The first SIIA (Software & Information Industry Association) InfoSoft Essentials conference attracted publishers of all stripes. Software developers, Internet networking and ISP types, database providers, entrepreneurs, marketers, venture capitalists, and industry executives and lawyers all gathered in Toronto September 15-18 for networking and discussion at the Royal York Hotel. The SIIA conference was held in conjunction with The World Financial Information Conference.
The Deal-Making Session and Opening Reception set the tone and provided the stage for the newly merged Information Industry Association (IIA) and Software Publishers Association (SPA) to begin the dance of getting to know each other better. The content kings and software queens, accompanied by their purses, scoped each other out at the grand dance.
The Software & Information Industry Association (http://www.siia.net) is the principal trade association for the software and digital content industry. SIIA provides global services in government relations, business development, corporate education, and intellectual property protection to the leading companies that are setting the pace for the digital age. The opening keynote speech noted that Washingtonian Magazine had recently declared the SIIA to be the "second most powerful organization in DC"! Not bad for a fresh-faced toddler!
I've chosen to structure this report as a series of impressions. There were several themes that emerged throughout the conference that might indicate some directions in which the industry is heading. A conference such as this seems to be focused on opportunities to develop connections and partnerships crucial to the growth of new companies, energizing the transition of established organizations to the "new world order" and educating industry executives in the trends and issues. I attended primarily the Content track; the other tracks available were Business Enterprise, Education, Web Tactics, and Financial Information Services. All participants converged for the plenaries and social events.
Almost 600 people were preregistered for the conference, largely senior executives from across all areas of the SIIA membership. Unfortunately, Hurricane Floyd traveled up the east coast of the U.S. that week, and many were unable to fly into Toronto due to the havoc it played on airline schedules. This is perhaps not an inappropriate metaphor for the turbulence this industry finds itself in today. Throughout the conference, in the sessions and in the hallways, small groups of industry executives talked in hushed tones about the sometimes high valuations of their enterprises or competitors, about their lack of profit or a stable business model, about the absence of all the Web billionaires, or about finding some small piece of truth to which they could secure a business plan. There were still expressions of that early Web bravado and confidence, while others were looking earnestly for the "meat."
I was particularly interested in how the merger that created SIIA was progressing. Would true cross-industry connections develop? Would there be substantive discussions over mutual issues? Could the little ol' content lamb thrive sleeping with the software tiger? Let's see …
The SPA had long focused on the issue of software piracy. Its strategies of public and business-to-business education—and informing legislators worldwide on the public policy and regulatory activities with respect to this issue—have been moderately successful in bringing the issue to the forefront of some agendas. With the marriage of IIA and SPA, we see the growing convergence of technology and content. It's interesting to note that there is renewed interest from all SIIA member profiles on the topic of managing rights in content, graphics, numbers, images, trademarks, software, plug-ins, etc. in similar ways.
There were several sessions on rights-management technologies. The clear impression that I left with was that these were at the lots-of-potential-but-not-ready-for-prime-time stage. There are several competing models, but few are fully converged with the diversity of e-commerce technology and information literacy in most markets. However, it's very clear that enormous development and intellectual effort is going into this and that there are many options out there to experiment with and learn from. If we're moving into a knowledge-based era, then these systems will comprise the banking system for it. It's coming—no one could say just when yet—though many will sell you something now. It seems clear that the biggest hurdle to international, broad-based consumer/end-user adoption of many of the current rights-management market offerings is that they require two unforeseeable premises: the global cooperation of a user educated in intellectual property rights (a vast leap to begin with), and the agreement to and adoption of additional barrier(s) between the content owner and the purchaser (a browser plug-in, a buy decision, a trust relationship for using credit cards, content owners adding standard metadata, etc.). The SIIA piracy strategy of education first and infringement suit later seems likely. It's all fascinating, and I'm sure to some it will remain a centerpiece of information industry conferences.
I also picked up a few quotable quotes at these rights-management sessions:
A major paper, entitled "The Rights Management Primer: A Discussion of Acquisition, Licensing, and Using Content in a Digital Environment," was released at the conference. It was developed by the SIIA Content Division Online Content Committee, Rights Management Working Group. Done by some of the best minds in the business, this piece is probably the best survey of the state of the art today. Copies are available from the SIIA.
