Dec
29
From Dickens to Digital…
Filed Under B2B, Big Data, Blog, data analytics, Industry Analysis, internet, news media, semantic web, social media, Uncategorized, Workflow | Leave a Comment
…in fifteen years. Now, settle down around the tree, children, for here is a Christmas tale to gladden your hearts. In which everyone is a hero, there is no recognizable Scrooge (like the recent BBC Dickensian production) – and Bob Cratchit aka the internet investor stands to make great rewards – in the Future. Our tale begins just before the millennium when the present writer first beheld the warehouse-like offices of Durrants of Banner Lane, London. This part of the City was full of low-rent offices of proto-information companies in the 1990s so I was not too surprized by what I found, but the dialogue in Reception was not encouraging, as I stood behind a long line of elderly ladies waiting to sign in. “It’s getting colder outside” I ventured to one. “Why do you think we come ‘ere – just to clip papers?” replied a voice from the queue, preparing me in mood if not in vision for the long office with desks covered in marked up newspapers being clipped into articles and gummed to headers which indicated the story and the company or product featured and the PR agency to whom the clippings should go. The rasp of the shears, the gossip of the shearers, the huddle of messengers on bikes – all this seemed the antithesis of the digital world I knew was coming. Surely this was typical of what was doomed? Or damned? Or both? In the 1990s I knew clearly, so I thought, where the digital future lay… and this was most certainly not it, even if it provided warmth and piece work on a cold day.
Today that same company lies at the very heart of a combination which City cognoscenti tell me is likely to seek a valuation of well over $2 billion after it does a further deal and comes to a public offering in 2016. So what happened in the meanwhile to transform its fortunes, and then it’s sector? In the 1990s this was a deeply unfashionable spot in the information marketplace, effectively doing the washing up after PR and advertising had finished dinner, a low margin service industry that measured the impact of PR campaigns by checking where they had achieved notice in the media, and recorded the fact that an advertisement, once booked, had actually appeared. Two operators sifted the industry waste in the UK – Durrants and Romeike, the latter being part of Observer Group, a Scandinavian-based roll-up which had emerged as a quoted company. The former had just been purchased by a private equity player and I had turned up to see the incoming CEO – and find out how on earth such a strange decision had been made.
The new man was an old friend, fresh from running Thomson’s global law enterprises outside the US. (Amazingly, Observer were soon to be run by an ex-Lexis chief – I feel there is a PhD thesis lurking on “The influence of law publishers on the development of online marketplaces 1975-2000!”). He explained what I rationally knew – there was huge potential in automating work processes in high cost service verticals. He then explained what he would do about it, starting with the search for scanning and coding systems that would automate the shears and remove the need for the bikes. In short he initiated the Productivity Revolution that is such a marked episode of every successful online business venture of the past 25 years. But it was only the first of at least five discernible phases.
Making the outcomes of PR activity machine -readable almost immediately triggered the second. Typically, the first PE investor was able to pick up the results of Rev 1, but then fund Rev 2 in order to get out himself. And the Analytical Revolution came in on time to allow this to happen. Old Durrants was still needed to fuel the engine, but two software acquisitions to provide the data analytics that helped to persuade the clients of PR agencies that the agency contract was really worthwhile – or how the technology enabled you to succeed without them – changed the name of the company to the name of one of the purchases – Gorkana.
And what, you eagerly ask, had Observer Group been doing all the while during this Revolutionary Age? Well, very much the same. Selling out its old clippings business in the UK to Durrants helped concentrate the market there, while giving them the ability to concentrate on dominating North American markets. In the failing days of newspapers, print managers stopping seeing both companies as a threat and instead began to appreciate them as a revenue source. In turn both companies began to monitor all media and not just newsprint. And then the Observer Group morphed into Cision and bought Vocus. And then the merged company bought Gorkana, mid-way through 2015. Sell off a few trifles to satisfy the regulator and then you have a really powerful, unavoidable dominant player across North America and Europe. The network tends to monopoly despite the regulator: you don’t really need two. Game set and match, said the commentators in the press box. Vertical integration in the recording and analysis of PR and advertising impact brings frenetic change to an end in a typical frenzy of M&A.
But that judgement is too hasty. We have come through three Revolutionary stages in fifteen years, yet we still have two more to go. The first began a week ago when new Cision with added Gorkana successfully bought UBM’s PR Newswire business. At the time of the Gorkana sale I felt this was becoming the imperative step: bringing together the whole cycle of PR activity from the cradle of the news release to the grave of the newspaper morgue. And it gives Cision a customer base of corporate users, vital as more companies decide that they want to buy creative inputs while being able to manage their own PR in the network with the help of Cision to manage the process and measure the results. Let’s call this the Process Integration Revolution.
Only one to go then. And the word on the street is that the next deal is the Global Integration Revolution. The final touch required to make this work is AsiaPacific, so predictably the next target will be iSentia, Australasia’s version of Cision. Tuck this one away and begin on the integration of global marketplaces in a very threatening manner, and then plan the IPO for late 2016. The integration of all of these rapid acquisitions is a nightmare prospect, so go to market as soon as possible. If ebitda is in the $250m zone, as looks possible, then a valuation of up to $3 billion could on the cards. Or is the strategic threat great enough to turn an IPO into a menu for Sir Martin and WPP? In either event, IPO or acquisition, competitive pressures will not harm valuations. And when it is all over, the revolutionary disruption of a service sub-sector will have irreparably changed the industry it once served. These five revolutionary steps are widely applicable: you have this from a man who had the Jeremy Corbyn Colouring Book for Christmas and has been busy with his red pen ever since!
