Ratings Wars

A new start-up called RentLogic has entered the New York City real estate market with a smart, simple idea wrapped around a proven business model. It provided a data product that rated rental properties on how well they were maintained. Unlike opinion-driven ratings sites like Yelp and TripAdvisor, RentLogic mines complaint and violation data from official government records, assessed them, and assigned every building a letter grade from ‘A’ to ‘F.’
 
It’s a clever idea and arguably much-needed. At the very least, it began to address asymmetric information exchange that has long characterized the real estate business. Put simply, your landlord wants to know everything about you prior to renting to you, but you know little or nothing about the landlord or the property itself.
 
RentLogic also was smart about its marketing. It hooked up with one of the largest rental brokerage firms in New York City, a firm called Citi Habitats, to match its database to its apartment listings. Pop up a listing in Citi Habitats, and you would see not only the standard apartment description and other details, but you’d also see a letter grade for the property and a summary description of violations and complaints. This was great exposure for RentLogic, and a differentiating website feature for Citi Habitats. And just to make sure that not too many landlord noses were bent out of joint, the two companies agreed that RentLogic data would only be shown if the property had earned an ‘A’ or ‘B’ rating.
 
All smart moves, and a win-win for both companies and apartment seekers. A ‘happily ever after’ story then? Not exactly.
 
Just eight days after rolling out the new ratings system, Citi Habitats pulled the plug and ended the deal, reportedly after receiving strong pressure from landlords. At least in New York City, landlords have lots of clout. While Citi Habitats makes it money from fees from apartment renters, it still needs access to apartment listings in the first place. And New York City landlords aren’t that into transparency, at least not about their own activities. Several landlords described the ratings system as “unfair” and “inaccurate.”
 
From a strategic perspective, RentLogic did everything right. In my view, its business model, drawing from official records, is far more defensible than sites like Yelp that aggregate largely anonymous opinions and turn them into ratings. But RentLogic missed one big item: the supply and demand imbalance in its market. RentLogic is trying to serve the demand side of its market (apartment renters), but given a shortage of apartments, the supply side (landlords) makes the rules. That complicates market entry for a disruptive market player, because with landlords closing down many distribution channels, RentLogic is left with selling its data direct to apartment seekers, a slower and more expensive path to growth.
 
But we’ll be keeping an eye on them to see how they evolve since more than one company has pivoted their way to a Model of Excellence. You can meet this year’s winners at BIMS. Here’s a preview, starting with TrendMD. 


Meet TrendMD at BIMS

Want to find out why TrendMD won an InfoCommerce 2016 Model of Excellence Award?

This year’s winners will be showcased at BIMS, November 14-16 in Ft. Lauderdale. It’s a peer-to-peer forum complete with exclusive tracks on Data and the unique opportunity to hear from the MOE founders firsthand.  Register now to attend!
 
Here’s just a taste of the brilliance behind TrendMD – be sure to attend BIMS to get the full story.
 
"It's difficult to fail if you actually talk to customers, " says Paul Kudlow, Founder of TrendMD. As he was going through medical school the last few years, Kudlow pictured his future: talking to patients all day, providing solutions, and working all hours. "It was still a massive transformation," Kudlow said, "I went through medical school and started residency—and then this came out of nowhere. TrendMD is a kind of Outbrain or Taboola for the medical world. TrendMD enhances content discoverability for readers by providing publishers with strong incentives to display relevant links to third-party content. We took that model and designed an article recommendation widget that's embedded in places doctors and other researchers use. Content producers can also promote their links on sites where the TrendMD widget sits.
 
"Unlike medicine, there's no playbook for startups," Kudlow said. "You kind of invent it as you go and see what fits. We offer value to readers. We're distributing content so it can get to the readers and give value to the authors. Before TrendMD, there was no way to push this kind of content to readers. Often we heard journals say that they get new readers through good SEO or posting content online," Kudlow said. "That's a bit like saying we printed the journal out it in one library hoping that people can read it."
 
Hear more at BIMS!

