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Vol. 11 No. 5 — May 2003

With this issue, we introduce a new columnist, Matthew McBride, who will share responsibilities for "The Better Mousetrap" column with Nancy Lambert. Searcher Lambert will continue to concentrate on patent information, while Searcher McBride will focus on other areas of science and technology.

With a background as a biological researcher, McBride has turned to librarianship with an emphasis on competitive intelligence. He has special strengths in biological, pharmaceutical, chemistry, and engineering areas. He has worked for Dialog, but now has started his own information consulting service.

His first column focuses on his old employer's new pricing scheme. We have promised him that all the rest of his columns will be easier and less controversial. (And he believed us!)

...bq

As a former Dialog information consultant, I had the opportunity to learn, love, and understand the Dialog system from a unique perspective. When you get up-close and personal with it, there is something very special about the command language, almost simplistic. Students, new users, and even seasoned information professionals see Dialog as a very complex and dangerous beast: The language is tricky, the content is deep and varied, and the steep prices can easily cause sticker shock. Dialog information consultants serving users would try to tackle the first two challenges through training and support and to solve the third by helping users identify more cost-effective search habits or alternate sources. The high cost of searching is the primary inhibition to developing more effective search habits for most users.

Well, 2003 brings an annual price increase that departs from raising standard output costs. Instead, the increase focuses on changes in some browsing formats, in some Alert charges, and a few other areas. Considering the difficult economic times, is the end result good for Dialog? Is it good for users? Or is it a decent compromise for everyone? Let's first take a look at it from....

The Dialog Perspective

I spoke with Roy Martin, Jr., president and chief executive officer of Dialog, about the recent price increase, and he was quite surprised to see the reaction from some users (see the "Q and A" sidebar on page 41 for more details). During our conversation, we specifically discussed the planning process for Dialog's pricing strategy, as well as the price increases for 2002. Martin told me:

Traditionally, Dialog has had annual price increases, and sometimes they have been announced. Before I got here, there were a couple of years that they really weren't announced that effectively or efficiently. We sat down this year to look at our pricing schedules, including the input provided to us by our customer advisory board.

Before we do something like this, we review it with them to get their feedback, their inputs, which we inevitably incorporate. Ultimately, our advisory board was supportive of what we were going to do. I would suggest that their support, in the absence of a lot of chatter on most of the listservs, combined with the absence of virtually any feedback from customers into our office here (in Cary, NC), basically says that what we set out to do has been received by the market.

I also think that the changes won't be felt until users see the impact on their monthly statement.

Mr. Martin further stated, "What we set out to do is not fundamentally change our pricing. When we went through all of this, the biggest decision we had to make was not to raise prices this year. Should this be a year where Dialog holds the line on prices or not?" And considering the difficult economic times, Dialog decided to hold the line.

But does that mean the resulting price increases are the best solution? It depends on your typical usage of Dialog, therefore we turn to....

The User Perspective

I polled SLA users, division listservs, and others to gather feedback on the perceived impact of the recent price increases on search habits, usage, and budgets. From e-mail and interviews, all the users indicated that they understand periodic price increases are necessary for the products and services that they use. Aggregators and information providers need to raise prices to cover their fixed costs. Last year's price increases for output on Dialog (approximately 6.5 percent) were counterbalanced by the option for users to reduce their search costs by using connect-time pricing, instead of DialUnits. This year, however, three areas in particular troubled some users.

1. Restriction of Free Formats

The elimination of free formats from selected files could lead one to assume the beginning of a trend. On one side, Dialog argues that the free formats are valuable output formats, and hence a charge for those records is reasonable. But die-hard searchers know that these formats are merely a means to an end and believe they should be considered a component of the search cost. If you must pay for browsing formats, then either the format should have some useful value beyond browsing, or the cost for those records should be deducted if you subsequently purchase the full format record. Is a company name worth 25 cents? It depends on how much browsing you need to do to identify your final output.

