Content Matters

Who is your customer?  Is it the consumer or the advertiser?

Ad-supported content products must continously ask themselves this question. Is their primary focus creating a great user experience or in creating content optimized for advertising? 
Saul Hansell at the New York Times (via Michael Parekh ) takes a look at this issue in a blog post about Zillow. Hansell is disillusioned by the typical pattern that occurs with new sites. Initially, they focus on the customer, then over time become more and more advertiser-driven, reducing the quality of the customer experience. Or, as he put it:

There has been a sadly predictable transition as idealism morphs into the cruel realities of running a business. The comparison shopping engines, like ComputerESP (bought by CNet’s Shopper.com) and BizRate (now part of ShopZilla), stopped displaying things in the order that most favored consumers with the lowest prices or whatever else the consumer wanted first. Instead, they tried to find ways to favor advertisers, like listing paying customers first or simply ignoring sites that didn’t pay for access.

This balance between the needs of consumers and the needs of advertisers is not something that newly emerged on the web. It's been there for decades in trade press, directories (where a logo or preferred positioning is sold to listees) and even in the conference industry.

Zillow, is trying to break that pattern, by keeping their products consumer-focused. Other mortgage shopping sites, such as Lending Tree, are lead-generation engines.  You can get quotes from multiple sources, but only by agreeing to have your contact details shared with lenders, who follow up with various levels of aggressive sales efforts. In the Zillow system, consumers remain anonymous. You can get quotes from multiple lenders who receive the key information needed to provide a quote (zip code, rough credit score, etc) but without the need to provide their identity. Consumers can send questions back to lenders, with Zillow as the intermediary, thereby remaining anonymous until they decide they wish to contact the lender directly.

I've always believe that if you create a great user experience, you'll attract consumers and make your site attractive to advertisers. At the same time, I know of many products - websites, magazines, conferences and more, which started by focusing on the needs of their target consumer, but later compromised the  user experience by letting the advertiser drive all of their decisions.  Zillow's Rich Barton seems to understand the need to avoid the temptation; let's hope they keep that approach even if they're missing their revenue targets.

NetProspex, a sales intelligence startup, has just released a suite of free email marketing tools called the Sales Lead Toolkit.
The Toolkit consists of four apps:

• Email pattern lookup: trying to figure out the email pattern for a prospect? NetProspex uses their database of corporate email addresses to suggest the right pattern (e.g. [email protected] or [email protected], etc)
• Email checker - most commecial email packages have this capability, but it's great to have a free web-based app where you can validate whether an email address is accepted by the email system.
• Lead by URL - just enter a URL and it provides you with a list of contacts which you can download/purchase.
• Custom search - by geographic region, job function, industry, etc.

NetProspex, founded in 2006 and run by former ZoomInfo president Gary Halliwell, is a fairly new entrant into the competitive prospecting and sales intelligence space.  Their approach seems to be a cross between the ZoomInfo and Jigsaw models. They claim 2.5 million contacts at 350,000 companies. The basic business model is a subscription model, though they are employing a Jigsaw-like offering where users can upload their own contacts in return for new ones.

I took a quick test run of the new tools. In a small and unscientific study, I found the data to be fairly accurate. Looking at the profile for Alacra, NetProspex had 12 contacts, as compared to nine on ZoomInfo.  Of the 12, there were a couple of good contacts that I would not have expected them to have and only one that appeared to be in error. They also incorrectly listed a few of our London contacts as based in New York, but that's a minor quibble.

The new Toolkit is a smart idea.  The lookups are limited to ten per day, so it's a freemium approach where they can show off their capabilities in hopes of getting users hooked so they subscribe. I've long been a fan of freemium, especially with products like this where power users will easily exceed the free version, but occasional users will bookmark it and come back for more.

The Toolkit is available on the NetProspex website.

The second entrepreneur panel of the afternoon included a diverse mix of companies.

