|
| % of total | |
| Electronic/Internet licensing & subscriptions | 53 |
| Internet advertising | 21 |
| Print products | 26 |
| Total | 100 |
CEO Patrick Spain sees traditional print publishing as the model for Hoover's mission and revenue model. The company's ambition is to be an excellent business publisher: "to become the dominant supplier of information about companies, and to lead the industry in quality, currency and breadth of information." The revenue model is also drawn from traditional publishing. "Traditional media have multiple streams of revenue: they make money from selling newsstand copies and subscriptions to readers, and by selling their demographic to advertisers, says Spain. "That's what we're doing online."
The role model and the revenue model may come from traditional print media, but Hoover's is also taking impressive advantage of the ways that the internet is different from print and other analog media.
Hoover's wants to induce more of its audience to become paying customers, to encourage customers to use the site more often and more deeply, and to subscribe for a long time. Content is critical. Hoover's provides a level of free content to attract users, and a deeper level of content to paying subscribers. Each search on the free section of the site is an enticement to subscribe, since visitors can see links to content that's available to paying members.
Hoover's continually adjusts the line between free content and paid content to balance its goals of attracting an audience and inducing readers to pay. Because the free content attracts an audience, Hoover's periodically moves content out from the members-only section to the free section of the web site. For example, information about competitors used to be available only to subscribers - now, all readers can see the top three competitors.
At the same time, Hoover's keeps adding to the information available to its paying customers. Despite the cliche that "information wants to be free" on the internet, Hoover's has found that customers are willing to pay for information, and they're willing to pay more for better information. Last year, Hoover's increased the subscription price from $9.95 to $12.95 and enhanced its information services at the same time. Subscription rates went up 20%.
Hoover's would like its readers to use the service more frequently. Today, customers use Hoover's for periodic research projects -- paying customers visit on average four or five times per month. Hoover's wants to provide tools and services that readers will use on a daily basis. One way to do this is to serve the personal information needs of its business customers. Spain notes that, "people aren't purely business users or purely consumers - they do both at their office." Hoover's has added the "stockscreener.com" site to help businesspeople with their personal investing.
Hoover's seeks to understand how its customers use the site and uses its findings to focus content development and improve usability. Using a home-grown system based on SAS, Hoover's analyzes its log files for clues to how visitors use the site. Hoover's also conducts usability testing, bringing in customers and watching how they use the site, and regularly surveys its paying customers about their likes, dislikes, and preferences.
Hoover's has found that most customers come to its site to search for a particular company. Out of 15,000 company capsules, every company is searched for at least once per month - very few are looked at less than five times. So Hoover's places the bulk of its content development on being a focused search site. Hoover's believes that its customers use the site for the ability to find information, not just for Hoover's-branded information. Today, Hoover's can deliver profiles to meet 90% of user search requests. Hoover's has partnered with other suppliers, such as InfoUSA, to provide information on companies that Hoover's doesn't.
The company not only looks at what its customers search for, but how they search. Spain says that, "When we gave people a choice of searching by company name, symbol or keyword, in each of three different search boxes, they overwhelmingly chose company name." As a result of this finding, Hoover's changed its navigation. "Now we have one search box with radio buttons, but the default is set to company search. It's easier and faster now for the majority of searches and no harder for the others."
Hoover's has found that its focus on usability has measurable business results. In September, 1998, Hoover's redesigned the site. At first, many customers were distressed -- Hoover's received 200 e-mails that day, instead of the usual 100. But the level of complaints slowed down after the first two or three days. The redesign proved highly successful -- traffic jumped 5% the day of the redesign, and has remained higher; subscriptions increased 20%, and remained at the new level.
Hoover's closely monitors the popularity of new content and services. For example, Hoover's just added information about patents. If patents prove popular, Hoover's will expand in that direction, perhaps adding international patent or trademark information. Analyzing site usage can generate new business opportunities. Often, customers use the site in ways the designers had not envisioned. For example, Hoover's has found that many people think that they can directly contact the company they are researching through the Hoover's site. They try to order products through the site. Says Spain, "It never occurred to us that people would do that. It presents some interesting business opportunities for consideration."
