Apr
2
Portfolio Power Down
Filed Under B2B, Big Data, Blog, data analytics, Education, Financial services, healthcare, Industry Analysis, internet, mobile content, news media, Pearson, Publishing, Reed Elsevier, Search, Uncategorized | 2 Comments
In the days when everyone did everything, few people did everything well. But I loved it. Editors in magazine companies moved from the Meat Trade Journal to the Retail Jeweller in a moment. I myself was transmogrified in a 3 line memo from running educational publishing to leading the charge in building a law publishing empire. We were in Publishing, we were Men (sadly, mostly) for All Seasons. “These are just businesses” we used to say. “You don’t need to be a lawyer to run publishing for lawyers”. And part of me still believes that, except nothing can now forgive how arrogantly little we knew about the needs and behaviour of the good people buying our publications.
These thoughts came to mind two weeks ago while reading this press release: “The company plans to complete its portfolio rationalization by exploring strategic alternatives for McGraw-Hill Construction, a leading provider of essential data, news and insights to better inform construction professionals’ decisions in the United States. McGraw Hill Construction has approximately $170 million in annual revenue and stand-alone operating margins approaching 20%. The business has shifted away from legacy print products to new, innovative data and analytics offerings, which are generating double-digit growth. Evercore Partners is acting as a financial advisor to the Company in this matter” (www.biia.com). It reminded me why we built these curious portfolio companies in B2B in the first place, as well as confirming my view that most press releases mean the opposite of what they say (“complete” in the context of the above note must be taken in the context of a complete review having broken the corporation into two and divested Education!).
We reached this place through a long experience of periodic recessions – at least that has not changed. We got here because we argued that a balanced portfolio gave us assets which would not all go down at the same time, and a balance of early first-in, first-out victims, recession proof activity (that is how we saw law publishing in the 1980s!) and quick recovery vehicles would proof us against all eventualities. Add in a blend of other qualities – some selected for high growth, others for cash generation, a few for high margins and we convinced ourselves that we could really get “balance” in a portfolio. But all of those traditional craft became waterlogged in a recession which was like no other in information marketplaces. As we emerged it became clear to all but the recidivist publishers that publishing, as experienced in the previous 50 years, was just about over. When we could pry people’s compulsive attentions away from their smartphones in order to ask them what they wanted, people did not generally say “book” or “newspaper” or “magazine”. In other words we were left asking Format questions which did not satisfy answers expressed as “solutions”, or “excitement” or ” learning without teachers” or even, “answers”.
Last week I was at a European Union workshop in Luxembourg on what we are going to do about stimulating the Creative Industries in Horizon 2020, the Commission’s workplan for 2015-2020. Only the nice lady from FIPP used the word “publishing” on any of the sessions that I moderated or attended, and even then with a sort of apologetic bashfulness. So it does not surprize me that the great portfolio conglomerates built in the publishing space of yesteryear are crumbling away, but it is worth asking why, and what may replace them. Companies change mission over time – think only of Pearson, a late Victorian builder’s merchant from Yorkshire which exploded into growth as an oil explorer in Latin America before, in late cycle, using the accumulated capital to become a brand portfolio in the post – war years. Now it is a single market entity once again, with just one of its brand acquisitions, Longmans, the eighteenth century bookseller/publisher, becoming the path to a remarkable twenty-first century market leadership. This is an odd story but not an unusual one. Portfolio is part of a cycle.
So what did Pearson need when they went single market in education? Well, specialist educational expertise is part of the answer. The single market specialists do seem to have a layer of market expertise which is very different from the jack-of-all-trades tradition that I noted above. And managers can talk tech talk and know what they are saying, while technology investment has become the key marker for many. Can you put a portfolio on a single platform is the “how many angels can you get on a pinhead” question for the industry rationalist schoolmen. Truth is, I believe, that new platforms and greater data concentration and increasing semantic analysis and domain ontologies increase specialization. For the portfolio players this raises a problem of choice and investment. Sometimes the answer, and this may be the case at McGraw-Hill, is not to invest further but to dispose. You could call this the D&B Gambit, as it retreated from portfolio ownerships over the last decade onto a core specialization. Sadly the pieces it sold are now worth more than the bits it retained, which is another warning to portfolio dismantlers.
Pieces of stucco have broken off some of the best regarded frontages in the industry in recent years and gone crashing to the pavement. Think of Penton Media in the US, now mercifully under management with a new plan. The McGraw announcement along with the break-out of Axios, itself a mini-portfolio, from UBM tells me that this is speeding up. And the units going now are not unprofitable, just not investable in the holding group context. And they are going to market now because markets are receptive to this kind of M&A in a way that we have not seen since 2008. So put your head back into the portfolio dominated world of 17 April 2008, when the market leaders included UBM, Informa, McGraw-Hill, Reed Elsevier, Wolters Kluwer, and Thomson Reuters, which was created on that day. Now, tell me which players will specialize in what as the ice thaws and the Big Portfolio Break-Up begins. Answers on an email please to david@davidworlock.com.
