Monday, February 23, 2009

Alacra Pulse: More Signal, Less Noise from Web-based Company News and Analysis

As the financial industry has writhed and wrinkled under the pressures of a wilting market for securities, financial content vendors have squirmed along with them, trying to define value propositions that will enable them to help both traditional clients and any and all possible new ones that they may be able to surface. One of the content companies positioned best to take advantage of these changes is Alacra, an up-and-coming aggregator of financial and business information that has spread beyond its roots in investment banking to appeal to a broader audience in finance and corporate circles. Alacra has a series of core premium research offerings with high functionality that major institutions can subscribe to as well as The Alacra Store that enables people to search for and purchase premium financial research and news sources on an a la carte basis. This allows Alacra to shift revenue streams rather nicely as clients become more or less oriented towards subscription services as the global economy goes through its cyclical paces.

One of the major problems in the current economic downturn, though, is that in many instances earlier sources of premium research are disappearing. As investment banks and other institutions have cut back on their research staffs, there are fewer people being paid to turn out premium research reports on institutions issuing securities and on market sectors. In some instances major institutions are passing on research coverage on major sectors such as the finance industry itself. Imagine that - banks refusing to analyze banks. Strange times, indeed, but that has become the economics of the securities industry. As more and more trading of securities has shifted to electronic trading systems, the shrinking profits from electronic trades have made it harder to justify the expense of offering clients detailed research and analysis.

This doesn't mean that quality research and opinion on financial markets has disappeared altogether, though. As in many forms of publishing much of the information that used to come from major banks and financial publishers through premium services can now be found in one form or another on the open Web. That's the good news, but the bad news is that it's not the easiest thing to filter out the good sources from the bad sources and to get it into a form that's meaningful for financially-oriented professionals. Barry Graubart, Vice President, Product Strategy & Business Development, calls this need to filter out lower-quality sources the "signal to noise ratio," a fair way to characterize the problem given the level of noisy and oftentimes inaccurate sources of financial information offered by some services on the Web.

Enter Alacra Pulse, a new "freemium" offering from Alacra that breaks new ground in organizing content freely available on the Web into a highly usable format for investors, an aggregation that focuses on content relating to several hundred large and medium companies from hundreds of sources on the Web. In some instances Alacra Pulse's sources are familiar names such as investment bank ABN Amro and Standard & Poor's Credit Research, sources that publish many market reports and alerts for free already. Other sources are much more niche-oriented and more likely to carry some of the Web's sometimes irreverent outlook on topics, but are carefully picked by Alacra for their quality and the demand for their quality by financial professionals.

For instance, Stockgeek.net might not be the first source that would come to an average person's mind as a reputable source of financial information and insight, but those in the know are aware of its opinions and rely on it and many other non-traditional sources of financial information to keep them informed. I have witnessed this myself many times in doing research for financial information companies. Many financial professionals take the time to look at key trusted online information sources that focus on their domain of expertise. These sources include many independent financial analysis firms, which use a level of free information on the Web to attract insitutions to premium services.

Alacra Pulse does a nice job of wrapping these sources up in a standardized format that makes it easy to get the best of independent thinking on investments available today. Alacra Pulse enables you to look at the latest on all topics from analysts, to drill down into research on specific companies or to browse through the research and insight offerings from specific sources. Links to articles and reports from sources are labeled with color-coded icons that identify the type of source - "sell side," "buy side," credit agencies and industry-specific experts - and are also complemented with links to premium sources in The Alacra Store for those who would like to pay a bit to dig further. Otherwise, you can click on a headline to view a story on its native Web site.

One of the key features of Alacra Pulse is the ability to leave comments on a featured story. In just the few days since its debut Alacra Pulse seems to be drawing quite a few comments already, helping to enrich the site for both its visitors and advertisers looking for a little extra "stickiness" for their ads. The presentation of the Alacra Pulse ad-based portal is similar to other Alacra products, offering a simple, clean look and generally easy-to-use features and ads that are not too intrusive. For those that need more tools, the premium version offers alerts filtering and email notifications as well.

