ProQuest Dialog: An Optimistic View
June 24, 2008
I talked with a colleague who described to me Outsell’s view of the ProQuest Dialog deal. I have not seen the report, but you can order a copy here. Note that the research company has as its url outsellinc.com. The url outsell.inc is an automotive company with the same name.
As I understood my colleague, Outsell sees a positive gain. Libraries–Dialog’s revenue bulwark–will win. ProQuest is a company focused on library information. The buyers got a good deal, paying considerably less than Dialog’s previous owners paid. My recollection is that with each sale of Dialog, the seller lost money. From a high of $400 million, this deal rings in well south of that, probably a fire sale price. Third, users benefit because ProQuest is able to leverage the terabytes of abstracted, bibliographic, full text, and semi-structured data on the Dialog computers.
This is a snippet of a Dialog Blue Sheet. It makes clear the details about a database. Can you figure this out? If you can, then you can pay as much as $100 per query to access these types of data. The market for this information is inelastic; that is, you can raise the price, but you will not be able to boost revenues. A few people will pay anything to get these data. Most people will go elsewhere.
The Optimist’s View
I can accept a positive spin on the deal. However, there may be some factors that the financial wizards with the sharp pencils may not be able to control:
- Libraries are strapped for cash. The life blood of information companies who sell to libraries is the standing order. Under budget pressure, each year standing orders get closer scrutiny. In head to head competitions, clever pricing deals can win the one year deal. The problem is that there is no renewal and thus no revenue base. With only a few big players selling online information, it may be tough to pump up revenues.
- Information users like the New South Wales’ students who will be exposed to Google may find the Dialog-style online information as archaic as my son did when I introduced him to online research in lieu of the Readers Guide to Periodical Literature in 1982. Dialog is simply not in tune with the bloggy, real timey, and Webby world of online.
- ProQuest and its parent have never been at the cutting edge of technology. Online today has to deal with scaling, commodity hardware, and fast cycle programming. Perhaps ProQuest’s technologists are as good as the engineers at Google? My thought is that ProQuest may be stretched to the limit dealing with an online system with its roots in the late 1960s. The cost to get modern may be beyond the reach of the new owners.
Why Dialog Has Been Lagging
Dialog’s original business model was to license databases like Pharmaceutical News Index for the lowest possible deal and then sell the data at the highest price the market would allow. Dialog also got a piece of the action for online access. In the late 1970s and early 1980s, an online user had to pay for connect time, and Dialog made deals with telecommunication companies to get a slice of the per minute connect fees.
With the Internet, the old Dialog business model no longer worked. Various companies bought Dialog and tried many different acrobatic tricks to make enough cash from for-fee data to pay the bills, maintain the mainframe computers, and pay programmers who knew how to code in PL/1 among other languages relegated to the sidelines of the exploding Internet world.
The Dialog business model, just like the business model of traditional print publishers, does not match the present online environment. Some data are in the wild and available because advertisers pay the bills. Dialog wants companies to pony up cash for data. That is hard when the information may be available via the Internet, at my Free Public Library, or directly from an expert who writes a Web log or posts conference papers on conference Web sites.
Thomson Corporation, the seller of the property to ProQuest, has decided that financial data sold for a fee to banks and legal information sold to law firms is more suitable for a company concerned with its earnings. ProQuest is not a Thomson, and it will be interesting to observe the management team take a aging prima donna and spruce her up for a Web 2.0 venue.
The search technology is getting long in the tooth. Dialog files were structured. Queries require specific syntax to get the system to spit out potentially relevant results. The Google fuzzy logic does not apply to a Dialog search. You enter strings and codes. You get matches. Results may or may not be relevant. If you submit a flawed query, guess what? You pay for the query and the display of the results. Interactive searching is tedious and expensive. Dialog is a boutique online service catering to specialized markets. It may be difficult to restart the revenue engines, upgrade the infrastructure, boost the marketing, and keep the database companies loyal.
Observations
Bottomline: I think it is all to easy to be optimistic about any acquisition. Having been involved as both a buyer and seller, the costs can be tough to control. With exogenous factors like Google, commonsense dictates that a happy face be balanced by a hard look at the technical, business, and competitive realities of a company that no one has been able to make work since its salad days in the early 1980s. Can ProQuest stop the down hill slide? Time will tell. Oh, this clock is running on Internet time, not mainframe time. We will know more very soon. Agree? Disagree?
Disclaimer. The previous incarnation of ProQuest was owned by Bell+Howell. The data unit of Bell+Howell was called University Microfilms. Bell+Howell bought the database assets of the Courier Journal & Louisville Times Co. I was a vice president of the Courier Journal’s database unit and was handed off to the many thumbed hands of Bell+Howell’s technology group.
Stephen Arnold, June 24, 2008
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