Paradigm Lost

The operative paradigm in almost all forms of publishing is to centralize information. At one end of the spectrum are companies like Factiva that aggregate thousands of data sources for their customers to access for all kinds of uses. At the other end of the spectrum are media such as newspapers that scan a specified body of information, then curate it, bringing to their readers only the information they feel is most important and relevant. Data publishers fall somewhere in the middle of the spectrum, both aggregating and curating, with the added step of normalization.

What’s implicit in this centralization, however, is that the customer comes to the content in some central location. There are obvious advantages to this approach, the biggest of which is that all the content can be accessed via a single, consistent search interface.

But centralizing data isn’t always easy. This is particularly true with some types of product data. In some industries, manufacturers, for reasons good and bad, want broad distribution of their product data to qualified prospects but nobody else. Sometimes this is driven by regulation; sometimes it is driven by competitive fears. So how do you centralize data when the market doesn’t want it centralized?

One early innovator we liked was a company called Innovodex (now owned by Underwriters’ Laboratory). It worked with companies in the materials industries who wanted only qualified engineers and designers to have access to their new product data. Innovadex took on the job of screening and vetting new users, granting access to those meeting certain criteria. It was  effectively a giant extranet of product data from participating manufacturers.

Recently, we’ve seen another spin on this model. A new initiative in the pharmaceutical industry called Align Biopharma (sponsored by the always innovative Veeva Systems) wants to centralize login credentials for physicians. Much like LinkedIn and Facebook offer single-credential logins to third-party sites, Align Bipharma wants doctors and other healthcare professionals to be able to access any pharmaceutical company product information site with a single login.

Align Biopharma has other interesting data standards initiatives, but what jumped out to me was that in a fiercely competitive industry where manufacturers all want to do things their own way, it may make more sense to centralize the logins than to centralize the content.  And of course, the data gleaned from sitting in the middle is a worthy prize in itself.

Centralized users and distributed content. Sometimes great new ideas come not from thinking outside the box, but inverting the box. 

Reviewing an Imperfect Model

We all know that online ratings and reviews are increasingly popular, with some large and successful companies based entirely around providing them (think Yelp and TripAdvisor). Ratings and reviews are not only popular, they have become a profoundly influential tool in helping consumers decide what to buy and where.

Not surprisingly, as ratings and reviews have become more important to consumers, they have also become more important to businesses, many of whose revenues rise and fall in line with the quality of their online reviews. And the outsized importance of these reviews has attracted scammers and spammers. Some even argue that this ability to post online reviews puts too much power in the hands of consumers, many of whom exercise it thoughtlessly and mercilessly.

The most important rating and review systems are invariably operated by third parties, who provide critical market neutrality. But many of the biggest ratings providers got into this business with no idea how powerful they would become. What they did know was that they needed to amass lots of reviews quickly to build consumer adoption. Making volume their top priority drove down the quality and integrity of these reviews. But the review site operators deeply believed in the concept of the so-called “wisdom of crowds,” and that with enough volume, the honest reviews would overwhelm the false reviews and everything would ultimately work out just fine … at least in the aggregate. But that’s little comfort to an individual business that is suffering from an onslaught on underserved bad reviews. Horror stories abound for all of the major review platforms:

Where’s the law on all this? “Desperately playing catch-up” sums up the situation very well.  Interestingly, the review platforms themselves are well protected by federal law that views them essentially as innocent messengers. Individuals who post reviews can be exposed to lawsuits if their reviews contain defamatory or inaccurate information that causes financial or other harm, but it can be hard and expensive to track them down. A recent federal law makes it illegal for businesses to prohibit customers from posting reviews about them. And an increasing number of government agencies are cracking down on businesses that pay to have positive reviews about themselves posted.

In short, the law is increasingly acknowledging the importance of reviews in commerce, but the whole field still lacks adequate checks and balances. In particular, businesses still have a weak hand. But forcing review platforms to take responsibility for the accuracy of reviews would be such a complex and expensive task it would likely put many of them out of business.

Reviews are powerful. Consumers depend on them to determine where and with whom they spend their money. Businesses are impacted by reviews – for better and for worse. Yet the major review platforms, well insulated by current law and all seeking scale at the expense of vetting and customer service, come down heavily on the side of consumers. Ordinarily that would be fine (success comes from knowing and fiercely supporting your audience), but consumers have shown limited interest in paying to support the big review platforms (think Angie’s List). At the same time, businesses have shown only limited enthusiasm for supporting review sites where they can’t have significant control over what is said about them.

Bottom line: rating and review sites represent an important but imperfect business model. Those who benefit most from they don’t want to pay for them. The platforms themselves don’t want the cost and hassle of vetting reviews. And businesses don’t want to advertise in a place where they can’t control the message. We’ve seen some innovation along the lines of verified reviews, where the reviewer must be a known customer of the business being reviewed, but this is not a full solution to what ails this model.

Opportunity knocks for someone who finds a kinder, gentler but still useful spin on this important category of content.

Making Introductions, Profitably

An interesting article in the New York Times highlighted a company called Legal Services Link. As you might infer from the name, the company works to connect lawyers with those who need legal services.