Let's get a clear perspective on what Format 6 really gets you. Across most company directory files, the Format 6 charge is now $0.25, which generally gets you just the company name. In terms of relative value, the new format in these files now costs an average of 7.5 percent of the full record cost (range of 0.7 to 20.8 percent). Format 6 in SEC and financial databases now costs $0.10, or approximately 1.8 percent of the full record cost (0.1 to 5.4 percent). Finally, Format 6 in patent files is now $0.25 for titles and $0.50 for titles plus class codes. In relative value, the new format charge in patent files now costs an average of 6.5 percent of the full record cost (3.2 to 9.4 percent).

So what's the big problem with paying for browsing formats, especially since several files already carry a charge for this format and have for some time? It really isn't a problem, as long as the browsing format contains useful data and the pricing matches the value of the data received.

One thing still troubles me: Under DialUnit pricing, you get charged to BEGIN a file, SELECT records, and even to TYPE records out. So I am already getting charged to browse when my cost is calculated using DialUnits. According to the example searches, I would be charged $0.44 in DialUnits to TYPE a record in Format 6 from file 584. In this example, the company name alone cost me $0.69, not $0.25. Granted, it takes the same amount of processing time to TYPE a single record or 30 all at once, but it does cause you to think that the cost of browsing is more than just the record.

2. Double-Hit for IP Searchers

Searchers working in the intellectual property literature — patents, trademarks, etc. — are particularly worried that the strategies they use to locate relevant records could be jeopardized. Many have begun to closely scrutinize the effect of the changes. First, Dialog now imposes a RANK charge of $0.02/document in five full-text patent files. RANK charges are already present in selected Dialog files, including some IP files (specifically Derwent). It may seem like a minor price increase to casual users, however it is not uncommon for patent professionals to RANK 10,000 or more records in a single search, which would now cost in excess of $200. In addition to the new RANK charges, Dialog is imposing a charge for the formerly free Formats 6 and 8 in 12 patent files. Many IP searchers feel this represents a double-hit on them.

Considering that patent information professionals comprise such a devoted core of Dialog users, it is extremely surprising to see a price increase installed that would impact on their search habits in two separate areas. If they haven't already, serious patent users should probably consider some of the fixed-price options now available for patent data on Dialog. Remember that fixed-price options are renegotiated annually based on your actual usage (not billing), so you should still exercise caution when determining the impact of any price increases on your search habits. Fixed pricing may merely defer some of the cost increases to subsequent contracts.

3. Pricing Inconsistencies

A few pricing conditions appeared on the system that were inconsistent with the announced changes in the period immediately after the announcement, however Dialog attributed them to a premature evaluation of the changes. After a brief review at the beginning of March, it does appear that corrections have been made, although a few more may be necessary.

For example, repeating the steps taken by Mary Ellen Bates in her NewsBreak article covering the price increase [https://www.infotoday.com/newsbreaks/nb030203-2.htm] posted February 3rd, 2003, I began a OneSearch group for corporate directories (CODIR), selected the most recent update (S UD=9999), and then typed out the first record from each file in FREE format (T 1/FREE/1 FROM EACH). Although most files notified me that FREE was not a valid format name, a record from SoftBase (File 256) was delivered in Format 8 for $0.45, though Format 8 is listed as a FREE Format in the Bluesheet. A record from Corporate Affiliations (File 513) was delivered in Format 6 for $0.50, even though FREE is not listed as a delivery format and the request for a free format record should have triggered an invalid format warning.

Alternatively, a sample search in U.S. Patents Fulltext (File 654), where Format 6 costs $0.25, delivered the intended record, however, the system charged me for Format 16 instead. Strangely enough, Format 16 costs only $0.15, yet it essentially contains Format 6 plus any image data.

Given the 548 files in the Dialog, each with multiple delivery formats, any reasonable person would expect a few inconsistencies, and I am sure Dialog will make any necessary corrections as soon as possible.

What Hasn't Changed

It's not all dire news; much has not changed. Connect-time and DialUnit charges have not increased for any file in 2003, and output charges for most files have remained steady. Service fees have also stayed level for all regions except for the U.K.

