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Dialog Announces Long-Awaited Price-Structure Changes
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Posted On June 26, 2001


After years of promised changes spanning two owners, Dialog (http://www.dialog.com) has announced major price restructuring. DialUnits, the incomprehensible, un-auditable pricing mechanism installed in the M.A.I.D./Dan Wagner era, will remain in effect—a fact that many online Dialog customers may sigh, not to say groan, to hear, but Dialog has promised substantial revisions in DialUnit pricing.

The alterations should eliminate the considerable variance between costs depending on which platform searchers use: Web vs. telnet, DialogWeb vs. DialogClassic Web, etc. In addition, the ancient, long-abandoned connect-time pricing will be reinstalled as an alternative option. Per-item royalty charges for viewing results will remain in force for DialUnit pricing, but no decision has been made as to their role, if any, in connect-time price schedules. The third initiative in the announcement covered the simplification of sales contracts.

In announcing the pricing initiatives, Dialog president and CEO Roy Martin Jr., said, "Since our acquisition by Thomson in 2000, we have reviewed our business model and listened intently to our customers." Customer "frustration with our current pricing model," according to Martin, drove the long-term pricing strategy changes developed by a team of Dialog's senior executives.

Martin explained: "A pricing strategy involves more than simply rewriting algorithms. It drills to the very core of the value proposition of a company's product and content development, and matching them to customer needs. Over the next 2 years, we intend to create a palette of pricing options and to develop alternative charging mechanisms as we correlate price levels with customer value."

As a sign of the company's commitment to its pricing strategy, it has created a new position, senior vice president of pricing, and appointed Brian Holland to the post.

"As senior vice president of pricing, Brian will become Dialog's champion in this ongoing process, as we examine and develop new pricing models, and respond to the market-value-based pricing initiatives," said Martin. Holland joined Dialog in 1998 as general counsel and has worked with pricing and licensing issues. Martin pointed out that Holland's experience will have particular application as the "ripple effect" of pricing affects the database providers with whom Holland has worked.

In redesigning its pricing structure, Martin indicated that the goal is to set up a price-neutral scheme that will help rebuild customer trust and a sense of value. When completed, Martin hopes that Dialog will offer "myriad choices for customers based on the way different customers use different products." After analyzing customers' feedback and their frustration with the DialUnit pricing initiated in 1998, the company hopes to repair damage done by confusion over how pricing works, a lack of predictability and consistency in prices across platforms, abrupt and arbitrary pricing changes, and a general lack of choice. Pricing work will also focus on complicated sales contracts. In May, Dialog eliminated any charges for training classes in North America, proclaiming that the company would allow no barrier to searchers trying to improve their skills.

The announced revision of DialUnit pricing focused on the erratic pricing across platforms, specifically DialogClassic, DialogClassic Web, and Dialog Web. The company still defended the original intention behind the creation of DialUnits, namely to combine a number of pricing elements—such as variable costs for content searched and the CPU processing demands defined by the complexity of a search—into one transaction fee.

Martin said: "Fundamentally, DialUnits is a good concept whose implementation went awry. It was introduced as a way to measure the isolated system load created by a user's request. DialUnits accrue only when a customer uses Dialog's system resources. It is essentially a measure of the processing resource. The processing fee (DialUnits) plus output charges are basically what make up the data charges for Dialog."

Some other systems still use transaction fees for their usage-based pricing (e.g., LexisNexis' fee-per-search-statement option with prices varying by size of database chosen), but usage-based pricing for most commercial online services today seems to follow a price-per-output or price-per-document model (e.g., Factiva's $2.95-per-document fee). In any case, almost all commercial services emphasize subscription models more than usage-based models.

When questioned about Dialog's decision to go counter to the output-pricing trend, Martin pointed out that Dialog does "have some products priced that way (e.g., DialogOne), but such products serve end-user audiences with very predictable search strategies. We should vary pricing based on how people are using our product. The hallmark of Dialog's product line is precision and selectability. We believe our features offer value, [such as] better results or faster results, and not just a simple Boolean searching box. We may go to output only in some situations, [such as] news files only."

Martin did not want to discuss competitor pricing options, but he did indicate that in time he hoped to move Dialog's pricing as close to a single transaction fee as the company could get. As searcher Mary Ellen Bates of Bates Information Service pointed out, Dialog has more structured content files and its search language has more power features (Sort, Map, Report, etc.), all of which makes for potentially high variation between searches and use of computer resources. Nonetheless, Martin indicated that he even aspired to a day when a searcher could enter a search and get an estimate from Dialog on how much the search would cost before making his or her purchase. The company already has a study project underway focusing on that goal.