Financial information for professional investors tends these days to fall into either the ultra-staid realm of subscription database services or the wild and wooly world of online services that speak frankly about investments. Alacra Pulse does an excellent job of aggregating the best of online services into a format that professionals - and those who pay for their financial information services - should feel comfortable using and supporting. In that sense Alacra Pulse is a good calling card for investment-oriented professionals who can learn about the Alacra brand from this new product and feel comfortable graduating from it into more premium offerings.

In the meantime hundreds of companies that have been losing valuable coverage from industry analysts at major investment banks can begin to reap the rewards of a service that begins to give their securities issues a chance of getting consistent high-quality free coverage aggregated in a convenient format for their investors. At a time when everyone in the investment community is struggling to come up with answers to getting investor confidence rolling again, Alacra Pulse is a well-timed offering with a great signal-to-noise ratio that may help the markets to get a pulse again.

Thursday, February 12, 2009

Micropayment Flap: Beyond the Rhetoric to the Real Issues

As you may recall David Carr triggered a firestorm of discussion in the media industry about micropayments with his 11 January column in The New York Times when he suggested that newspaper publishers should think about how Apple's iTunes platform does quite handily charging consumers for by-the-song access to music. I blogged on this and other aspects of the business model quandary a couple of days later and mentioned micropayments as one innovative avenue for publishers to explore. It would be hubris for me to say that I triggered the ensuing firestorm of discussion on micropayments, but certainly the "M word" has been buzzing around quite a bit these days.

The crescendo on micropayments was marked by former Slate online magazine editor Michael Kinsley's op/ed piece in The New York Times a few days ago in which he lambasted the idea of micropayments. Kinsley notes rightly as have others that the prime thing that keeps people from paying for content from traditional brand sources is the availability of free/ad-supported sources of content from new online sources that are oftentimes perfectly acceptable alternatives. There's no doubt that Kinsley's early abandoned experiment with online subscriptions was a bellweather for the content industry (my now-rusting Slate umbrella from my own subscription now shelters me on the way to the end of my driveway for newspapers and mail), so his negativity certainly speaks from experience. However, Kinsley's slap against micropayments seems to miss the mark. He notes:
Micropayment advocates imagine extracting as much as $2 a month from readers. The Times sells just over a million daily papers. If every one of those million buyers went online and paid $2 a month, that would be $24 million a year. Even with the economic crisis, paper and digital advertising in The Times brought in about $1 billion last year. Circulation brought in $668 million. Two bucks per reader per month is not going to save newspapers.
Well, yes, micropayments of that scale are certainly not going to preserve major media companies as they've existed for the past century or so. But Kinsley's math is based on newsprint daily circulation. Looking at the New York Times' online monthy unique visitors - estimated by Compete.com to be at about 16 million in January - the same math would come up with a rather tidy $384 million annual revenue for The New York Times from online micropayments. Given that such revenue would not have to support the lumbering NYTimes printing presses over in the borough of Queens, that would also be a pretty tidy profit, as well, probably close to the net income from newspaper circulation.