Bambi Francisco pitched her new company, Vator.Tv.  Vator (short for elevator pitch) is a community site for entrepreneurs who can create a home page for their company and can network within the site.  Vator's tagline is "Where startups launch and grow up" and their goal is to assist startups by providing support for funding, business development, promotion and infrastructure growth.  Most of the pitches are via video - either short interviews by Bambi or her staff, or user-uploaded videos.  The Company has strong backing (Paypal's Peter Thiel, Richard Rosenblatt of MySpace and Georges Harik of Google) and seems compelling, but I was surprised to hear that they really haven't figured out a business model yet (somewhat ironic for a site of this nature).  According to Bambi, they have held a series of competitions, each with a corporate sponsor, which have generated about $40k in revenue to-date (the company launched this past June).  She also suggested possible revenues from syndicating the content or alerting companies to new startups on a lead-gen basis.  They have about 1,000 company profiles up, so they are attracting participation.  If they develop a solid community, I could see this being acquired by a targeted media company (maybe Inc.) but I can't see this becoming more than a modest product line extension.

The second presenter was Nikos Iatropoulos, CEO of Lingospot.  Lingospot offers technology to help publishers cross-link their content.  Unlike the "more like this" providers such as Sphere, Lingospot uses NLP to identify key terms on a page, offering links to other content by that publisher for those terms, as well as links out to sites like Wikipedia, youtube, flickr or amazon.  Their value proposition is a modest bump to page views.  Nikos suggested that a typical publisher could see a 2-5% increase in page views out-of-the-box and could improve that if they train the system.  I think Lingospot offers a nice feature but I'm not sure that it's a sustainable standalone business. 

Dr. Bob Levine, CEO of ArchieMD was the next presenter.  ArchieMD provides 3-D models of human figures, organ systems and medical technology and processes.  They also create interactive products that can show a medical process.  Today, they distribute their content through partners like Reed Elsevier and Houghton Mifflin in the health professions and K-12 space.  They are looking to enter the litigation (jury education) space and are hoping to find a partner for that.  They have an interesting niche and, though fairly narrow, should be a sustainable business.

Keibi Technologies CEO Paul Remer followed.  Launched in 2006, Keibi helps sites with user-generated video assure their advertising partners that they will suppress offensive or inappropriate material.  Today, most sites with UGC have to manually moderate their sites or rely upon other users to point out offensive content.  Keibi offers a moderation suite that uses a combination of technology along with pattern detection to score uploaded video for its likelihood to be offensive.  For example, a user who has uploaded offensive material before will trigger a higher score than one who has not.  This approach is important as automating the recognition of "offensive material" is a challenge.  While supreme court justices may define pornography as "I know it when I see it", that's a bigger challenge for a computer.  Keibi's pitch is as a productivity solution.  Sites will still need moderators, but using their moderation suite, their productivity will be much higher and sites will need fewer moderators.  Keibi also offers an outsource model, where they will provide the moderators and are working on certification services to meet the needs of specific advertisers.  I think this is an interesting niche.  Advertisers today are cautious about running ads on UGC sites and those that do tend to pay remnant CPM rates.  If Keibi can help sites reduce the fear of UGC, this could be a big win for those websites.

The final presenter of the day was Michael Breyer of Courtroom Connect.  Courtroom Connect initially launched by providing wireless access in courtrooms so that attorneys and others could communicate with their offices.  They quickly found that the greater opportunity was to leverage that technology to broadcast trials out.  While CourtTV and other mass media focus on the sensational trials, Courtroom Connect follows the money.  So, a patent lawsuit for a biotech company might not make compelling television, but the plaintiff and defense firms will want to watch it, as will hedge funds and others.  In addition to the live broadcasts, they maintain a video archive of the trials.  This content is compelling to attorneys who might want to see how a jury responded to various arguments in a similar case, or see how a judge acted in a prior case.  Launched in 2005, the Company now has installed permanent networks in more than 50 courthouses across the country and generated $2.5M in revenues in the past year.  They are seeking capital to expand their coverage.

The second panel was not as compelling as the earlier group, but finished strongly.  Both Keibi and Courtroom Connect have solid business models and are positioned well for a strong market.

This one slipped under my radar late last week.  TechTarget announced the acquisition of KnowledgeStorm in a $58 million deal that combines the two leaders in IT lead generation.

TechTarget has been the leader in the market, with Q3 revenues of $23 million. According to the press release, they expect KnowledgeStorm to add revenues of $12-14 million in the 12 months following integration.  TechTarget had previously acquired KnowledgeStorm competitor BitPipe, so they now have a solid lock on the IT white paper and lead gen market.

