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Dialog Information Services: Can a New Owner Revive a Former Online Giant

A flurry of voice mail greeted me when I landed in San Francisco a short time ago. Thomson Reuters, according to the folks feeding me rumors, is looking to sell Dialog Information Services. Dialog was once the Google of online. Just long ago, of course. In the late 1970s and early 1980s, online dirt paths ran through Dialog Information Services, once a crown jewel of Lockheed Martin.

Dialog hosted commercial databases, charged users for access, and shared the money with the specialists who created such files as ABI / INFORM (business information) and Investext (analyst reports). The customers were not average folks. The users were trained information professionals who mastered the syntax of the naked Dialog command line. When I used Dialog, I paid to get a password. I paid to connect to a dial up network. I paid to see a bibliographic record. I paid to see an abstract. I paid to print out on thermal paper my search results. After getting a Dialog bill, it was easy for me to make the jump to Internet research. I did not get whacked $1 an abstract or more when I wanted to research a topic. I have had Dialog bills for a single research session that hit $300 in 1980 dollars.

Thomson Reuters is run by financial wizards with sharp pencils. Selling this property makes sense. I am not the only person addicted to research who found the online charges motivation to find an alternative like the Internet and Google Scholar.

Commercial online services have been hard hit in recent years by a double-whammy.

First, the core market of trained information professionals have watched their budgets squeezed. The for-fee services, therefore, have to fight to keep their numbers up.

Second, the Internet has become the first stop for many people looking for information, including me. I no longer use for fee services. The most timely information is available elsewhere, and I think that a specialized service for a user community used to looking for information on no charge Internet sites suggests an even more difficult future.

Potential Buyers

Who will be sufficiently bold to buy Dialog for several hundred million dollars, maybe more? Here are a few possibilities:

• Cambridge Scientific Abstracts. This company has been gobbling up good properties and questionable information companies for several years. More debt should make life exciting if CSA is the buyer
• Ebsco Electronic Publishing. This is a unit of the privately held EB Stevens Company. I heard that Ebsco just inked a deal with Endeca to breathe life into Ebsco’s own online service. Ebsco Electronic Publishing has a parent with deep pockets, and it is possible that buying Dialog delivers more reach.
• An investment bank. Buyout masters see gold where others, like me, see dust bunnies. Dialog will be tough to spiff up and resell.
• LexisNexis. This online legal service has not had an easy time with non-law content since it lost its exclusive for the New York Times. Parent Reed Elsevier will have to be reading tea leaves to find a way to make this combination work technically and financially. If LexisNexis is the buyer, I think the management team may know something about traditional online I’m missing.

My hunch is that Bethesda-based Cambridge Scientific Abstracts will make the leap.

The rumor, of course, may be false. But let’s look at the upside and downside of buying an online company with its roots the mainframe world.

Upside

Dialog, along with LexisNexis and Westlaw (also a Thomson Reuters property), has a good customer base among Fortune 500 companies. Also, Dialog has more than 500 commercial databases online and ready to go.

Downside

I think the big issue is the cost of operating this traditional business. Add to that the lack of enthusiasm youthful online searcher have for for-fee services and you have a growth problem.

When I get more substantive information, I will pass it along.

Stephen Arnold, June 17, 2008

Update 1, June 17, 2008 9 am Eastern

A reader who wishes to remain anonymous reminded me of these points:

• Dialog has more content than any other service.
• Dialog’s interface could learn from Ovid. He writes: “[What is needed is an] OvidSP-type interface to all Dialog databases. You can see how that looks by clicking on “Journal Articles Buy Now” on www.ovid.com, then on “Main Search Page” on the top toolbar. This pay-per-full-text-view interface for the medical field is a large subset of the complete commercial product.

Let me offer some comments about these useful remarks.

First, Dialog has content. One issue that challenges the present owner and the to-be owner if there is one with sufficient appetite for risk is scale. Dialog’s content would be more useful if it were possible to query, analyze, and report across the data. Let me give you one example. At this time, it is difficult for me to manipulate the Investext reports. I have to download chunks and then assemble them. If I want to look for relationship, I have to download other results and then process the data in a separate application on my own system. No problem for me, but this is a challenge for others. Can Dialog do a “dataspace” query? Nope, not unless the buyer is Google or one of the data management companies with the technology and the ability to scale a commercial service. I agree that Dialog has terabytes of data, but in its historical form, those data are increasingly valueless to me. Making Dialog into a golden goose is out of reach for most of the online companies with which I am familiar. I hope I am surprised that Dialog’s terabytes of individual datum atoms become useful information. My hunch is that the cost and technical complexity of as-is Dialog will make progress slow, expensive, and difficult.

With regards to the interface, I agree. Online services have not been particularly good with interface and user experience. Ovid is better than some, but not as good as some of the more innovative systems that I have seen and in one case profiled in my Silobreaker.com write ups in this Web log which you can locate using the Web log search box on the Beyond Search splash page. The reason commercial interfaces to for-fee content are lousy are not so good boils down to two factors: [a] the money comes from experienced or expert users, so the interfaces are overly complex. The Google approach is ignored in favor of too many choices, options, and features. [b] The decision making process at for-fee information companies are hamstrung by their legacy systems, contracts that limit what can and cannot be done with content, and awareness of the outside world. Like traditional publishing, for-fee database operations find themselves isolated. Remember, in the pre-Web world, these outfits were in the driver’s seat. Now most are waiting for the bus to come pick them up.

End update 1

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