I don't think that micropayments are the only answer to online media's problems, nor is any one particular business model going to produce a "magic bullet" revenue stream in all likelihood. As Walter Isaacson noted in his recent Time magazine article on how to save newspapers:
Newspapers and magazines traditionally have had three revenue sources: newsstand sales, subscriptions and advertising. The new business model relies only on the last of these. That makes for a wobbly stool even when the one leg is strong. When it weakens — as countless publishers have seen happen as a result of the recession — the stool can't possibly stand.
Clearly most publishers have relied on multiple business models and revenue streams to build strong businesses, including Time magazine's own powerful direct marketing capabilities, as noted by Susan Mernit at The Huffington Post. There's no solid reason to think that micropayments couldn't develop into one important revenue stream that could benefit both traditional media organizations as well as the millions of independent publishers whose content has become popular online. Unfortunately micropayments remain a neglected alternative with a reputation that's been scarred by poorly planned early micropayment experiments in the early days of the Web. What's most discouraging is that there are plenty of successful models that are analagous to online micropayments that work very well for content and communications revenues. A few familiar analogies to micropayments:
  • The phone bill model. You might say that telecommunications companies introduced the first micropayment model with their ability to charge by the minute for phone calls that were billed to clients on a monthly basis. It has worked for decades and has included both fixed payments for base-rate services and add-on payments for value-add services. Thinking of news as a communication rather than as a thing may help publishers to reconsider just what it is that they're trying to get people to support.
  • The music royalty model. The music industry certainly has its challenges these days, but certain aspects of music monetization are still fairly intact and operable - including the royalty payment scheme that's used to disperse payments to music publishers and artists when songs are played on broadcast outlets. Monitoring the use of news content can provide similar mechanisms.
  • The newsstand model. One of the most obvious payment models that's been around for years is the newsstand model. After years of plunking down quarters for newspapers on the way to catch a train to or from New York, it's hard for me to accept that some people cannot fathom the idea of small payments for news content when it's in the right place at the right time.
  • The tips model. You see it all the time on streets and in public spaces: street musicians plunking, bowing or blowing away with a tray to collect tips from passers-by. Public broadcast outlets in the U.S. as well as many online news Web sites have been using the tips model to receive donations from people who appreciate their content creation efforts. Micropayments could be as simple as enabling a per-item tip jar infrastructure.
Any and all of these are possible approaches to micropayment-supported media that are both relatively simple to implement from a technology perspective and that offer possible paths to value-add revenues. A micropayment system may tick along in the background on some metered system at lower rates than newsstand fees without a per-use transaction, but an obvious advantage of such a system is that it could easily trigger a per-issue payment for someone who want to browse through more than one or two hit-and-run articles - which could also be billed in the background.

Why hasn't such a system been built to date? Certainly highly competitive rivals in the content industry have managed time and again to try to turn micropayment systems into a proprietary choke point that can give them an advantage in the marketplace; in the process of doing so they choke off the potential for the industry as a whole to grow through micropayment. Nobody down at Grand Central Terminal is trying to install cash registers at newsstands that can be used for only certain newspapers or magazines: why would it benefit the industry to do so for electronic content?

Similarly, for all of the praise that's been lavished on premium downloads on iPhones, the iPhone represents a relatively small sliver of the mobile markeplace where music could be sold. The model appeals to music publishers because it has that good old "choke point" feel to it, but the truth is that the iPhone's highly proprietary approach to content ecommerce only underscores how poorly music publishers fared in coming up with a technology-neutral micropayment solution.

I do believe that many new successful models for generating revenue for content suppliers are on the verge of being introduced. The bad news for many publishers is that probably established major media companies are not the ones that will create them or implement them first. It's far more likely that the chokehold-averse, technology-neutral community that generates social media and other new forms of publishing will recognize that there are benefits to be gained by collaborating on payment systems that can benefit their community as a whole - with our without established publishers benefiting from them. One can see this to some degree already in the book publishing industry, where innovative online outlets such as Lulu.com have been aggressive in pushing value-add print-on-demand sources of revenues while traditional book publishers continue to focus on mass production of print titles.

The sad truth about most media companies is that if their existing sales and marketing forces aren't going to benefit from a new revenue stream it's fairly difficult to get it accepted by their organizations. Thus the anxiety about exploring micropayments may have as much to do with an executive's career comfort level as it does with any strategic business factors. The flap about micropayments is really not about micropayments themselves as much as it is about a mindset in most media organizations that has yet to grasp how to do business the Web way. Search engine optimization is a small step forward in that understanding, but it's really only about optimizing one revenue model and not much at all about confronting the real nature of how to broaden the revenue base for content on the Web.

Micropayments are coming and they will provide billions more in content revenues online eventually, but by the time that traditional publishers get around to adapting them the millions of publishers using social media publishing tools to take advantage of them may leave them a fairly meager slice of the revenue pie to share. If media companies can stop trying to build artificial chokeholds and focus more on enabling content commerce the way that the Web really works, perhaps there will be hope yet for them to close the revenue gap between online operations and their traditional operations. In the meantime, brace yourself for micropayments - they're coming anyway.