The Dialog Finder Files remain one of the best values on the system. The journal name, company name, and product code finders are still free of charge, while DIALINDEX increased modestly in cost to $2/DialUnit (still $0.67/minute). One note: If you are a heavy DIALINDEX user searching across all or multiple files, considerswitching your account to connect time to save a bundle. The following sample search proves why: B 411;SF ALL;S PDA? ? OR HANDHELD? ?;RF;COST. This search costs an average of $5.10 under DialUnits (2.64 DU), but just $0.64 under connect time. Smaller DIALINDEX searches do not yield such a dramatic benefit, and very small searches may be cheaper under DialUnits. If you haven't thought of switching, consider reviewing the article: Bates, Mary Ellen "Dialog Pricing Redux: Deja Vu All over Again," Searcher, vol. 10, no. 3, March 2002, pp. 36+; also available at https://www.infotoday.com/searcher/mar02/bates.htm.

The Bottom Line

Dialog, or any other vendor, is well within its rights to raise prices to a level that meets user ideas of perceived value. For many of us, that value lies in the powerful command-searching capabilities of the system. I can spend hours scouring the Internet trying to find an article of interest, or 30 seconds on Dialog. However, I am concerned with the increased complexity of Dialog's pricing strategy.

Janice McCallum of JMC Consulting, a former Dialog insider, is a consultant who specializes in pricing information goods and services. "It appears that Dialog is eschewing the price-simplification strategy it began in the early '90s and is back to a cost-recovery plan. The tactic of adding new fees for existing commands and search practices forces customers to make a decision about what commands they can afford to use every time they carry out a search."

I would agree, especially since the intentions of any price increase are not nearly as important as how they are perceived by the average searcher. In this case, power searchers are anticipating the need to modify their search habits, a user perception that Dialog should avoid. Janice noted further, "Perhaps more important, they risk driving away new prospects who will be scared off by the complexity of the pricing scheme." Again, only time will tell. Dialog has several interfaces and price plans to meet the needs of different searching styles, users, and budgets, so new and seasoned users with pricing concerns do have alternatives.

In the end, Dialog simply could have increased output charges by a few percentage points and thereby passed along a greater cost increase than theone implemented for 2003. A small increase in output charges would have been less than the increase for 2002, much more simple to calculate the impact on your budget, and possibly more expensive on the monthly bill. According to Roy Martin, this is exactly what Dialog didn't want to do to its customers. All of the individuals that I spoke with that had prior knowledge of the pricing strategy for 2003 indicated that Dialog was trying to search for the best solution in difficult economic times for its customers. Yet, I expect the outcry from most users would have been much less if there was small increase in output charges, because it does not impact search habits.

The result of this price increase is that the power searcher may need to modify their search habits to avoid or lessen the impact of these new costs. Should it be necessary to develop workarounds to meet your information objectives at a reasonable cost? No, but I also don't think it is healthy for users of Dialog to try find flaws in the pricing structure to get around these increases. Instead, you should voice any concerns directly to the company. Dialog has stated that the traditional pricing model for power searchers emphasizes and rewards precision and sophistication. On the other hand, additional fees for existing commands, as well as the already-imposed 10 percent surcharge on DialUnit pricing for DialogClassic via telnet, does lend credibility to the perception that it is becoming more expensive to be a command searcher on Dialog.

Ultimately it's up to you, the user, to determine whether the price paid for any vendor's services, features, and content is worth the value received.

SUMMARY OF DIALOG PRICING CHANGES FOR 2003

Below is a summary of some of the pricing changes for 2003 on the various Dialog platforms taken from the letter sent to all Dialog customers on January 20th, 2003.

• Connect time and DialUnits charges unchanged.

• Full format document charge for news files increase from $2.75 to $2.95/document.

• Charges ranging between $0.05 to $0.50 inaugurated for formats 6 and 8 in 90 selected business files.

• Charges of $0.25 for patent titles and $0.50 for patent titles and class codes inaugurated in 12 selected patent files.

• All output in remaining files remains unchanged (versus 6.5 percent increase for 2002).

• RANK charge of $0.02/document implemented in five full-text patent files.

• Alert charges for individual news files increase from $2.15 to $2.95/week (20 bundled records included).

