Thursday, October 14, 2004

Dialog Pricing: Flat Fee a la Carte

Steve Goldstein, CEO of Alacra, was a speaker for the pricing panel I moderated at the recent InfoCommerce 2004 conference. Alacra is a value-added aggregator of financial content. One of Steve's slides was titled "It's Tough Being a Middle Man". The slide went on to describe how database aggregators face the complexity of serving two sets of customers: the users of your content and the providers of your content. I think it's safe to say that pricing is the toughest area in which to satisfy both sets of customers.

Dialog, a company that helped pioneer the online search and database aggregator fields, faces difficult pricing issues that must be causing some top executives to be thinking about just how tough it truly is to be in the database aggregation business these days. Customers of the service want pricing that is easy to understand, predictable, and can be provided on an enterprise-wide basis with a centralized invoice. Last February, Dialog announced its Dialog Choice plan, which allows enterprises to pay a flat fee for access to the participating databases. Fixed-price subscription fees for annual access to the selected databases are based on the number of active users of the database. Recently, Dialog announced additional database providers had joined the Dialog Choice pricing plan.

The fixed-price deals partially satifsy the purchasers of the service. The pricing is predictable and the designated users have unlimited access. Dialog also allows the users to decide if they want to pay for a flat-fee subscription or rely on usage fees for particular databases--ergo the "choice" in Dialog Choice. The fixed-price deals on individual databases also provide assurance to the database providers that their content is priced to reflect its value and won't be lost in a large aggregated fixed-price subscription pool. With Dialog Choice, Dialog is in essence acting as a subscription agent for the contributing publishers: they offer centralized purchasing, a single invoice, and they represent the contributing publishers' pricing lists.

With its proprietary search and retrieval system, Dialog offers much more than subscription agency services to publishers. However, with increasing competition from Web-based search engines, a growing number of open-access sources on the Web, and other new entrants that specialize in specific elements of the new aggregation value chain, it is wise for Dialog to focus on improving the attributes of its service that provide distinct value to both sets of its customers. Offering superior service in centralized pricing and billing for enterprise deals is a good area for Dialog to distinguish itself.

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