Kate Bulkley, Media Analyst.

Protection money

By Kate Bulkley

The Guardian

Monday April 26, 2004

Clare Hart claims that her online cuttings service has the power to stop damaging rumours before they start - but you'll have to pay for the privilege, reports Kate Bulkley

Clare Hart

Fee versus free - the debate has been raging since the creation of the new media world, but every month it seems that another piece of evidence emerges to settle the argument once and for all. And, although the web purists may not like it, fee is emerging as the victor.

Clare Hart, CEO of the giant news retrieval service Factiva, has been backing fee for years. Now her $245m-turnover company has two more reasons to celebrate its dedication to online subscription.

Firstly, it signed a deal with Microsoft late last year to embed Factiva.com - described by analysts at Butler Group as the Rolls-Royce of business information services - into the new Office 2003 software.

And, secondly, Factiva launches a new reputation management software tool next month that not only searches for relevant business cuttings among 9,000 sources in 22 languages and 118 countries, but also tracks information on blogs and bulletin boards. It's the kind of service that could help companies from being blindsided by damaging rumour or customer concerns that may first appear in a chatroom.

"Sixty per cent of information on Factiva.com is not available for free anywhere on the web," says Hart. "People are sick of wasting their time when about 50% of web searches turn up unsatisfactory results and that's not me talking, that's the analysts. People are now willing to pay for quality information."

The analysts do agree. Mike Davis, senior research analyst at Butler Group, says: "The free internet model - back to the idea of the egalitarian, hippy web - is gone. It's a business environment now. If you want high-value services, you pay for them. The pornographers learned that a long time ago."

Danny Sullivan, editor of Searchenginewatch.com, says: "We already have free news searching and we have free news search engines, but they aren't very customisable. That's what some people are starting to want and are willing to pay for. They want to do news monitoring, reputation monitoring and opinion monitoring."

Factiva is just such a company. It has been subscription-based ever since it was created in 1999 with the merger of the two separate online news services operated by Dow Jones & Co and Reuters. Hart became CEO six months later thanks to her predecessor's decision (not a good one, as it turned out) to follow a dotcom dream.

"It's been a long haul," she says. "In 1999 and 2000 we walked straight into the free-on-the-web world. This was when a lot of publishers were putting their information on the web for free. Then, of course, we had the economy struggling in 2001 and 2002, so it was only after September 11 that publishers began saying 'We're used to two lines of revenue - subscriptions and advertising - and in the web world we thought we only needed advertising, but the truth is we need both.' So you don't see many news and information websites where the whole thing is free any more."

The lean towards subscription services is giving Hart more confidence that her original strategy was correct. She also now has 1.6 million subscribers who believe her as well.

Not only that, but Factiva will celebrate five years of operation on May 17 - an achievement that most similar joint ventures never enjoy.

The company was cash positive by 2000 and by the first quarter of this year had achieved an operating income of $4.3m on turnover of $64m. These figures are an improvement from the same period a year ago when the quarter's operating income was $2.3m on turnover of $62m. For the full year of 2003 Factiva had an operating profit of $13.3m on turnover of $245m.

Huge corporate clients were pretty much Factiva's only customers in the early days and those companies, like Boots, Nestlé, and Ford - plus many smaller ones - are still the most important for revenues. A subscription to a Factiva service for a business can cost anything from $1,000 per month to $300,000 per year. It's unlikely that the man in the internet street would have even heard of the company, but the link-up with Microsoft means that Factiva will start to become ubiquitous in the world of information search. With that thought in mind, Hart is offering part of her service at a price affordable to individuals (a $69 per year subscription plus a charge of $3 per cutting).

The PCs containing Microsoft Office 2003 software only began being shipped to retailers in October last year, so it's early days for Factiva to judge the success of the deal, but Hart is already optimistic.

"The assumption is people are starting to realise that they are going to have to pay for quality news and information. So, with that as a given, if you put services in the context of their desktop - whether they're in Word or Excel or Powerpoint - when they link to Factiva.com they don't even realise they have left their own computer. Within seconds, our service is giving them headlines and articles," she says.

There is, of course, a possibility that a top-end information service like Factiva could damage its brand image by becoming mass market. According to Mike Davis, Factiva must find the correct pricing model.

"They are the Rolls-Royce of these kind of services, so you would expect to pay a high price. One of the risks they run with putting their service on Office 2003 is undervaluing their brand," he argues.

There are many rival companies to Factiva when it comes to the whole range of news information search and retrieval - from search engines like Google to specialist online news cuttings sites like Newsnow.co.uk - but there really is only one competitor in the same league.

LexisNexis is owned by Reed Elsevier and began as a legal search service. They now have a similar profile to Factiva, but Hart claims that her service is more robust. Analysts say LexisNexis leads Factiva in market share, but has no deal in place like the Microsoft one.

"Factiva's product is very slick. It's a very nice portal. You can drop it into any other corporate intranet environment seamlessly. It's good stuff and it's what everybody else should be aspiring to," says Davis.

But although Factiva is becoming more available to a wider audience through Microsoft, it is the large corporations using the new reputation management software that could be the breakthrough.

Hart sees this service as "very cool", especially in today's world where protecting the reputation of a brand is so important - just think Coca-Cola and its recall of Dasani water or Shell misreporting its oil reserves.

The software - developed in conjunction with IBM - is intuitive, providing links between a brand and other key words. It searches on such a granular level that opinions about the company or brand are picked up on millions of individual blogs, chatrooms, bulletin boards and discussion forums in addition to traditional media outlets and websites.

"It's happening at the high end now, but gradually it will work its way down to the individual user," says Hart. The minimum entry level for this service is $150,000, so it is currently targeted at major corporations and Factiva had three major corporate clients on board before its launch.

"If you have this reputation management software, you won't be blindsided," says Hart. "It's so important these days - look no further than Enron or Andersen. If you have this, it gives you time to influence the thinking or change the perception. There's an opportunity to influence the agenda as well as managing threats."


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