Lead generation? Yes, but with a twist. In this model, buyers are actively seeking sellers and the intermediary is attracting these buyers and adding value by actually matching buyer to seller. In many cases, the buyer is asked to complete a requirements survey, which is then matched to a database of qualified sellers. The intermediary (usually a data company), identifies usually from one to three vendors best qualified to help the buyer, and puts everyone in touch.

The benefit to the buyer is that a small number of pre-screened, qualified sellers make immediate contact with the buyer – enough sellers to have some choice, but not enough to be overwhelming or annoying. You may possible be surprised to learn that a hidden value-add of these matching services, is that they monitor the sellers to make sure they get in touch with the buyer quickly. Yes, even with sellers paying sometimes hundreds of dollars for a hot lead, they still manage to drop the lead on the floor!

What’s also nice about this model from the perspective of the intermediary is that there is no chance of “leakage” – a term for when buyers or sellers circumvent the intermediary, often to avoid paying a commission.

This model works well for both B2C and B2B. It seems to work best for high-value purchases that the buyer only purchases sporadically. This irregular buying pattern is key because it means the buyer can’t keep up with what seller offers what product, or even the products themselves. Markets with rapidly changing technology are especially good.

Since the buyer fills out the requirements survey with full knowledge she will be immediately hearing from salespeople, she makes an enormously high value lead. And since the seller has a good understanding of what the buyer needs before making contact, the initial conversation is more productive and the sale tends to close faster.

This is a strong model that makes more sense than ever in a world that’s rapidly getting used to apps that speed the delivery of everything. If you see the right fundamentals in your market, it’s a model that’s well worth exploring.

Knowing More Than You Can Tell

Most of you have some familiarity with Gerson-Lehrman Group (GLG), the phenomenal success story that pioneered the idea of connecting experts on a wide variety of topics with those who needed fast, trustworthy and unbiased insights into a market, a company, a technology … whatever.

Not surprisingly, GLG found most of its clients in the financial sector, from hedge funds to private equity firms and others that needed expert insight fast to inform the often significant investment decisions they were making. These clients paid fat fees, and the experts were well paid for small chunks of their time, and it all went swimmingly for many years.

Where things got awkward is that some investors wanted more than background information: they wanted confidential information. GLG was very aggressive about policing this, understanding that it could damage its business. However, some GLG competitors didn’t have the same ethics, and differentiated themselves by playing on the often-murky line between public information and inside information. This potential to misuse the raft of expert services that now exist continues to cast a pall over another otherwise strong business model.

Enter a new start-up called Emissary. It’s an expert service, but rather than focusing on connecting experts to investors, it seeks to connect experts to salespeople. Want to know how to tailor your pitch to a particular company? Emissary can find someone who knows. Similarly, salespeople often find themselves wondering if they are dealing with a decision-maker or not at a particular company. Say hello to Emissary, whose experts may well have worked at the company in question.

Visit the Emissary website, and you’ll see a carefully crafted message: we’re just people helping other people. At one level, this is certainly true. And connecting a sales team to a recent former employee of the prospect company doesn’t seem to be rife with the same legal and ethical issues that exist for investors, but I suspect Emissary’s long-term success will depend on it also establishing an ethical line in the sand and policing it closely.

What also makes Emissary interesting is it’s a model that can be moved not only across verticals, but across functional areas as well. 

Data Insights from Bitsight

A Boston-area start-up called Bitsight is pulling in investor money so quickly, a total of $95 million, that it doesn’t know what to do with it all … yet.

And what does Bitsight do, to justify this level of investment? It examines company websites, evaluates them for the quality of their website security, and assigns them a rating, much like a credit score.

How do they do it? There’s a bit of proprietary secret sauce in how the company evaluates the security of a website, but what’s particularly interesting is that they do it all with publicly available information. And that raises another fascinating aspect of the business: the companies that Bitsight rates are not its clients. Bitsight is not an online security consultant with an automated assessment tool. Indeed, it has evaluated over 60,000 websites to date, and ultimately may evaluate tens or even hundreds of thousands of websites.

Why would anyone want this information? The uses for this data are surprisingly numerous. You can sell it in the form of a benchmark products to the companies you have rated. What IT manager wouldn’t want to know how their company stacks up against its peers? A better opportunity is to help insurance companies properly price data breach insurance policies.

But perhaps the best opportunity is to help big companies evaluate and manage risk with their vendors – a huge issue as a number of headline-grabbing recent data breaches resulted from a company’s network being penetrated via one of its vendors that was connected to it.

While Bitsight may look like a cutting edge analytics company, what’s significant is that so much of its business model is drawn from very basic approaches used by many other data publishers. It is aggregating publicly-available data into a database. It normalizes this information, then applies an algorithm to assess it and produce comparable company ratings. It sells this data product for internal benchmarking, risk management and due diligence applications.

In short, despite its high tech trimmings, Bitsight very much has data publishing DNA. It is also a great example that data products don’t have to be perfect right out of the gate. By relying on public information, Bitsight can’t possibly know everything about the security of a company’s website. But by relying just on public data, it can quickly build a large database of comparable company ratings using a credible methodology and solve market needs that require a certain scale of coverage. If you’re the first data provider serving a serious market need, you can launch with good-enough data and improve it over time. Trying to perfect your data prior to launch can mean missing the opportunity entirely.