Open Password – Dienstag,

7. August 2018

# 415

 

Anthea C. Stratigos – Outsell – Information Industry – Facebook – Cambridge Analytica – GDPR – Mark Zuckerberg – Russian bot farms – Acxiom – Interpublic Group – LiveRamp – Google – IAB Tech Lab’s Transparency & Consent Framework – California – Data privacy – Thomson Reuters – Blackstone – Dun & Bradstreet – S&P – Bloomberg – Kendo – AI – McGraw-Hill – Cengage – Chegg – Writelab – Siri – Alexa – Harvard Business Publishing – Cerego – Springer Nature – IPO – DEAL – Elsevier – Tariffs – Fed – Cisco – Accompany – LinkedIn – Moody – BvD – Informa – Stephen Carter – UBM – Taylor & Francis

International Corner

Bilanzierung erstes Halbjahr

The First Half of 2018’s
Most Significant Industry Events

And Why They Matter

By Anthea C. Stratigos, CEO Outsell (London)

Important Details. Amid the constant backdrop of white noise — political strife, the media’s constant drip-drip-drip of unrepentant fear and loathing, trade wars, and whispers of a recession — the information industry marches along with changes closer to home. The first six months of 2018 featured no shortage of significant events, the most important of which we analyze below.

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Media & Marketing:

„Two months after GDPR’s big day, we are inundated with more spam.“
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Facebook’s testimony and continuing fallout. Issues such as the News Feed reprioritization, Cambridge Analytica’s misuse of data, and it casting off another data provider just last week continue to chip away at Facebook’s empire. In January, a refocus on friends and family in the News Feed limited publishers’ reach. In March, Facebook shut off reach estimates after it found yet another vulnerability. In April, it stopped third-party data providers from targeting consumers and created a new, controversial policy that treats publishers as political advertisers. In June, another software bug surfaced that publicly shared the private posts of 14 million users.

So far, advertisers have responded tepidly to Facebook’s latest safety moves. In the wake of the GDPR deadline, the company limited external use of its data, making it difficult for marketers to compare cross-platform campaign efforts. Even after Mark Zuckerberg’s congressional testimony, and all the Cambridge Analytica fallout, Russian trolls and bot farms still had access to Facebook data as late as this past spring. And last week, Facebook stepped into a controversy about whether it was an “arbiter of truth.” After a major slump, Facebook’s stock is back at record highs, but brands have begun moving away from the platform, and the appeal of Instant Articles has dimmed for publishers, signaling interesting impacts to the company’s future user growth and ad revenues.

Acxiom’s Dismantling. After a major reorganization of the company in February, Acxiom sold its low-growth Acxiom Marketing Services business to Interpublic Group for a high price and got LiveRamp ready for its own sale. IPG became the first big agency to own a significant data asset, which will put pressure on the other big agency holding companies to make similar moves. LiveRamp, on the other hand — known affectionately as the “arms dealer of people data” — will prove a nice (though expensive) grab for an enterprise cloud vendor like Oracle, Adobe, or Salesforce, or perhaps a private equity firm looking to do an AdTech rollup.

Meanwhile, Andersen and Deloitte march along targeting agencies, while WPP and Martin Sorrell go through a messy divorce.

The Impact of GDPR and Privacy and Consent. With the deadline for Europe’s GDPR now passed, many issues remain, and the debate about data controllers and data processors continues. Publicis will now require publishers to collect and manage consent and assume all liability, causing strain on agency-publisher relationships. Google established itself as a data co-controller and limited the number of AdTech vendors that publishers can use on their sites to 12. It later removed that limit and eventually agreed to commit to the IAB Tech Lab’s Transparency & Consent Framework — but without a lot of details about how and when. It also will require AdTech firms to guarantee GDPR consent and assume liability. California just passed its own privacy law, which goes into effect in January 2020, and other states and countries may move down a similar path. Meanwhile, legitimate interest, layered consent, and consent management platforms have all become part of the new language of advertising, marketing, and media as all companies dedicate more resources to dealing with consent. Two months after GDPR’s big day, we are inundated with more spam under the perverse notion of opting out, and once again, lawyers have become the beneficiary of data privacy regulations.

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Finance & Risk:

„Thomson acquisition of Reuters has not lived up to its promise.“
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Thomson Reuters’ divestiture of its Financial & Risk business to Blackstone. Following years of “transformation” work that did not deliver to board or shareholder expectations, the Blackstone deal to take majority control of TR Financial & Risk is effectively an admission that the cornerstone of the Thomson acquisition of Reuters has not lived up to its promise. It’s also an admission of failure to deliver meaningful operational synergies between the Financial, Tax & Accounting, and Legal businesses, despite attempts to position the firm around covering the three major pillars of the central functions of all large enterprises.

