Aug
5
In Search of Enduring Value
Filed Under B2B, Big Data, Blog, data protection, Financial services, healthcare, Industry Analysis, internet, online advertising, privacy, Reed Elsevier, Thomson, Uncategorized, Workflow | Leave a Comment
Yes, I remember Dun and Bradstreet. In the old UK headquarters in High Wycombe, the “white elephant” building that was intended to become the global data centre (in the days when you concentrated data instead of distributing it) had a waxwork figure in the foyer depicting a frock-coated Mr Dun (or was it Mr Bradstreet , or Lewis Tappan , the real founder?) collecting together the vital credit rating clues of the 1840s, as well as a discreet reminder that Abraham Lincoln had acted as as a data collector in Illinois in the 1850s. But the company I knew was a large and prosperous portfolio player, the very demonstrator for the theory that markets never go all bad at once, and that change in one can be nurtured from sustained growth in others. Under the portfolio, if I recall correctly, there nestled Nielsen in market research , IMS Health in medical market research, Donnelley in directories and market-leading marketing services, Cognizant in technology, Moodys in global rating services and Hoovers in company profiling. Never, you might say, was there a better example of a company with a portfolio of related interests who could interconnect these data collections to create fresh value in wider marketplaces – and take it all global as D&B itself was already going global. What a huge opportunity that now seems to create value through connecting hitherto unconnected data values and effect the type of transformation that Thomson Reuters are now attempting.
But the voices that D&B listened to were not the voices that said things like this. They were the siren voices of the market, who said that short term values could be increased by selling off all these allied companies, organizing the buyback of shares on a major scale and creating a greater value in the parent than would have been possible if it had remained in the group. So all of these companies went, and mostly to private equity buyers. But this was still not enough in terms of value creation, so the majority of the overseas subsidiaries were franchised to local operators , with valuable operations like China, Russia, Australia, and Germany having their data leased out to previously competing market players, who would then pay fees and royalties and contribute to the global data holding (now around 200 million companies and 53 m details of directors) in return for local re-use.
Markets and managements change, and over time D&B have bought back Hoovers ( revamped and without its research services ), and bought out their local franchise holders in places like China (where they now face a local data privacy infringement case) and Australia. No one adds the loss of value from these buybacks to the long term calculation, but presumably at some point the company became aware that by paring itself to the operational bone in search of value, it was actually losing opportunity. Now we gather (Wall Street Journal, 31 July 2012) that the company has been seeking a buyer for the past year, and has now appointed financial advisors to “explore opportunities” that may or may not lead to a sale.
D&B know all about creating value. In 1963 they created the DUNS number , forcing consistency and their own metadata on a market they meant to dominate globally. In just the same way IMS Health created its proprietory BRICS system for measuring medical activity in a community. Here were the forefathers of dominant metadata systems, whose value creation (think of the recent Thomson Reuters argument with the European Union over its RICS metadata nomenclature) is the bedrock of value add in data driven systems. Given its birthright, D&B might have been the dominant player today in value-added workflow services and systems offering solutions in areas like procurement and customer profiling. Question: has it been competitively outflanked by Experian (compare performances in Brazil, for example, where D&B have been since 1933) and lost touch with a value growth plan beyond buying back the franchises it once leased out?
It seems to me sometimes as if value in the sense that markets use the word is in fact a bell curve. It is clear how the asset sales drove D&B’s valuation up one side of this and how it has peaked through an inability to add fresh value in the narrow front on which it now operates, without the advantages of platform integration and Big Data-style development. It is possible that in places where these factors have come together (insurance risk in the US would be an example, where Lexis Risk use these elements to dominate in a related but consumer-orientated marketplace) it may be very difficult, without very extensive strategic partnerships and joint venturing, for D&B to prevent itself from losing ground.
So does this mean sale at a discount to a private equity player, or are there trade buyers who would offer a premium. Before Sanford Bernstein suggest again that Reed Elsevier should sell Lexis Law and buy this, let me just say that, in my view, the only real potential fit is with Thomson Reuters, and they probably have enough on their plates without trying to absorb a $1.7 bn revenue player, or Bloomberg. Competitors would all face anti-trust issues, but enterprize software and systems players might be interested – and D&B already has good links with Oracle.
A friend reading the last two pieces on this blog – a sort of odd trilogy on valuations – kindly asked how the UBM announcement that it “might” sell its “data services” fitted into all of this. Surely, as with D&B, we do not sell data at the moment: instead we try the alchemy of value add. So I have looked at this too, and am now even more confused than when I started. For example, by “data services” UBM appear to mean the databases from which they once sourced their print directory products. Apparently they have found that advertising online earns such diminished CPMs that it is very difficult to sustain the services. Similarly with Tech Insights, which they acquired and seems to suffer from the same problem. Is this surprizing? Not at all, since unless that data can be recombined with other internal or third party content there is no real hope of getting a subscription value from it. Advertising online is always going to be dodgy territory and at best a subsidiary income source.