KnowledgeStorm had initially put itself on the block in November, 2006, when CEO Kelly Gay indicated that the company had achieved a $20 million run-rate and was a sustainable business, at the time stating "We are at that point. We've proven we can do it."

Congratulations to Kelly and the KnowledgeStorm team on the growth and successful outcome for the Company.

Lead generation website CreditCards.com has filed to go public in an initial public offering to raise $115 million.

The CreditCards.com portal serves as a destination site for those seeking to compare credit cards offers.  The site generates revenues through acting as a lead generation service for issuers of credit cards and their marketing agents.  The Company generated revenues of more than $27m for the first half of 2007, up from $18.7 million for the same period a year earlier.

The Company was created last year by Elisabeth DeMarse with funding from Austin Ventures.  DeMarse, of course, previously led the growth of Bankrate.com from $15m to $36m in revenues and also served in leadership roles at Hoovers and Bloomberg, among others.

The Company indicates that it plans to use funds from the IPO to service debt, currently $154.8 million and for other expenses.

While the timing might seem unusual in light of the current credit squeeze, what the past has shown us is that, regardless of market or economic conditions, consumers are always looking at ways to manage their debt.  And with tighter markets, credit card issuers will be willing to pay a premium to generate more leads and fund growth.

Credit Suisse Securities will be the lead underwriter on the IPO, with participation by Citigroup and Thomas Weisel Partners.

People data has long been a solid niche in the content industry.  Multiple times in my career (particularly at Nelson and Leadership Directories), I’ve developed products built around people data.

While this segment has been changing over the past five years, the pace of change has accelerated dramatically during the past 12-18 months, and the traditional business models are quickly becoming obsolete. 

In recent weeks, there have been a few compelling new entries in this market.  For the traditional providers, the biggest short-term threat probably comes from the new partnership between Capital IQ and sister company Business Week.   The new Company Insight Center on Business Week’s website provides snapshots of both public and private companies.  The People section includes fairly accurate lists of officers and directors and also shows “degree of separation” relationships among board members for social networking.

In essence, Capital IQ is now providing for free a product that paid content providers have been selling for tens of thousands of dollars.  While the user interface of this beta version could use some improvement, that’s pretty easy to fix. 

In the longer term, the trend that’s likely to have a much greater impact is a paradigm shift to accessing people data through search.  Traditional providers have built proprietary (and often complex) user interfaces to view their data.  In an effort to address every potential user need (list building, views of complex organizational structures, sharing of user edits and more), vendors developed systems that were not intuitive and often required training of end-users.

But in today’s environment, users don’t want proprietary interfaces.  They don’t want to read documentation or sit through training sessions.  Users have already found a user interface which they like and it’s called Google.  I can hear the response of the traditional vendors - Google is too simplistic and can’t do all of the fantastic things which your proprietary interfaces allow.  Well, that may be true, but it’s the interface that the world has embraced and if your system is more complex, you’re going to be left behind.

The emerging providers are viewing this market as a vertical search issue.  ZoomInfo and LinkedIn were the first to take this approach.  New providers like Wink and Explode have launched compelling offerings.  Perhaps most interesting is a new site (still in early beta) called Spock.  Spock is sort of “ZoomInfo meets LinkedIn”, with a Web 2.0 interface which incorporates tagging and other community features.  When you first join Spock, it asks you for your ID and password to LinkedIn, Plaxo, Gmail, Yahoo or AOL.  It uses this information to scrape your existing network, adding that information to your Spock profile.  Spock automatically tags your profile, using term extraction to identify companies, titles and industry terms that represent you.  Users can “vote” as to whether the tags accurately represent the person, creating a tag cloud for each person. (Note: I will do a more comprehensive review of Spock in an upcoming post.)

The people data market is going through a transformation similar to that which affected news content a few years ago.  Contact and biographical data are rapidly becoming commodities and the next six to twelve months are sure to bring more disruption to this market.