Mar
23
The Odd Future of Aggregation
Filed Under B2B, Big Data, Blog, data analytics, Education, eLearning, Financial services, healthcare, Industry Analysis, internet, mobile content, news media, Publishing, Search, semantic web, social media, STM, Workflow | 1 Comment
Mr Bezos and his cohorts at WaPo (the Washington Post to you and I, earthlings) have decided, we are told, on an aggregation model. As far as skilled translators of Bezos-speak can tell, this will mean bringing together licensed news content from all over the globe – spicy bits of the Guardian, a thin but meaty slice of the London Times, a translated and processed sausage segment of FAZ, a little sauerkraut from Bild, a fricasse of Le Monde… well, you get the picture, and the fact that I am writing this before dinner. These ingredients will get poured into a WaPo membership pot, heated and served to members who want to feel that they are on top of global goings-on, from the horses mouth, and without having to read the endless recyclings and repetitions which characterize the world media at source.
Well, I see the point, and the idea of membership and participation seems to me one which has endless energy these days. But I have been thinking for several years now that the Aggregation business model as experienced from 1993 onwards on the Web is on its last legs. Believing that “curation” is too often a word which we use when we are trying to maintain or defend a job, I have tried to steer clear of imagining that storage, the ultimate network commodity, was a good place to start building a business. In the early days of the Web it was certainly different. Then we could create the whole idea of the “one stop shop” as a way of simplifying access and reducing friction for users. All of the things we were collecting and storing, for the purposes of aggregation, were in fact “documents”, and their owners wanted them to be stored and owned as documents, bought as documents and downloaded as documents. The early reluctance of STM publishers to apply DOI identity beyond the article level and make citations, or references or other document sub-divisions separately searchable seems in retrospect to demonstrate the willingness of IP owners to manipulate the access to protect the business model.
Three clear developments have comprehensively undermined the utility of content aggregation:
* the desire of users to move seamlessly from one part of one document through a link to another part of a different document seems to them a natural expression of their existence as Web users – and in the content industries we encouraged this belief.
* the availability of search tools in the Web which permit this self-expression simply raises the frustration level when content is locked away behind subscription walls, and increases the likelihood that such content will be outed to the Open web.
* the increasing use of semantic analysis and the huge extension of connectivity and discoverability which it suggests makes the idea that we need to collect all or sufficient content into a storehouse and define it as a utility for users just by the act of inclusion a very outdated notion indeed.
It seems to me that for the past decade the owners of major service centres in the aggregation game – think Nexis, or Factiva, or Gale or ProQuest – have all at various times felt a shiver of apprehension about where all of this is going, but with sufficient institutional customers thinking that it is easier to renew than rethink, the whole aggregation game has gone gently onwards, not growing very much, but not declining either. And while this marriage of convenience between vendors and payers gives stability, end users are getting frustrated by a bounded Web world which increasingly does not do what it says on the tin. And since the Web is not the only network service game in town, innovators look at what they might do elsewhere on internet infrastructure.
So, if content aggregation seems old-fashioned, will it be superseded by service aggregation, creating cloud-based communities of shared interests and shared/rented software toolsets? In one sense we see these in the Cloud already, as groups within Salesforce for example, begin to move from a tool-using environment to user-generated content and more recently the licensing of third party content. This is not simply, though, a new aggregation point, since the content externally acquired is now framed and referenced by the context in which users have used and commented upon it. Indeed, with varying degrees of enthusiasm, all of the great Aggregators mentioned above have sought to add tools to their armoury of services, but usually find that this is the wrong way round – the software must first enhance the end user performance, then lend itself to community exploitation – and then you add the rich beef stock of content. For me, Yahoo were the guys who got it right this week when they bought Vizify (www.vizify.com), a new way of visualizing data derived from social media. This expresses where we are far more accurately than the lauded success of Piano Media (www.pianomedia.com). I am all for software companies emerging as sector specialists from Slovakia onto a world stage, but the fact that there is a whole industry, exemplified by Newsweek’s adoption of Piano this week, concerned with building higher and harder paywalls instead of climbing up the service ladder to higher value seems to me faintly depressing.
And, of course, Mr Bezos may be right. He has a good track record in this regard. And I am told that there is great VC interest in “new” news: Buzzfeed $46m; Vox $80 m; Business Insider $30m, including a further $12m last week: Upworthy $12 m. Yet I still think that the future is distributed, that the collection aggregation has a sell-by date, and that the WaPo membership could be the membership that enables me to discover the opinions of the world rather than the news through a smartly specialized search tool that exposed editorial opinion and thinking – and saved us from the drug of our times – yet more syndicated news!
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