Credit Scores: Not Just for Credit Anymore

A credit score, like it or not, is something that exists for all of us. Pioneered by a company called Fair Isaac (now just known as FICO), the credit score provided powerful advantages to credit granters in two key ways. First, using massive samples of consumer payment data, FICO analysts were able to tease out what characteristics were predictive of an individual’s willingness to re-pay their debts. With this knowledge, the company built sophisticated algorithms to automatically assess and score consumers. This approach is obviously more efficient than manual credit reviews by humans, but it offered consistency and dependability as well. Second, FICO reduces your credit history to a single number in a fixed range. The higher the number, the better your credit. This innovation made it possible for banks and other to write software to offer instant credit decisions, online credit approvals and more. Moreover, a consistent national scoring system made it easy for banks to both manage and benchmark their credit portfolios, as well as watch for early signs of credit erosion.

There’s little doubt that credit scoring was a brilliant innovation, but is it so specialized it can’t be replicated elsewhere? Well, it appears that creative data types are seeing scoring opportunities everywhere these days.

Consider just one example: computer network security scores. There are several companies (and FICO just acquired one of them) that use a variety of publicly available inputs to score the computer networks of companies to assess their vulnerability to hackers. Is this even possible to do? A lot of smart people in the field say it is, and pretty much everyone agrees the need is so great that even if these scores aren’t perfect, they’re better than nothing.

You may also be asking whether or not there is a business opportunity here and indeed there is. Companies buy their own scores to assess how they are doing and to benchmark themselves against their peers. Insurance companies writing policies to cover data hacks and other cybercrimes are desperate for these objective assessments. And increasingly, companies are asking potential vendors to provide them with their scores to make sure all their vendors are taking cybersecurity seriously.

While scoring started with credit, it certainly doesn’t end there. Are there scoring opportunities in your own market? Put on your thinking cap and get creative!

Old Models Never Die … They Evolve

Most of you (I think) remember the heyday of yellow pages when those thick print directories hit your doorstep, often followed weeks later by thinner but still hefty print directories from competing publishers. Now, if you receive a print yellow pages at all, it’s a shadow of its former self.

That’s why I was so surprised to receive a print, 120 page directory in the mail yesterday. It’s called Best Pick Reports and it is owned by EBSCO, a company known to most publishers but very few consumers.

I think it’s fair to call Best Pick Reports a next generation yellow pages. It’s organized by categories (with a focus on home improvement and repairs) and presents a list of local vendors. It’s also printed on inexpensive paper with modest production values, much in the spirit of the old yellow pages directories and suggesting saturation distribution, also a key aspect of the yellow pages model.

But Best Pick Reports also draws on the model of Angie’s List, presenting only local vendors that have been given high ratings by the local community. Angie’s List, however, struggled to sell this information as a subscription service to consumers, while Best Pick Reports distributes its information for free.

Drawing on the resources of EBSCO’s research arm, the company surveys consumers in local areas to develop lists of recommended plumbers, builders, etc. Those that receive high ratings are offered the chance to be listed in the publication for a fee, so while vendors can’t buy a rating, they do pay to play. Companies that do pay to list are assigned what appears to be key phone numbers to track response (another yellow pages innovation). Best Pick Reports also checks the license and insurance status of companies that pay to list.

Overall, it’s a fascinating blending of models. There are elements of the old yellow pages: categorized reference information and mass distribution. There are elements of the new vendor sourcing models: ratings and reviews, trust markers and focus on a limited selection of choices, presented as “the best.” And there are generous dollops of the innovative Angie’s List model, but modified to remove the vexing subscription component. At the same time, this model bypasses the anonymity that makes it hard to fully trust most of the big online review sites.

Is this an ideal model? While it has many appealing characteristics, this is an expensive business to operate. It needs a large and robust research capability (and since not every highly rated firm will advertise, you need to cast a wide net). It has expensive print distribution costs. It also needs a professional advertising salesforce. Moreover, EBSCO is hardly an established consumer brand. But none of this means EBSCO can’t succeed; it just means EBSCO will need to work hard to succeed. And business success that doesn’t come fast and easy usually defines the businesses that are the most successful of all.