Most of the traditional players in this market have built their business by identifying a niche which they can fill better than anyone else.  At Nelson, we knew industry specialties for buy and sell-side analysts; at Leadership, we could tell you which committee staffer had an interest in a particular subject.  But the dirty secret for most of these providers is that the core application typically accounted for only a third to half of their customer base.  The rest of the customers were just looking for lists for sales prospecting or recruitment.   While the emerging products may never be deep enough to steal away the core users, they are already getting good enough to pull off the ancillary user and will only get better.  So, if you’re trying to project 2010 revenues for one of the traditional players, there’s a pretty easy formula.  Just estimate about a third to half of their 2000 revenues and you’ll probably be on target.

Agree?  Disagree?  I'd love to hear.  Please post your comments.

Last week, I had the opportunity to sit down with Jigsaw Data CEO Jim Fowler for an update.

Jigsaw, previously profiled as one of the 50 Content Companies that Matter, has built a web 2.0 business card exchange, leveraging their user community to build and maintain their database.

According to Fowler, Jigsaw has had strong revenue growth during the past year and expects to achieve profitability in 2007.  As of December, Jigsaw had more than 5 million contacts in their database and, based upon their current run-rates, expects to reach 10 million by the end of this year.  They have more than 165,000 registered users, who submit content to the Jigsaw database, and their system of rewarding those who “challenge” old or inaccurate data keeps the database clean.

As is often the case with startups, some of their revenue is coming from unexpected sources.  While their core business model is selling access to the database to corporate sales and marketing groups, the fastest growing segment is from companies using the Jigsaw database to clean their CRM data.  Jigsaw has a dead record locator, or “graveyard” as Fowler describes it, with more than 700,000 records.  Clients can tap into this graveyard to identify inactive contacts and can use the live Jigsaw database to append and update partial data in customer management databases.  Fowler indicates that data cleaning now amounts to more than half of their revenue.

On the product side, Jigsaw is launching some new features to attract new users and increase usage among their existing base.  Until now, Jigsaw has required new users to register with a credit card, to ensure that they knew who was submitting or updating data.  In their new release due this month, Jigsaw will allow sign up without a credit card, for users with a legitimate enterprise email address.

Later this spring, Jigsaw will be adding some new features to increase the level of user-contributed content.  Today, if a user adds a contact, they later receive points (which they can use for their own downloads) if that contact is downloaded by another user.  Under the new model, there will be more competition.  While a user will still receive points for downloads of records they have added, a new user can take over “ownership” of that record by adding additional information, thereby taking over the “revenue stream” for that record.  That’s a good incentive for users to periodically update the records they have contributed and look to add more information to records updated by others.

Jigsaw Data has demonstrated a compelling model for user-generated content.  In my tests, their data shows favorably, as compared to traditional databases or web-scraping approaches like ZoomInfo.  To-date, they have done a good job of balancing the needs of their editorial participants (the users who update the database) and their revenue-producing corporate accounts.  While social networking sites like LinkedIn have dominated the mindshare of the web 2.0 prospecting space, the reality is that most sales organizations still rely upon old-fashioned cold-calling to drum up business.  Jigsaw is effectively leveraging the community to address that market need.

Austin Ventures has announced its acquisition of All Star Directories, a lead generation service for higher education.

Last year, Elisabeth DeMarse of DeMarseCo partnered with Austin Ventures on a $50M buyout fund to make acquisitions in the content space.  This is the first deal completed under that partnership.  DeMarse, of course, led the growth of Bankrate.com from $15M to more than $36M, so she knows something about the lead generation space.

DeMarse has been carefully analyzing consumer spends in recent months, to identify the market niches where aggressive growth is attainable.  Indicates Elisabeth "I've reviewed categories as disparate as travel, education, housing, health and wellness, and all the categories of personal finance. When you look at these categories as a percent of HHI, there is a strong common denominator—that a unique visitor to a destination site in one of these categories is quite valuable to an advertiser. The acquisition of All Star Directories represents our first investment in the online education lead generation space.

Mike Mathieu, founder of All Star Directories, has built a very impressive company in five years, with an excellent management team. Doug Brown, President of All Star Directories, will retain his role leading that organization. I will serve on the Board, and continue to uncover investments for AV and DeMarseCo that fit with our strategy."

All Star has thirteen directories and revenues estimated at $15M.  Its products, including All Criminal Justice Schools, All Business Schools and All Nursing Schools, among others, are lead generation  applications aimed at the rapidly growing for-profit education segment.