With all best wishes for 2016 to every one who gets this far!
Nov
29
Mile High in Denver
Filed Under B2B, Big Data, Blog, data analytics, Industry Analysis, internet, online advertising, Publishing, Reed Elsevier, Search, Uncategorized, Workflow | Leave a Comment
Living at high altitudes is often credited with changing brain activity but until I read a piece by an esteemed Outsell colleague, Chuck Richard, (Outsell Insights “IHS to sell GlobalSpec” 24 November www.outsellinc.com) last week, I had not realised some of the fuller implications of that. But then again, all companies come to decisions in their own ways, and the manner in which they explain them does not always align exactly with the reasons for making them.
Yet I am still shocked. When IHS bought GlobalSpec in 2012 I hymned them with tributes (A Stroll Down Utopia Road, 13 June 2012). I had followed GlobalSpec since its foundation in 1996. Owned by Warburg Pincus, it did truly belong to the age when it was tough to sell subscriptions to engineers. But it amassed a unique collection of 10 million design briefs and specifications, as well as a library of 50,000 supplier catalogues, 70 e-newsletters and 15 online shows. I thought, in my ignorance, that this was a free workflow directed service just ready for IHS, with all their skills and specialization in engineering markets, to add some analytics and a real workflow productivity element and win hands down. How many of GlobalSpec’s then 7 million users needed to be converted and how much cross selling would take place with the existing IHS engineering strengths I thought was grist to the mill for the ever-active IHS acquisition team. After all, in a world where RBI had moved from over 200 subscription products to less than ten subscription-based, data-fuelled, workflow orientated, focussed information services and solution areas in B2B, and IHS was seen to be working in the same strategic framework, what could possibly go wrong?
The lines in the Investor Day presentation (7 October 2015) which remove GlobalSpec from the IHS roll-call are terse to say the least. On a slide which notes that the plan was to “transition” the company from an advertising-based to a subscription-based revenue model, appears this “Were not able to achieve this objective as market not ready to transition from advertising-based to subscription-based revenue models”. Did investors, hearing this, start to sell RELX shares on the grounds that Knovel could never succeed for Elsevier? Or did they ask what value had been added to those design specs to entice users out of the free into the value-added?
No, I suspect they were wholly unruffled. GlobalSpec, although a real prospect in 2012, has been massively overtaken in the annals of IHS by further waves of acquisition in fresh industrial and commercial areas. Indeed engineering itself is now heavily camouflaged and not mentioned in the deck as a business focus in its own right. A decade ago this company, having burnt its fingers as a portfolio player, decided in the time of Charlie Picasso to redefine itself as a focussed player concentrating on energy and engineering (the latter being very much where the group roots lay). Energy is still there, but a steady stream of important acquisitions over the past five years, culminating in Polk, seem to have distracted attention from engineering. This is now again a massively diversified player with outcrops of activity all over the place. Was there focus in this activity? Perhaps indeed they simply forgot they had GlobalSpec?
Well, we smile at such thoughts, but I can testify to the power of the new in corporate portfolios. Nothing was more powerful than the magnetism of the latest buy in Michael Brown’s Thomson Corporation in my adolescence in this marketplace. These companies had the best leadership practices, the best strategies, the best business models and the best sales plans, and this much was self evident… because we had bought them. Six months later, when the discredited leadership had departed and their successors were trying to explain why it was impossible to to reach the forecasts they had been committed to make, it did not seem to matter – after all, we had usually bought something even newer and shinier in the meanwhile!
Is this what happened to GlobalSpec? Maybe. But whatever the answer what happened to those 7 million registered users. Surely IHS changing the name from GlobalSpec to Engineering 360 did not entirely throw them off the track, even if it wasted the brand asset developed since 1996. And what happened to all that delicious data. Since all of those specifications and design briefs were deposited by users, and all those catalogues submitted and updated by suppliers, it could be said that the data acquisition model came out of the user community. Was none of that data useful in the engineering workflow platform which IHS has built and of which it is justly proud? Before engineering took a back seat to other sectors more newly acquired we might wonder whether any attempt was made to see where the data now to be sold off formerly worked so well in the working lives of engineers, and how it might be re-energized in a value-added service model.
And finally lets turn to all of these engineers who were “not ready” for a subscription-based world. I wonder how such readiness is measured. Is there a formula available in the management schools? Did Netflix have to apply it at the point of deciding whether they could compete with free to air advertising-supported broadcast TV. Or did they simply say “We are confident of a value so powerful that people will want to have it to enhance their lives”. Or, in the case of GlobalSpec, their jobs. Building that have-to-have value is not easy, and takes some of that detailed appreciation of how people work for which IHS was once famous – in engineering. Buying GlobalSpec and selling it again within three years does not represent a failure of markets to recognize what they should do; it represents a failure of management. Either that failure was down to buying the wrong asset in the first place, or it comes down to not deploying it effectively and getting the reward from the investment. Rather than one line on a slide investors might have reasonably expected a “mea culpa”.
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