Authority Databases

With an increasing proliferation of databases these days, it can become hard for a business to make sure it is properly represented in multiple data products. That’s because every database producer collects data in different ways and updates it at different times. Increasingly, data producers are licensing data from third parties, and with increasingly sophisticated matching and overlays, it’s often difficult to even say with certainty where certain data elements are coming from. And if all this is complicated to the data producer, imagine how overwhelming it is for the typical business owner.

That’s why opportunities are emerging for what might be called authority databases. These are databases where a business owner supply their information and keep it current. The information about the business is represented exactly as the business owner wants it, and is the most current information available. The database owner then arranges with other data companies to use this data and treat it as definitive. The advantage to the business owner is that business details only have to be entered and maintained in one place. The advantage to the data companies using the data is a trusted source of authenticated information. Business models vary. Currently, the business is generally paying a fee to participate, but there’s no reason the data companies using the data shouldn’t pay. In an ideal situation, both parties would pay.

Do such databases exist? Indeed they do. Universal Business Listings has for a number of years offered an authority database where businesses could input authoritative data on their companies. Universal then syndicated this data to hundreds of online databases, getting them to accept it as authoritative. That’s an important little detail, because it prevents this data from being overwritten by data coming in from other sources.

You’ve probably also heard about new regulations meant to increase the accuracy of health plan provider directories. Wouldn’t it be great for physicians if they could enter their basic information in one place where it could be picked up by all the health plans they are associated with? Well, a non-profit organization called CAQH is doing just that. The benefit to the health plan is that it doesn’t have to constantly chase its plan physicians to re-confirm their information. The benefit to physicians, who can be affiliated with a dozen or more plans, is the efficiency of maintaining their information in just one place, rather than having to provide it over and over again, endlessly to multiple plans.

These are just two examples of authority databases. Hopefully they’ll get you thinking about your own market, and whether there might be an authority database opportunity in your future.

Could You Be a LinkedIn for Product Information?

A young Canadian company called Hubba is making waves internationally with its goal to become the “single source of truth” for product information. Described simply, they’d like every company with products to post and maintain their product information in their database so that everyone who needs that product information (retailers, wholesalers, online merchants) can find it in one place, in one format, and with the knowledge that it is always the most current information available.

Ambitious? You bet. But the company, only founded in 2013, has taken on over $45 million in investment. As importantly, there are signs of market traction: 10,000 customers have already listed over 1 million products on the service. The company’s founder described Hubba as “a little bit like LinkedIn for products.”

Organizing product information is no small challenge. Most companies of any size struggle just to keep their own product information organized and current. And product information is a nightmare for those who sell products. The work involved in finding and accessing current product specifications, images and brochures is slow, painful and never-ending. And good product information isn’t only in the interest of the retailer; manufacturers increasingly see the value of consistent, accurate and attractive presentation of their products across the web.

Somewhat surprisingly, this isn’t an entirely new idea. Indeed, it’s an application model we call “Central Catalogs” in our business information framework. The first company I found doing this was working in the audio-visual equipment industry. Currently called AV-IQ (and recently acquired by NewBay Media), the site lets manufacturers centralize all their product information for the benefit of their retailers.

Another company called EdgeNet performs a similar service in the hardware market. And there are others with slightly varying models. Some see themselves as content syndicators, pushing product information out to the world. Some are built on closed networks. But to date, given the scale of the challenge, most services limit themselves to a single vertical. While Hubba is currently tackling just a few verticals, it’s clearly positioning itself to become the central product information repository for everything.

Hubba isn’t just notable for its ambition. It’s also adopted a freemium model that makes it a small decision for a manufacturer to participate. And consider too how far this company has come in just three years with an offering that’s good, but in a category that certainly isn’t new. That’s Internet speed for you!

Central catalog opportunities belong naturally to companies in the center of their markets, particularly those that are data-savvy. Having a neutral market position is critical too, because product information gets political very quickly. It remains to be seen how Hubba evolves, but in the meantime, vertical market central catalog opportunities abound, and data publishers in vertical markets are the best positioned players to take advantage of these opportunities.