Blackstone will do its best to ensure that it makes money out of the process, and the remaining Thomson Reuters business will benefit from focus and any improvement in performance via its 45% stake. But it’s not yet clear whether fresh financial firepower under PE ownership will allow the business to challenge Bloomberg’s #1 status. To be sure, we predicted the move to focused scale — focusing on a single market or vertical at scale — an industry trend for the past decade, as the industry pendulum swings from diverse portfolios to targeted, lean enterprises able to invest in a single category. Ironically, this move also speaks to enterprises buying information industry assets. Blackstone is both an investor and an enterprise in the financial sector, so this move is a double twist that will have implications as it unfolds.

Dun & Bradstreet’s leadership change. In another example of the impatience of boards, Dun & Bradstreet and its CEO parted ways in February. The past couple of years have seen firms buying and selling data businesses at high multiples. D&B’s latest change in leadership demonstrates how high investor expectations remain and how unrelenting digital transformation is.

S&P Global buying FinTech all-star Kensho Technologies. This moveintensifies the battle with Bloomberg and Thomson Reuters and is very well timed given the distraction of Thomson Reuters’ divestiture to Blackstone. S&P’s acquisition of Kensho Technologies lets it skip the fight in the stagnant desktop business and jump right into data science and AI with both feet. S&P Global’s decision to buy Kensho signals that major financial research providers are willing to take a big chance to satisfy Wall Street’s thirst for AI-driven predictions, the one element it believes to be a powerful differentiator in a world already saturated with predictive analytics. For the rest of the information industry, this acquisition could accelerate the trend for marriages between emerging analytics start-ups and traditional data providers.

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Education & Human Capital Management:

„Creating resources from a digital-first perspective.“
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McGraw-Hill’s announcement that it will cease selling print textbooks. The move to a rental-only model for print books following Cengage’s launch of Cengage Unlimited in Dec 2017 shows the extent to which big players are experimenting with new business models to drive digital sales and encourage students to move away from print. In an ideal world, this new approach offers more long-term revenue predictability for McGraw-Hill Education, and it also allows the company to reinvest in ongoing digital developments. Print is not going away, but the recent challenges of existing pricing and delivery models have threatened to bring the whole edifice down.

Chegg’s investment in WriteLab. Chegg’s Writelab acquisitionis indicative of the importance of AI in education. Creating a collection of compellingly priced integrated tools that solve real-world problems using AI and adaptive technologies puts Chegg in an enviable competitive position for the foreseeable future.

McGraw’s use of games and simulations. Using games and simulation for teaching and learning — as reflected in Harvard Business Publishing’s new Education site — is nothing new. However, McGraw-Hill Education’s approach combines simulations with principles of micro-learning to deliver a compelling new offering. The announcement indicates how solution providers are (finally!) starting to think about creating resources from a digital-first perspective — something they’ve been talking about, but often not doing well.

Cerego’s use of voice. Cerego’s focus on voice provides evidence of the next UI being no UI, a trend we predicted several years ago. With the rise of chatbots and AI- and voice-driven virtual assistants — the likes of Siri and Alexa — this evolution promises to go mainstream in professional use cases one day. In the interim, Cerego’s move is an interesting one that portends the future. Voice remains peripheral in education, but it is indicative of companies beginning to investigate voice and alternate interfaces as a way of delivering information.

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Discovery & Innovation:

Challenging the Status Quo with Big DEAL negotiations.
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In the world of science and engineering, and the scholarly communications that surround it, the bellwether for change continues to ring louder than ever.

Springer Nature’s failed IPO.The news of the pullback was an indicator of changes in market desire, and perhaps a misreading of them. It speaks to a vote of little confidence in academic publishing’s growth model. The market is moving quickly toward data and analytics, and significant investment in traditional publishing is simply not that appealing, at least for public markets. Ultimately, it was the right decision financially, and it highlights the investment uncertainty around academic publishers — traditionally a safe bet, if a conservative one.

Ongoing Big Deal negotiations between consortia and the largest commercial publishers. Friction with customers continues to make the news and is another bellwether for the fracturing of the segment. The Projekt DEAL consortium has just withdrawn from negotiations with Elsevier (although it is continuing them with Springer and Wiley). The number of “read and publish” Big Deal negotiations supporting centrally funded OA preserves the status quo. Because of their size and scale, they most benefit the largest commercial publishers, while smaller and pure Open Access publishers are excluded; this enhances the status of firms such as Springer Nature and Elsevier as the largest global Open Access publishers. That said, they also threaten the traditional system so fundamentally that with the largest of the Big Deals, despite some inevitable level of compromise, the publishers have an incentive to stand strong for as long as possible. Projekt DEAL is important not only because it is worth a lot to the publishers in providing read access to content, but possibly more so because Germany is one of the largest producers of research. At the moment, the friction is creating bad press and also tarnishing the reputation of academic publishers more broadly. Stalemates with customers will likely persist and challenge the status quo of the entire sector.