Royalties, or per-document charges, will remain the same under the new revisions, according to Martin.
 

What and When?
Between next month and October, Dialog expects that its revisions to DialUnit algorithms will virtually eliminate the variability of DialUnit pricing across platforms. The changes will create a more simplified measure of search activity and greater consistency across interfaces. (See Bates' chart below that displays how wide the differences can run between current platforms.)

Under DialUnit pricing, customers do not get charged for "think time" (in other words, for consulting help screens or Bluesheets, browsing and viewing title lists, reviewing search options, configuring Alerts, or establishing delivery options and user preferences). The company maintains that lengthy head-scratching sessions, for example, when searching an unfamiliar topic or when browsing masses of results online, will still work best with DialUnit pricing.

The resurrection of connect-time pricing, abandoned when DialUnits came into play, will probably shock most professional searchers. Oddly enough, the ancient pricing schema originally became popular when the potential market proved reluctant to buy from online services billing for CPU processing time and other computer costs. Online vendors turned to connect-time as a pricing scheme that would neutralize wide pricing shifts, depending on the demands a particular search strategy might place on a computer, and, instead, establish pricing that would help users anticipate their search expenditures in time to stop them, if necessary. Since anyone with a pulse can detect the passage of time, connect-time pricing broke down customer resistance to online searching. However when computer speeds started running from 57-K baud to broadband speeds, the equity of connect-time pricing collapsed.
 

Or So We Thought?
Now the company has announced its return: In October, it will launch connect-time pricing on DIALOG (DataStar already uses it). "While we fully support the DialUnits pricing model," said Martin, "there are some cases in which it is not the best value-based option for our customers. The introduction of a connect-time option will enable Dialog customers to choose among pricing methods tailored to their skills and search methods, as well as their search needs."

"Clock time" vs. "work time" is the way Dialog expresses the difference between the two pricing structures. The company recommends the connect-time alternative for more sophisticated searchers capable of quick in-and-out work or for naturally brief searches like citation or address checks.

Users will have the option to choose which pricing they want at a session level. Martin, who used to head up the Westlaw service, remarked that Westlaw allows searchers to "change their pricing on the fly within a session."

Simplification of contract language for all current pricing plans was the last of Dialog's first three pricing initiatives. "We realize that our contract language can be difficult for customers to understand," Martin explained, "and that can make it difficult to do business with us. We have evaluated our current contracts and have made them clearer and easier for customers to interpret." The new contracts should come out next month.
 

What Next?
These three initiatives are not the end of Dialog's promised price enhancements. The company expects to conduct a series of methodical and structured changes to its pricing—supported and framed by frequent, continuous customer feedback—over the coming 2 years. On schedule for examination and review are new discount programs that vary prices based on customer-usage patterns, changes to the DIALOG minimum fee, and subscription pricing. In particular, Martin promises "absolutely" to address the $75 a month minimum fee that he recognizes has proved very difficult for smaller users.

Martin said: "We are committed to making fundamental changes in the way we do business and to strengthening our customer relationships by establishing a foundation of trust, value, and understanding. As we continue to develop more alternatives, customers can expect to see additional pricing options introduced throughout 2002. Over the next 18-to-24-month period, quarter by quarter, customers will see new pricing programs establishing different value streams for customers and reinvigorating the notion that you can trust Dialog." Martin also indicated that the company plans to disclose more information in the future on how DialUnits are calculated as the revisions make them more predictable.

The company wants customer feedback on pricing. (When I asked Martin for a contact point for searchers with comments or questions about Dialog pricing, he paused and then replied, "brian.holland@dialog.com").

Dialog, a Thomson subsidiary, provides a wide array of data covering business, science, engineering, finance, and news, as well as the arts, humanities, and social sciences. Its products and services, such as DIALOG, Profound, and DataStar, cumulatively carry more than 6 billion pages of information. In business for over 30 years, Dialog markets primarily to corporate and government markets. Its products are used by over 20,000 professional researchers in over 100 countries. Based in Cary, North Carolina, the company has offices in 30 countries.
 

Searchers Always Have the Last Word
Bates, author of three early and influential analyses of DialUnit pricing that appeared in Searcher magazine, expressed disappointment that Dialog had decided to continue with DialUnit pricing at all. Interested in why Dialog chose to focus its first revisions of DialUnits on "platform price neutrality," Bates did a quick check to verify current price differences between platforms, using some of her past benchmark tests. She also checked on how prices may vary when large sets of downloaded results on the same three platforms increase the effect of the non-DialUnit portion of charging.