- "You get the right to read it and forget it."
- The Wall Street Journal is "the number-one most photocopied publication in the world."
- "Don't dilute my brand name."
- "Separate the licensing and rights from the content to overcome barriers to the customer experience."
- "We need to move the software volume licensing model over to the content space."
- Royalties were referred to as "performance metrics payments"!
Mergers and Acquisitions
Kevin O'Leary, CEO of The Learning Company, delivered the opening breakfast keynote speech. He shared his experiences—the good, the bad, and the ugly—in building companies through acquisition. He also made a few fearless predictions:
O'Leary noted that there are thousands of new Internet companies, and 99 percent of them make no profit and are using unproven business models. He asserted that there has been a collapse of Web advertising rates, with over 80 percent unsold capacity. Customer-acquisition costs are up, and e-tailing margins are razor-thin. He posed the question: When the music stops and the mop-up begins, who will get rich?
- "Everyone in this room will be involved in a deal in the next 2 years."
- "Venture capital has an exit strategy through IPOs. Therefore the IPO expansion must continue. If it doesn't, consolidation will start very quickly—probably in less than 2 years."
Many business models were reviewed and presented. Some online publishers claimed that many information providers were now providing their information to them for free! Others promoted their point-and-click purchasing solutions. Some like Don McLagan at NewsEdge Corporation have their feet in a few camps, delivering high-value content to the business enterprise market for a fee and re-slicing portions of that content and delivering it for free to business end users through NewsPage.com, Inc.
It's clear that we're still immersed in this renaissance and redefinition of the information industry with millions of experiments in new modes of business. Some are being discarded by the wayside, while others work for some and not for others. Jane Reeves, Primark's international general counsel, said, "From a lawyer's point of view, joint ventures are worse than marriages—far more fail than succeed."
Another major paper was released at the conference, "Content Online: A Discussion of Business Models." It was developed by the SIIA Content Division Online Content Committee, Business Model Working Group. This piece, which avoids academic theory, combines the thinking of actual folks in the business who are grappling directly with the issue. Copies are available from SIIA.
The phrase "customer acquisition" was repeated in session after session as something that was on the minds of executives. Interestingly, it was rarely mentioned in the traditional model of sales or one-on-one relationships. While everyone was touting the benefits of focusing on the individual customer, most of the strategies outlined were aimed at adding large volumes of users en masse.
In the session "Changing Channels of Content Distribution: Which Way Is Up?", Charlie Terry, CEO of COMTEX, outlined three new rules of e-distribution: 1) The customer has always been king and is fed up with you thinking otherwise, 2) the online experience is everything in an online world, and 3) maximize the experiences with your content.
Terry noted that it is essential to remember that it is very costly to attract the user and that revenue depends on the user. The customer experience requires content ("critical mass" that is easily accessed and in context), community (based on common interests and enhanced with supportive services), and commerce (seamlessly integrated when using purchasing models that match their value proposition).
Terry listed the following strategies for adjusting to the "new world order":
Tim Bradbury, of the Gale Group, outlined four challenges for maximizing channels: 1) Understand the widely varying levels of content knowledge and information literacy in different niches, 2) choose ways to differentiate your content for different markets, 3) understand and experiment with new business models and stay flexible in the context of business realities, and 4) know what makes something "sticky"—is it different in different niches? He also asserted that it costs an information provider more to support smaller channel partners than larger ones.
- Protect the value of your crown jewel content, but always deliver value.
- Repackage—slice and dice—endlessly on topics and subtopics, and develop tiered products based on niche-market value.
- Provide useful teaser content.
- Base prices on the user's value equation.
- Develop, promote, and protect your brand.
- Cannibalize yourself before someone else does.
- Partner with intermediaries and aggregators for success.