• Alert charges for DialogSelect, DialogPRO, and Dialog Intranet Toolkit inaugurated at $2.00/month/profile.

• Charges for DIALINDEX (File 411) increase from $1.75 to $2.00/DialUnit (no Connect Time increase). All other Finder files continue to remain free under both DialUnits and Connect Time.

• Telecommunications fee increases from $13 to $14/hour.

• Service fees billed monthly rather than semi-annually.

• U.K. user ID fees for up to five users increase from $10 to $14/month/ID (equal to U.S. price).

• Dialog DataStar search fees increased an average of 6 percent (connect time), and output charges increase an average of 1 percent (compared to increases of 6.5 percent in 2002).

For more detailed supporting documentation on the 2003 pricing changes effective February 1, 2003, see http://support.dialog.com/pricing/.

Q&A with Roy M. Martin, Jr.

President and Chief Executive Officer of Dialog

March 4, 2003

What is your vision for the viability of the telecom, search, and output cost pricing strategy currently used by Dialog and other vendors?

I think that over time, pricing models in the industry will continue to evolve as customer and user requirements change. As information delivery continues to migrate across the enterprise, different pricing models that are more attuned to this growing user group — especially those that involve fixed price options — are likely to continue to emerge. For power searchers who have a level of sophistication and knowledge of content and sources that goes beyond that of most enterprise users, traditional pricing models that emphasize and reward precision and sophistication will likely remain.

I think that most vendors of broad-based information that reach diverse audiences, such as Dialog, will continue to provide a range of options for customers, depending on their unique needs.

On the surface, the recent price increases seem very minor. However, the greatest financial impact is on the independent to small business user with a limited budget. What Dialog options do they have to return to predictable costs?

I think what you refer to when you say "on the surface, the recent price increases seem very minor" is the reality of the pricing changes from Dialog this year. Most of our users will see very minimal changes in pricing. This contrasts with significant price increases in prior years.

We think we've done a good job in 2003 at holding the line on prices, and we believe our users will reward us for this. The vast majority of Search Fee, Output Fee, and Services Fee charges are unchanged. As a result, our belief is there is not a significant impact to small business users that is different than that of other customers.

Regarding small business users, I think it is important to point out two things. First, we launched a new line of products in 2002 specifically designed for small businesses. The products in this line share one common feature — unlimited usage of information for a fixed monthly price across a number of selected databases. The product line, DialogPRO (Predictable Research Online), has been well received by customers and the media alike. We are continuing to expand this line throughout 2003, offering more options.

Secondly, throughout the past 2 years, we have implemented numerous pricing changes to help our small business customers, directly in response to the feedback they provided to us. These changes have combined to significantly lower the cost of searching on Dialog for this segment of our customer base.

For instance, we eliminated the minimum monthly fee of $75 last year, which was instituted by prior ownership of Dialog. We reintroduced Connect Time as a searching option to DialUnits. Connect Time, which was eliminated when DialUnits were originally introduced, provides a high-value, lower-cost searching option for many types of content on Dialog.

Additionally, major performance enhancements to Dialog systems through increased capital investment by Thomson have resulted in faster response times on
Dialog, which have effectively lowered the overall cost of search fees significantly. Most notably, in October of 2001 we reduced DialUnit fees on many platforms. For instance, the reduction in DialUnit search fees at that time was over 40 percent on DialogWeb. And of course, half of the Dialog product platforms have no charges for searching, including Dialog Select, Dialog1, and our Custom Solutions products, all of which are very popular among our small business users.

With all the discussions about change, what hasn't changed in terms of pricing?

I'm glad you asked that question, because what hasn't changed is the real story. The facts regarding our price reviews are that 526 of the 548 files on Dialog have no change in search fee pricing, and the 22 that do are a direct result of price increases by information providers that affect all distributors of this information. There are no changes to DialUnit fees. There are no changes to Output fees for 335 files. And in 99 of the 100 countries where we have customers, there are no changes whatsoever to our services fee. We are very proud of our ability in 2003 to help our customers through difficult economic times by holding the line on our pricing.