And what does all this demonstrate ? Is the portfolio model broken for good and cannot ever be mended ? Or maybe D&B were right fifteen years ago , as Thomson Reuters are now : you can build portfolio if the players you buy are data-related and if you have platform and distributed search going for you . When D&B lost faith in their original model they did not have the technologies to do the job . So they followed the equity market view of value , and the chronic short term thinking that results from that has brought them to this . Now comes a more interesting question : what is credit rating and how do you reconstruct the service future of this marketplace ?
May
8
Fiddling with your Devices
Filed Under B2B, Big Data, Blog, data protection, eBook, eLearning, healthcare, Industry Analysis, internet, mobile content, news media, privacy, Search, semantic web, social media, Uncategorized, Workflow | Leave a Comment
In our shuffling ascending spiral motion up the great Tower of Time, we do denial at every turn of the stair. A year ago: “Devices are just display tech and will never replace real multi-functional office computing”. Today: “Everything goes to the Cloud”. Last year: “Everybody must build all the functionality into Apps”. Now: “Personalization will overtake Apps before Apps take over publishing”. The result is familiar. Let me see if I can deepen the gloom and make the waters more muddy for a moment, knowing that our only hope of insight comes from bafflement and obscurity.
It seems to me for a start that publishers really do not like Apps. They are convenient, developers love them, they work at the subscription level, but as information products they are not very satisfying. Many of them lack the linkability which has now become a habit of mind for network users. They are certainly Workflow, and invaluable if you are buying a train ticket or booking an hotel. Elsewhere they are often Shortcuts to Nowhere. The statistics tell us that the vast majority of App downloads are never used twice. Since they are tied to devices and the formatting demanded by device manufacturers they do not meet the expectation that we encouraged the former print world to accept: go digital neutral and cover every channel of distribution. They work well for community and clubs, where they can act as a holding point for shared content and a jumping off point for discussion, but I am becoming so unsure of the hegemony of Devices that it is undermining my faith in Apps as well.
The last straw was a note on Pebble in the Guardian (8 May 2012). Pebble is a wristwatch lookalike device based on eInk and providing email and text access on Android and iPhone. (http://www.wired.co.uk/news/archive/2012-04/12/pebble-e-ink-smartwatch). This really hurts. I have been going round for years telling everyone that the reason my children do not seem to wear watches is that they are people of a modern age who work (albeit late) on network time. But despite the founders of Pebble raising £5 million in funding through product pre-purchases, this only convinces me even more that we are wrong if we start “publishing to” devices as if they were a platform or a channel. I think that our efforts need to be directed elsewhere, while we watch devices morph into new forms and bifurcate across functions. The day will come when we shall each have several (I have unfortunately already arrived) and they will be dedicated to use purposes in our lives – this for flying, that for taking to meetings, this other for holidays etc. The device spec will be governed by our purposes and requirements in these functions, not by any attempt to put every function into every device. The device in the car will have different requirements from the one in the kitchen, though of course some of the functionality will be the same.
All of which rather begs the question of what environments we should be publishing for if not specifically for Apps and devices. And the answer, of course, is the personalized Cloud. The environments we should be watching are Apple’s iCloud, and Amazon (AWS)’s CloudSearch. In this sense, current battles in the book sector are simply a kindergarten warm-up for the big battles out in the playground at lunch hour. Current popular neurosis about privacy (an odd but real phenomenon, since the security services have always had unfettered access to our deepest secrets, at least since Sir Francis Walsingham bought his first thumb screw) and the business drive to Cloud computing will come together in Personal Cloud. There I will have my library, my searchable subscriptions and, above all things, my Cloud Server. This will end all questions about the Web as a service venue – it will become a place for browse and research, not a full service zone. That I will control for myself, as well as all the data derived from it, and on that server I will decide what access to content derived from me and my activities that I give to third parties (using long available services like Paoga – www.paoga.com – to do this). The device that measures my blood pressure files the results in my Cloud, gives me well-informed medical guidance from the selection of service vendors that I trust and subscribe to, but only releases my actual results to my physician at regular periodicity – and his monitoring devices tell him when we need to talk. Come to think of it, the Pebble strapped round my wrist could handle the pulse for a start!
I have too little space here to demonstrate the full extent of my ignorance more than superficially. My feeling from reading is that Amazon’s announcements last month now put them a little in the lead over Apple and Google (http://www.readwriteweb.com/cloud/2012/04/amazon-beats-google-to-a-cloud.php). Apple’s concern was content sharing across devices (https//www.apple.com/uk/iCloud). Googles of course was search, but clearly both Amazon and Google are alike in the vastness of their server farm environments and their ability to support global personal and corporate Cloud usage. And Amazon, having started AWS in 2006, may be said to have the experience, and the readiness to move into these new worlds. We are entering the age of “he is so old he can remember when Amazon was a bookseller”. An annual rental of CloudSearch costs 100 USD.
So has my once upon a time dream of the consolidated omni device completely faded? Probably so, though we are likely to be bewildered by the range of device offerings and their narrow differentiation for many years to come. Meanwhile, the next virtual world builds quietly in the Cloud, and demands our total attention.
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