Going forward, Hoover's intends to continue to use technology to help improve the usage and usability of its site. Hoover's has decided to upgrade its content management from a homegrown system to Vignette's StoryServer, in order to be able to more easily add content and services, and to control the site's organization. However, Hoover's is finding that it is taking longer than expected to deploy StoryServer. The delays, says Spain, are "no reflection on Vignette," but a consequence of the up-front design and analysis it takes to build a dynamic web site. "It's a massive effort - there are so many questions we need to answer in order to set up the system to give us the flexibility we will need in the future. We want to set up the content organization for future content, and to set up the permissioning for additional levels of service."
Hoover's would also like to be able to conduct more detailed analysis of users' behavior on the site. "We do not currently monitor navigation paths in any sophisticated way," says Spain. "We know how many people look for news, but not whether people reading the Microsoft capsule are more likely to look for news than people reading the du Pont capsule. We have the raw data, there is just too much of it to parse intelligently with the tools currently available to us."
Hoover's seeks licensing partnerships that generate paying customers and frequent users. To ensure that it is attracting the right sort of audience, Hoover's carefully analyzes the source of the traffic to its site, and relates the visitor's origin to their purchasing behavior. For example, Hoover's tracks the number of page views it takes to obtain a subscriber (lower is better). Good sources of leads for Hoover's include the Wall Street Journal and America Online. Visitors from these sites read relatively few Hoover's pages, on average, before signing up. Since Hoover's most valuable customers are business users at work, Hoover's is highly interested in developing partnerships with vertically-focused information providers who distribute content to company intranets.
Hoover's has found that personal finance sites generate a lot of traffic, but those users almost never buy subscriptions or commerce products. The ratio of page views to subscribers from these sites is quite high. Spain explains: "there is a lot of free information for personal finance that is available on an ad-supported basis from sites like Yahoo and BigCharts. This information will always be free, and those sites can keep raising the bar. Those customers are disinclined to pay for information - they're not the right demographic for us."
Hoover's is finding that it is getting harder and more complicated to establish co-branded licensing arrangements as internet business models evolve. Today, licensees pay a fee for content and/or a commission on advertising revenue generated by the content. In the future, deals will also include commissions on transactions that result from advertising. Payments in content licensing arrangements are starting to flow both ways -- licensees are starting to seek a share of the revenue generated by the customers that Hoover's acquires.
Mass market portals such as Yahoo and AOL have been charging large "carriage fees" - up-front payments for content placement on their sites. So far, Hoover's has resisted this type of arrangement. Spain believes that information providers are beginning to push back against the exorbitant fees charged by portal sites, since the fees are not justified by the lifetime value of the customers acquired from those sites (Bill Gurley has written an astute analysis of this topic). While Hoover's finds "carriage fees" financially unattractive, Hoover's is amenable to licensing deals that include ongoing payments for customer acquisition. Says Spain, "we allow our partners to participate in the ongoing revenue stream from a customer they bring us for as long as they remain a partner and their referral remains a customer. This protects against the uncertain value of that customer."
Because Hoover's monitors how often its "company capsules" are typically read, it's obvious when there's a spike in traffic. Says Spain, "Once a small company that had low traffic leaped to among the top viewed companies. Upon investigation, we determined that the Washington Post had written an article about it and that almost all of the page views of our capsule that day were on the Washington Post co-brand."
Hoovers takes advantage of the "context effect" by creating packages of company information that complement news. On one of the busiest travel days of the year, for example, Hoovers' created a home page feature on Southwest Airlines which pulled together a collection of information about the airline industry. "These context-based packages generate additional page views for Hoover's," says Spain.
Similarly, Hoover's believes that context is key to driving sales of ancillary products like books and magazines. For example, when Hoover's featured Pepsi as the "company of the day," they included a purchase link to a book about the company's history: "Pepsi, the First 100 Years." Interestingly, when readers head off to Amazon's site, they often buy a different, related book, based on Amazon's recommendations (Hoover's still gets paid when this happens). Hoover's plans to continue test its ideas about context-driven commerce.
The best customers are business people with jobs that involve researching companies or financial information. Hoover's has found that sales and marketing people make particularly good customers. Hoover's is also interested in attracting students, hoping that they will develop the habit of using Hoover's services. On the model of Lexis/Nexis, which has provided free terminals to law schools for years, Hoover's offers discounted packages to business schools so they can give students free access to Hoovers' services.