It is important to note that customer feedback, including that of our Customer Advisory Board, was taken into account before the pricing changes were implemented. In fact, since we mailed our pricing notice to Dialog and Dialog DataStar customers in January, customer feedback has been minimal. That includes direct responses to Dialog, as well as commentary on the major listservs, all of which we routinely read.

Several news and business searchers who are not current Dialog subscribers but are who considering evaluating your services in 2003 have expressed concern that prices are being raised for news while comprehensive newspaper sources continue to be removed, like The Washington Post and LA Times. Are you concerned that potential users evaluating your services are getting the wrong message from this price increase?

The increase of our transaction list price for an individual document to $2.95 is consistent with other providers of this information. Interestingly though, our customers are increasingly taking advantage of other pricing options at Dialog, rather than paying for a single news article at a time. With the launch of Dialog NewsRoom and dialognewsroom.com, our customers can now access over 7,500 sources of worldwide news, wires, trade publications and business information for one low monthly fee. In the same way, our NewsEdge product line and our Advantage and Enterprise pricing options allow customers to pay one predictable price for news and business content on Dialog, depending on their unique needs.

Regarding overall content availability on Dialog or other services, this certainly varies over time. In the past 2 years, we brought back a number of files to Dialog, among them the Financial Times. While we would prefer to have all of the content that exists in a specialty area always available on Dialog, that is not possible. Where we lose content, for whatever reason, we will consistently work to bring it back, particularly if it is strategic for our customers and us and is premium in nature, such as the two papers you mentioned.

However, it is important to note that with more than 7,500 sources, our Dialog NewsRoom content is broad and deep, and our partners are the leaders in their field. For instance, in the business news category, there are two acknowledged leaders with global reach — The New York Times in the United States and the Financial Times in Europe.

Alerts in news files and interactive alerts have increased in price for 2003, but most surprisingly is the introduction of Alerts charges on the Dialog1, DialogPRO, DialogSelect, and Toolkit platforms. Historically the Alerts on those platforms have been free of charge, although users only receive the titles and there are no bundled records. What was the reason for eliminating this as a free service?

As we've noted in our strategy statements regarding pricing over the past 2 years, we've been working to harmonize our pricing across platforms and standardize our pricing options across all products. The Alerts charges are modest — for instance, the change on the platforms you referenced is about $2/month/profile — but continue our efforts to eliminate confusion among our customers about pricing on different platforms. The fact that we do charge for Alerts on some platforms but not on others has been more of a historical anomaly than a conscious choice. We're making progress in these efforts to standardize, but we have further work to do.

Have the record pricing problems identified in the NewsBreak article by Mary Ellen Bates been addressed and how? If so, what caused these pricing errors?

I'm glad you brought that up, because much of the information in that article was misleading or incorrect. In the cases where the issues identified were correct, they certainly have been addressed. Let me explain.

The tests indicated in that article were apparently run either the day before the price changes were actually implemented or within hours of these changes being in place. The changes, which were due to go into effect February 1, were actually implemented in portions across a 48-hour period over that weekend during down time periods for many of our customers, as the 1st of February was a Saturday. It appears that certain of the tests prematurely evaluated the results due to a publication deadline. We have re-tested all the points raised in the article, and there were either no issues with these to begin with, or those that were identified correctly have been addressed.

Can you explain the reasons for the elimination of the free formats (6 and 8) from selected business and patent files? Were these changes made at the request of the information providers or by Dialog?

As a point of clarification, Formats 6 and 8 are not "free formats," as they are already chargeable on many Dialog files. With this price change, we extended this to a selected number of patent files and business files. The changes were once again an extension of our plans to standardize and simplify our pricing, as well as equate the price paid with the value received. In some files, especially patent and company information sources, Formats 6 and 8 provide significant value that goes far beyond browsing.

Moreover, given the increased ways in which searchers, especially patent searchers, have been able to reduce their search costs through other avenues we provide, such as the use of connect time instead of DialUnits, we think we continue to be positioned as a high-value service versus other alternatives.