According to Bates, differences with lengthy search results were "remarkably little." However, the DialUnit-focused differences were, to put it mildly, noticeable, as she comments and demonstrates: "Having just heard about the upcoming revision of DialUnits to create ‘greater consistency across different Dialog interfaces,' I got curious as to just how inconsistent the DialUnit charges are now. I was shocked to see the differences among the platforms. While I knew from earlier tests that a search on DialogWeb (http://www.dialogweb.com) was consistently less expensive than the identical search on DialogClassic via telnet, I was amazed to see how much more expensive it is to search DialogClassic via the Web (http://www.dialogclassic.com). DialUnit charges for some searches were twice as expensive. One search in a patent file cost $25 on DialogWeb, $44 on DialogClassic telnet, and $74 on DialogClassic Web.

"I see that Dialog has its work cut out for it, and I now understand why they don't anticipate completing these revisions until October."

 
   June 2001 June 2001 June 2001
 Commands File(s) DialogWeb Dialog Classic (telnet) Dialog Classic (Web)
1 s marathon? ? and galloway; t 1/7/1-6 [read them for 2 minutes] 48 $12.40 $12.59 $13.17
2 s cheney(15n)oil; limit s1/1997:2001; s (dick or vice()president)(3n)cheney; limit s2/tx; c 3 and 4; rd; t 6/3/1-7 from each [read results for 4 minutes]; k 6/1-4 from each 148 16 15 9 $44.31 $46.12 $56.51
3 e na=molle, j 234 $.82 $.82 $1.48
4 s waremart? And cy-eureka and st=ca; s waremart? and cy=eureka and st=ca; t 2/9/1 516 $6.23 $6.50 $8.63
5 s nutrac??tical? ?; report s1/titles; [display one complete table of contents] 770 $6.44 $6.79 $13.14
6 s cx=humboldt and sc=5411; sort s1/all/sa,d; report s2/co,cy,sa/1-10 516 $13.40 $12.64 $16.13
7 s wenckebach and (pacemaker? ? or pace()maker? ?); limit s1/human; rd 155 72 55 $2.61 $2.83 $5.58
8 s (photo()voltaic? Or photovoltaic?) and (vehicle? or camper? or car or cars); rank s1/all/ic; s ic=h01l?; c 1 and 2; t 3/8,ti/1-5 351 $25.16 $43.99 $74.06
9 target ‘genetic engineering' *strawberr? 47 484 $.80 $1.37 $1.72
10 s raychem/ti; s fib??optic? or fib??()optic? ?; c 1 and 2; add 636 696 148; repeat; t 3/8,k/1-3 from each papersca $2.85 $3.85 $3.44
11 s sy=aluminian acmite; map rn; b 399; exs 301 $7.60 $7.42 $14.71
12 e na=lisinopril; s e3; map rn temp; b 445; exs; s s1/profile; t 2/9/1 301,445 $51.18 $51.40 $62.13
13 s jn=searcher; report s1/journal 414 $.56 $.58 $.95
14 ?rates 629 629 $.49 $.39 $.49
15 ?fields 629 629 $.48 $.24 $.48
16 b 522 ; b 122 522, 122 $.29 $.84 $1.61
17 s jn=(nation or the nation); s s1 and pd=931025 and tossing/ti; t 2/9/1 484 $4.56 $4.75 $5.90
18 s lucent()technologies/ti; s s1 and definity/tx; t 2/8/1-6; logoff; [log back on]; b 148; t 09095023/3,tx; b 16; t 06470226/3,tx 148,16 current2 $9.95 $10.79 $13.82

As soon as the scheduled October re-introduction of connect-time pricing occurs, Bates will begin work on another full test of the price changes using the standard benchmarks that she has developed. (The article will most likely appear in the January 2002 issue of Searcher magazine, but, as a service to our readers, we plan to load it onto the Web site this year as soon as it emerges from the editing process, where it will join other full-text articles on this topic: http://www.infotoday.com/searcher/sep98/bates.htm, http://www.infotoday.com/searcher/nov98/bates.htm, http://www.infotoday.com/searcher/jul99/bates.htm).
 
 


Barbara Quint is contributing editor for NewsBreaks, senior editor of Online Searcher, and a columnist for Information Today.

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