As a seller of advertising space, Hoover's is most interested in the traditional ad business model - selling the value of its demographic to advertisers who wish to build brand awareness. "If you look at Fortune Magazine," says Spain, "you don't just see ads for other business information - Fortune is full of ads for BMWs. We hope that the internet evolves to be a good place to build brand." Selling advertising space on a direct marketing model, Spain believes, is more suitable for mass-market sites such as Yahoo, which deliver many millions of impressions and sell some of those impressions on a discounted price-per-action basis.
Hoover's has some solid advertisers - Volvo advertises on Hoover's, as does Merrill Lynch and Investor's Business Daily. But it is challenging to sell advertising as a niche site. Part of the solution, Spain believes, will be technology to serve targeted ads based on customer demographics, preferences and behavior. The ability to target ads will help justify ad expenditures on small, focused sites. Hoover's uses Adforce's ad server for serving ads, but finds today's technology insufficient. "While Adforce is as good as any of the servers out there it does not fully meet our needs. You can't query the ad server's database to determine that this is a customer who likes to buy fishing gear. The technology is not there yet."
But technology is only part of the solution, because part of the problem is the habits of ad buyers, not the limits of ad servers. Says Spain, "Ad buyers for consumer products companies are not sophisticated at buying electronic media. Buyers tend to buy in packs - and you never go wrong buying Yahoo."
The company is struggling to define a "customer life cycle" because most of its customers are project-oriented. Some stay only for a month or two and don't return. Others sign on, use the service regularly for weeks or months, sign off, and then sign on again when they have another research project. Another challenge is sifting through the terabytes of visitor data to find clues to customer preferences that relate to customer value. Says Spain, "There are lots of relationships that exist that we don't think about, but which need to be pointed out to us. For example, I doubt we would ever on our own ask whether people who live in one city tend to look for information on companies located in that city. However, if there was a very strong correlation between these factors, we would like the software to suggest that we look at it."
The data that Hoover's is mining for clues to customer value include profiles of paying customers -- drawn from registration profiles and customer surveys -- and aggregate site usage data. Hoovers is considering several ways of increasing the amount of information it collects about visitors. Today, Hoover's does not ask non-subscribers to register, but is considering asking for voluntary registration in return for a free newsletter or other free information. Neither does Hoover's currently track the site usage of individual customers. Hoovers' is considering changing this policy in order to improve site navigation and possibly to provide product recommendations -- but is moving cautiously out of concern for users' privacy. "We want to be sure we have a person's consent to any such tracking and that, if they would prefer not to have offers made to them based on their behavior, they will have an easy way to opt out."
That said, Hoover's is experimenting with some web-based personalization. Today subscribers can choose whether they want the news feed on their member home page to come from CBS or ABC. Hoover's plans to experiment with allowing customers more variety and choice in the sources of news, and to be able to set up profiles to gather news about companies, industries, and topics of interest.
Spain believes that e-mail may be a better vehicle for personalized information. Hoover's currently offers several free e-mail newsletters, containing company news, IPO filings, and updates about Hoover's content. The company is planning to allow users to customize these newsletters. For example, Hoover's will soon add a feature allowing subscribers to store a list of companies, and receive notification whenever the company has filed with the SEC.
Spain is particularly uncomfortable with the aggressive use of personalized promotions -- he personally finds it intrusive and scary when commerce sites persistently suggest products for him to buy. "We're reluctant to build barriers to using the site," says Spain. "Instead, we want to create contextual opportunities and triggers for customers to make purchasing decisions."
Another buzzword that's low on Hoover's priority list is community. "We're overwhelmed with opportunities," said Spain, "and community has taken a back seat." So far, Hoover's has not found an effective way to incorporate community features into its site. Hoover's tried bulletin boards at one point. But because Hoover's is a general-purpose research site, it is not clear how to define communities of common interest. Spain thinks that niche sites based on vertical industries or topics of interest might be more suitable for community-building. Hoover's is seeking niche partners who might provide community-based contextual triggers for the use of Hoover's services.
