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Vol. 21 No. 3 — March 2004

Based on the pre-conference literature, it seemed the mood of the summit would be hopeful: companies finally picking themselves up, dusting themselves off, and looking to the future. While panelists and keynote speakers were enthusiastic about recent innovations in the industry, exciting verticals that are opening up, and venture capital opportunities, the tone of the show turned out to be more cautiously optimistic than actually upbeat.

It Makes the World Go Round

Although the show's sponsor has the word "software" in its name, much of the summit's focus was more business-oriented than technological. A brief introduction to one panel by John S. Suhler, president and co-CEO of Veronis Suhler Stevenson (VSS), separated the proverbial men from the boys. He showed a series of graphs that depicted industry trends over the past 25 years using BIS EBITDA (Business Information Services Earnings Before Interest, Taxes, Depreciation, Appreciation) data.

Suhler explained, albeit in language replete with financial acronyms, revenue multiples as arbiters of expansion and recession and compared BIS EBITDA margins to those of the VSS Top 50 and the S&P 500. Although BIS margins had been leading the others since 1978, they have fallen behind the VSS Top 50 since 1998. Suhler says this can be attributed in part to the consolidation of the media industry.

The panelists broadened the discussion a bit and offered their insights about the coming year. Roger Krakoff, partner at JEGI Capital, LLC, noted, "When verticals dominate an industry vertical, they tend to innovate less." The panel talked about the recent industry consolidation and what implications that can have on innovation (or the lack thereof) in the information sector. All were quick to point out how dangerous it is to generalize about such an ever-evolving industry and that factors for success tend to vary from company to company.

According to Diana Noble, managing director of Reed Elsevier Ventures, since cleanup from the "bubble-burst" is for the most part over, there's now money to be invested once again. This bodes well for the industry as a whole. Where will that money be invested? Krakoff says that JEGI looks at three factors when weighing venture capital opportunities: management, management, management. Because a company in that position is likely to have a blurry business model, it's extremely important to have strong management.

Earlier in the day, keynote speaker Martin Nisenholtz, CEO of New York Times Digital, touched on how important it can be to have an actual business model versus a good idea, particularly as the industry shifts to a fee-based model for digital content. Businesspeople are used to paying for content, Nisenholtz reminded attendees, but consumers are not. Within most folks in the industry, there's a businessperson and a consumer, so the trick is to appeal to the businessperson.

In a later session, James Kollegger, CEO of Genesys Partners, wondered what business models will look like down the road and used the iPod as an example of a product that entirely outperforms its original minimal plan.

Blowin' in the Wind

It appears to me that ... the difficulties and disagreements, of which history is full, are mainly due to a very simple cause: namely to the attempt to answer questions, without first discovering precisely what question it is which you desire to answer.

—George Edward Moore

Moore's opinion from 1903 is surprisingly relevant in light of the hurdles to the effectual mining of digital content. The issues surrounding effective search were debated throughout the summit. Now that there's so much information available digitally and a Google search can easily yield hundreds of thousands of results, there's value in offering customers less information but the information they're actually seeking (to paraphrase the overused "getting the right content to the right people at the right time" mantra). According to David Marques, CTO of Elsevier, there's a shift from the value of content to the value in content. The key now is determining who gets paid for what.

Tim Cadogan, vice president of search at Yahoo!, pointed out that there's significantly more content out there than is represented in a typical search experience. The average query is two words, so it can be nearly impossible to determine exactly what someone needs. There's also the question of how best to display results, as a list is not always the most appropriate. A multimedia offering or a purely image-based offering may be more useful.

In his lunch keynote address, Brewster Kahle, director and co-founder of the Internet Archive, touched on the same issue of how best to determine what people are really looking for. While Google is ideal for many general information queries, within an industry people do not necessarily want to see what's most popular. They want to see trends, up-and-comers, and related content.

Marques shared a personal anecdote that shed some light on this endlessly discussed issue. His daughter had sent him a question: "Can you fill up your memory and have no room left to remember anything?" In this situation, "no" is not necessarily the answer she had in mind. While it may suffice for a young child, for students or adults the best answer would include a look at neuroscience sites, links to the most current memory research, and perhaps information about Alzheimer's and other diseases that alter memory.

The consensus was that no matter how you look at it, the search segment of the industry both needs to be and will be vastly improved. Nisenholtz discussed how Google, Yahoo!, and other information services are designed to offer answers that are "good enough to satisfy the masses." (This was a part of his much-blogged "The Pong of Electronic Publishing" keynote. In it, he paralleled the success of these search engines to the success of the video game Pong, which was enormously popular despite its simplicity.)

In a later panel, Patrick Spain, chairman and CEO of HighBeam Research, built on Nisenholtz's theory. He said that his company's goal is to go a little further than "good enough" and offering "pretty good" answers. Factiva's Clare Hart responded that Factiva wants to offering "the answer and in context." But no one seems to be quite there yet.

Proceed with Caution

According to many panelists and speakers, success in the coming year requires equal parts solid business plan (or at least a solid idea) and the alignment of the stars. A number of speakers now lead or work for extremely successful operations but have spent time working for equally valid companies that failed for one reason or another.

Throughout the day, many attendees shared their war stories. And while they cannot generalize for the industry as a whole, their experiences, victories, and disasters offer valuable perspectives on how to proceed in 2004.

The SIIA 2004 Information Industry Summit did not propose panaceas but offered insights in a variety of specialized niches. While few dusted-off companies have hit the ground running, 2004 should bring great innovation, increased interoperability, and standardization across the industry. In addition, we should see a much-needed influx of venture capital funding so that those poised to take off have the power to do so.