clients never wanted more than an hour of my time, there's only so much time I can justify spending on any one of these inquiries. In addition, Gerson Lehrman has sent an endless stream of emails urging me to post more and more information about myself in order to attract a greater number of projects. Instead of doing the matchmaking itself, Gerson Lehrman now apparently wants it clients to source and qualify experts directly. It finally dawned on me: Gerson Lehrman had evolved from an exclusive, personalized network of experts to a B2B version of eHarmony.com - an online dating service. From my perspective at least, Gerson Lehrman has been an unsatisfying experience, and I have to believe some of their clients must be feeling the same way.
Giving customers the ability to "self-provision" through an online web interface can be beneficial and liberating for all parties for certain types of services with certain price points. But when you build a business based on high fees, lots of service and an air of exclusivity, I'd suggest moving to a web platform that is somewhere between a buying guide and a dating service isn't the optimal strategy.
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Do Tell
Even if you are not familiar with the term "top level domains" or TLD's, you know what they are: think dot com, dot biz, dot net, dot info, and so many others it's difficult to keep track of them all.
The purpose of TLD's has traditionally been remarkably limited. They provide conveniently remembered names that help you get to websites or send email. It's much easier to tell someone to go to www.infocommercegroup.com than to go to 64.78.29.122.
But there is a whole new twist on the concept of TLD's coming in just a few weeks. That's when a new TLD called dot tel opens for business. Operated by Telnic Limited, the new dot tel domain has big ambitions: it wants to be a full-fledged universal contact directory.
I am sure I am poorly describing the underlying technology, but when you order a dot tel domain name, you essentially get both a domain name and a home page. On that home page, you can provide four types of information in a highly structured format: basic contact details (physical address, phone, fax), navigational details (deep links to your corporate website or contact information for departments, subsidiaries or branch offices), geolocation details (links to Google maps) and keywords describing your business. The whole design and format is particularly well optimized for mobile devices.
This is a fascinating concept from a number of angles. First, by specifying a structure to the information that appears on a dot tel "home page," users can be sure of what they will find every time they go to a dot tel domain. Second, you can argue that a company might be better off promoting its dot tel domain than its current company domain because the dot tel domain functions as a convenient "switchboard" of sorts, making it easy for users to get to critical pieces of information conveniently. Third, if dot tel takes off, it could become a central reference database that provides always-current and trusted company contact data. This was a role I thought Plaxo was poised to assume before it decided to morph into a poor imitation of Linked-In.
This is a creative venture with a lot of potential. But will it fly? That's always the question with ambitious and ground-breaking schemes like these. But judging by the big ads in the big media I have been seeing for dot tel, a serious push is going to be made to get market traction. Keep an eye on this one.
Recent News from the InfoCommerce Blog:
Angie's List Gets More Financing
Jigsaw Goes Mobile with SkyData Partnership
ZANA Networks Partners with Kompass
Demandbase Partners with Jigsaw
RDC, Alacra Partnership Yields Compliance Product