When we announced these changes, we did not expect them to have a significant impact on the cost of searching among our customers and still believe that to be true.

We will continue to monitor user reaction to these changes and understand their concerns. I also meet with customers frequently on a one-to-one basis, and such feedback is valued.

Unlike price increases in telecom or output, each time there is a price increase in a search component, information professionals need to modify their usage habits and search strategies. Although the free formats are considered output, most searchers use these formats as part of their search strategy to help identify which relevant records will be purchased. Does the elimination of the free formats seem particularly fair, especially considering that the most devoted Dialog users have already dealt with modifying their search habits as a result of the implementation of DialUnits? What about in cases where the record titles and table of contents are already freely available on other systems, market research in particular?

I think the question overreaches. In our pricing, we constantly seek the right balance in charging for the value received. These are in fact output formats, the changes are relatively minor, and any significant changes in search components in the last 2 years since we announced our overall pricing strategy have frequently resulted in price decreases to searchers. The implementation of Connect Time as an alternative to DialUnits comes to mind, which many users now prefer as a real cost-effective way to search. The changes in DialUnit calculations on DialogWeb, which reduced the average search cost on that platform by 45 percent in the past year, are another example. Frankly, I don't view the changes you reference as ones that fundamentally or strategically alter search strategy methodologies or searching patterns on Dialog for most users.

Patent searchers have been double-hit by this price increase by the elimination of the free formats in 12 patent files (now $.25 to $.50) and by the implementation of a RANK charge in five patent files ($.02 /document). Considering Dialog is one of the premier patent search systems, do you feel Dialog is potentially alienating such an important segment of its user base? Are you concerned that they may transfer their usage to competing systems such as STN, or other Thomson services such as Derwent or Delphion?

No, certainly no more than I was before we announced our pricing changes for 2003. If anything, given the nature of our changes in the past 2 years, my view is that we are more competitive from a pricing perspective now than we have been in recent memory.

Matt, it is a fact that we continue to offer the most comprehensive collection of intellectual property information in the world on the Dialog service, with more content from more providers than any other single service — and by a wide margin. We think it's priced fairly and available in a variety of price plans that allow users of all types and in all industries to receive the service in virtually any manner they desire in terms of how much they pay and for what.

For instance, patent files on Dialog are now available for one fixed monthly fee, as announced last year. So, if all you need are patent files for a low monthly price, we can provide it. If you want a more comprehensive array of IP content at a fixed monthly price across the entire Dialog service, we can provide it. And if you know what type of patent information you need and don't want to pay search fees for this information, you can use Dialog1 for patent searches where there is no search fee charged. We also offer fixed-rate packages for patent document delivery.

At any moment in time, particularly during times when providers of online information services are listening to customers and working toward positive changes as we have been for the past 2 years, any service and its pricing can be viewed out of context without a full picture of improvements that have been implemented. I believe our users largely understand all of the positive changes that have been made in Dialog content, functionality and pricing during the past 24 months and respect us for them. Moreover, our pricing is as competitive as any in the industry, offering a range of pricing options to address customers' unique needs.

Finally, what should Dialog users expect from future price increases? Will there be an elimination of additional free formats?

In 2001, we announced a comprehensive pricing strategy and approach to our customers and to the market. We said we would work to harmonize our pricing across our various platforms, to provide more standard options and less confusion. We said we would focus on trust and value. Everything about what we have done during the past 2 years is underscored by these two attributes. We said we would work to simplify our pricing, which we have done consistently. And we said we would migrate more and more to an array of fixed price options and subscription products, which we are doing and will continue to do.

We will continue to apply our energy to these areas, be responsive to customer feedback, and work to ensure our pricing offers high value and is competitive. Certainly, price changes are a fact of life in all businesses, but we want our customers to be successful and to use our service. With that in mind, we will continue to strive to find the balance in our pricing between "value received" and "price paid."

We know that if the price a customer is asked to pay for Dialog does not equal the value that same customer receives, or is out of sync with competing alternatives, then our customers will not be happy. We will continue to work to provide good value for the price we ask for our service, and are pleased that we could hold the line on our pricing in 2003.