latest new features, which include a much more clean and intuitive interface, really nice graphic analysis tools, trend analysis tools for companies and people, a new iPad app and lots of other really great hooks. It's great stuff, making the Factiva interface far less nerdish and much more friendly to enterprise content users used to more slick online publications. I expect that this update will be greeted warmly by its enterprise users; it may even help Factiva to pick up a few more subscription seats here and there.
But are these changes really enough to modify the fundamental economics of a general-purpose subscription news service like Factiva? Sadly, I think not. Factiva does a lot of things with business news and information very well, and their design team has really picked up the pace to make it a more appealing media service. At the same time their APIs and taxonomy services make it easier than ever to integrate Factiva content with enterprise portals and applications, as well as with selected sources of Web content. All of this is positive, no doubt. But at its core, Factiva's cost structure and, as a result, its fundamental ROI structure is not likely to change because of enhancements like these.
This is not Factiva's fault, ultimately. Like other major subscription news services such as ProQuest and more general business databases such as InfoGroup's OneSource, much of the cost of a Factiva subscription goes right out the back door to news publishers to pay for the licensing of their content. There's a certain amount of productivity gain to be had in supporting professional journalists, but when much of today's general news content can be had online for cheap or on an ad-supported basis, how much does one gain from a Factiva database of thousands of fee-based sources? Today, to be frank, it's fairly small compared to the wealth of other information sources that make today's enterprise users productive.
And by this I don't mean to focus just on the vast amount of general news available online. Time and again, when companies like ours or other companies conduct research into business information users, inevitably they say that their first and most important sources of business information are trusted peers. Some of those peers may be accessed on the phone or by shouting over the cubicles, some may be bloggers or other people accessed via services such as LinkedIn or even Facebook or Twitter. Professional journalists are talented and often knowledgeable people, but they're mostly miners of other people's expertise. Today there are just too many other ways to harvest the expertise of people who journalists access that business people have at their disposal to make the licensing fees for most general news information sources realistic on the basis of real or perceived enterprise productivity gains.
That doesn't leave a lot of wiggle room for services like Factiva. They and their customers are essentially providing welfare payments to support the current revenue expectations of major news media companies. In earlier days those licensing fees, while hardly small, were small enough in proportion to ad and individual subscription revenues to be called "ancillary revenues" by many publishers. Today, with those traditional sources of news revenues dwindling, content licensing fees paid by database services like Factiva loom much larger in the overall revenue picture for struggling news media companies. Since line-item budgets for corporate libraries are pretty much locked in for access to these licensed sources of information, it's a can't-lose proposition for many news publishers.
But in the meantime the ROI advantages for services like Factiva gets skewed terribly. If you had to spend equally on one service that had non-subscription information services that gained you a certain amount of productivity and another that did not contain subscription information services but near-equivalents or even more effective sources, which would you pay for? Increasingly, enterprises are opting to place their productivity bets beyond subscription news content sources. This doesn't mean that they're giving up on premium content altogether, just purchasing it more strategically for those sources and tools that provide the most value to specific audiences in their organizations.
There's no easy solution to this problem for companies like Factiva. As long as much of their revenue goes right out the back door to general news providers whose pricing is inflated in relation to its true productivity value in today's market, it will be harder for general news aggregators to compete with both pure Web news sources and with enterprise productivity software providers. To move beyond this equation, news aggregators need to look more seriously at what are their core assets. Increasingly this will mean capturing metadata and other forms of content from its audiences and the Web that are unique, timely and which can add more value than their own limited resources can provide. Services such as Zoominfo, based largely on harvesting information from the Web and its clients, are in this space already and driving value and information quality for their clients cost-effectively. Within these emerging services, news organizations will be challenged to justify the cost of their royalties based on the comparative productivity gains from these other services.
In the meantime, Factiva continues to look more slick, more digestible and more valuable as an insight tool. If only they could make the price for commoditized news go down in enterprise budgets more easily, they'd be in a very good position. As it is, these features are great, but they will help Factiva to claw its way into limited revenue and and margin growth.