Digital Science’s launch of Dimensions. Last in this sector, we must address this platform, which we believe is genuinely game-changing. A combination of technological impact and the rise of a data- and analytics-driven world over the past decade left many elements of the scholarly research ecosystem behind. Researchers, funders, and research institutions suffer from productivity inefficiencies given that various workflows and the data needed to support them are often undiscoverable, difficult to access, and difficult to use in combination with other vital datasets. Digital Science addresses each of these issues with Dimensions, sourcing and linking together data from multiple sources across the research lifecycle to enable novel insights in a sophisticated yet easy-to-use solution that simply doesn’t exist elsewhere in this form. Furthermore, it has done so in a way that is affordable while harnessing the latest technology to provide customization options for those institutions that wish to pay for it. It also stole a march in getting this launched into the market, showing that first-mover advantage still has its benefits.

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Business Intelligence:

Tariffs and Fed policy as a serious concern.
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Tariffs are becoming an issue for myriad vertical industries that may also be affected by trade wars. It is too early to tell, but popular business press outlets are citing statistics affecting steel, construction, and agriculture/farming. Separating politics and media from the general pace of the economy, we hear from CEOs in our annual industry sentiment survey that trade wars and tariffs are a serious concern to them and their businesses. The information industry grows along with GDP, so any slowdown in commerce is not good for our industry, particularly in B2B. Interest rates are another item to watch, as Fed policy dictates can have trickle-down effects.

Beyond the broader trade and tariff issues affecting B2B and business and company information sectors, specific news points to important trends in the B2B sector.

Cisco’s acquisition of Accompany. Cisco bought Accompany, which provides real-time profiles for every Fortune 500 CEO, on May 1, 2018, for $270 million. The move is significant because there is increasing interest in company and contact information players from large technology companies and because the move enables Cisco to take on market leader LinkedIn. This trend also speaks to enterprises in general buying information industry assets, such as Fortive’s recent acquisition of Gordian, adding to a long list of similar deals that are collectively heating up valuations for data- and analytics-driven companies. No longer is it the likes of Moody buying BvD or PE investing: Now enterprises are joining the competition, driving up the values of precious assets. We expect to see more deals like this in the future.

Informa’s closing of the UBM acquisition. Informa’s move creates a powerhouse in mega-events/exhibitions businesses, further streamlining a highly diverse portfolio. It also opens up opportunities for deeper specialization in verticals and rich data businesses that spin off from the activities of events. Several years ago, Informa was a hodge-podge of over 80 acquisitions bolted together in a portfolio patchwork. Under Stephen Carter’s tenure, a company that was too diverse for its britches has shaped its portfolio. With two serial acquisitions of Penton and then UBM, it is also rendering its own flavor of focused scale. How long Taylor & Francis fits in the portfolio remains to be seen, likely driven by how long academic publishing remains a cash cow. Despite that, in an odd way, the firm remains highly diversified, given its vertical industry coverage and span. With the potential to gain scale in the operation of events, marketing services, and data businesses that spin off from them, it promises to be a powerhouse in several verticals while continuing to narrow focus

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Implications:

„Every day, major announcements about AI in new product offerings and acquisitions.“
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The industry continues to remake itself in an ongoing march of innovation and consolidation. Start-ups sprout daily, fed by the deep pockets of venture capital and easy access to technology. Larger companies continue to reshape their portfolios, though they have already completed most of this work. Reed Elsevier remains one of the few major hold-outs in truly diversified businesses, if not last; even Wolters Kluwer, which serves several sectors, is continuing to double down on health. Thomson Reuters’ divestiture speaks to the end of the conglomerate, while Springer Nature’s failed IPO challenges the future of publishing in the investor’s eye. Indeed, pressure at D&B and moves as bold as Thomson Reuters’ speak to investor pressures across the sector and the continued pace of change and transformational investment required to keep up.

Company moves and industry developments continue to take shape around specific markets, users, and verticals, with a persistent procession toward real-time measurement of just about everything, as we enter the next generation of computing and see flavors of AI weaving their way into our industry’s products and services. To be sure, data, information, technology, and things are coalescing to improve applications and end-user workflow at the point of decision making. This is the mantra for the sector and continues to shape the moves we’re seeing unfold.

Every day, major announcements about AI in new product offerings and acquisitions like S&P buying Kensho point to the future. To invest in these capabilities, companies must focus on their markets, divest assets that no longer fit, and acquire people, technologies, or entire companies that bring new capabilities while accelerating the business of decision making. For some, it may be too late. Thomson Reuters Financial and Springer Nature both got mired in the blending of two very diverse cultures, perhaps limiting the pace of change necessary in this era. Informa is making big, bold moves but must bring data services and analytics to the core of what it does. Education companies are making the change.

The journey to an AI-driven world is underway, and as we forecast last year, this is the year of execution: getting the essential done.

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