Don McLagan of NewsEdge referred to a SIMBA study, which calculated that only one-sixteenth of the market is being reached by value-added digital products. SIMBA estimated 50 million users globally, the vast majority of whom were business users struggling through consumer-oriented services that are hit-or-miss for business users. With numbers like this and a narrowing window of opportunity, it's clear why so many executives are focused on issues of bulk customer acquisition vs. traditional sales. He chimed in again on the issue of customer-acquisition costs by noting that it costs about $8 to acquire each unique NewsPage user.
"Vertical portal" has become the term of the moment, just like "push" was a few years ago. While all the "vortals" essentially just look like a standard aggregated Web site, many are developing these portals for a wide range of reasons. Some are like Cliff Boro of Internet Financial Network (IFN), where the pay-per-view part of the Web site acts as a great lead-generator for the sales force. Others want to generate advertising revenue and struggle with banner-blindness syndrome. It's not small change. As Cliff Pierce of Bell & Howell Information and Learning noted, a newspaper-content owner can generate $15,000-$20,000 a month in archive sales through a Web site.
The founder of industry-leader CDNOW, Inc. noted that the "the first big Internet wave was B2C (business-to-consumer). The next big wave on the Internet is B2B (business-to-business) plays." The implication being that this is what will drive the creation of vertical portals.
Mark Capaldini, CEO of CIS, came up with the most interesting pricing model for LEXIS-NEXIS Academic Universe, which includes reviewing the "pillow-to-port ratio." This bases some of the academic-market pricing on the number of dorm beds vs. the number of ports in the dorm at a college or university.
As you would expect at a conference that combined technology- and content-focused people, there was a lot of talk of what the next generation of search engines would look like. At the end of the conference, Don Wilson, of H. Donald Wilson LLC and formerly CEO of a major online service, moderated a panel of people concerned with these issues, but the topic of bigger-better-best search engine strategies permeated the conference sessions.
AskJeeves got a lot of attention for its strategy or model for two reasons. First, the seemingly upside-down concept that one should index the question, not the answer, was a whack on the side of the head for some. As users ask questions, the database improves in a tightly customer-focused way. Second, the infrastructure to have librarians and others index questions and monitor user behavior was debated.
Northern Light's model was also presented and reviewed as an interesting Web fee/free hybrid. Other new players like Google and FAST were also debated as options where new algorithms or sheer size can carve out a niche in the Web world. Even some traditional players—if the word "traditional" can be applied here—like Microsoft presented their "digital dashboard."
Another search issue that got attention was the re-emergence of auction models for answers, not information. Users post the information/answer desired and either the price they're willing to pay, or researchers bid on what they will charge. There was general cynicism related to this one, as the notorious reticence to pay for information by Netizens cast doubt upon its success.
Bot and Shopbot technology and their usefulness in developments underpinning the next wave of information-seeking, behavior-based tools were debated as possible future paths. Where was the next set of convergence going to come from? Who would offer an easily used suite of tools that seamlessly tied search behavior to ongoing information-seeking behaviors?
Anthea Stratigos, president of Outsell, Inc., a leading firm specializing in the information-industry market, user behavior, and sales research, identified several challenges with the industry:
- There are a host of integration issues between content and knowledge workers.
- There is a misunderstanding of end-user needs and behaviors.
- Relevance is in the eye of the beholder.
- Vendors have an exaggerated sense of self in preserving their brand identities.
- The intranet or enterprise portal is at the hub of all the action, and inter- and intra-vendor tensions are delaying adoption.
- The industry doesn't seem to be working fast enough to reduce the frustration of the user.
The Future . . .
Seth Godin, Yahoo!'s vice president of direct marketing, based his luncheon keynote speech on his great book, Permission Marketing. With pizzazz, he skewered the bad Internet marketing techniques foisted on Netizens today, and outlined a clear way (supported by real-life examples) to grow your business and customer satisfaction in tandem at exponential rates.
Am I hopeful that the new SIIA will thrive for all its constituencies? I'm withholding judgment for now—not because I saw anything bad at this conference. Indeed, I saw more progress on mutual issues and concerns than I was expecting. There appear to be lots of people actively seeking to make this new organization work. It's simply still too early to tell. Maybe when the music stops there won't be the industry islands that exist now. When the dance is over who will take home the crown jewels?