Small On-Line Services Multiply
Well-known computer on-line services such as Prodigy attract millions of users, but now niche services are jumping on the bandwagon
ON-LINE services are proliferating, yet this lucrative field still has plenty of room for newcomers, according to one of the leaders in the business.
``There are all kinds of opportunities to build on-line services,'' says David Brown, chairman of Telescan Inc. in Houston. ``I'm not going to tell you which ones I'm thinking of because I want to be first.''
Mr. Brown has already built Telescan into a business with sales of $1 million a month. Its 100,000 subscribers use the service to help them select, analyze, and buy 300,000 securities at 48 stock exchanges worldwide. Telescan also provides the text of analyst reports, press releases, legal filings, and 34 news services.
Niche services such as Telescan differ from consumer-oriented services such as Prodigy or America Online, which aim to attract millions of subscribers.
Brown says he considers only 20,000 of his subscribers to be ``serious,'' meaning they spend about $50 a month with Telescan. He adds that he could have 250,000 serious subscribers within five years; Telescan also could have services priced to reach two other kinds of users - casual users, who would spend $10 a month, and professional users, who would spend $2,000 and up. Each market could eventually be worth $75 million in annual revenue, Brown says.
``It's an outstanding business,'' he adds. And no niche is too obscure to be served. Rare coins? An electronic bulletin board service earns $2 million a year by keeping collectors informed, Brown says. Telescan offers other on-line services in conjunction with the American Institute of Architects, Billboard magazine, Editor & Publisher magazine, and others.
By the end of the year, Telescan will market software (presently code-named Sunflower) that will allow buyers ``within hours'' to create their own on-line services. Telescan's computers will act as the host system for these services. The creators will control updates, access, and cost; Telescan will handle billing.
Although their target audience is smaller, niche services are able to turn a profit faster because they can get started faster, says Michael Mead, president of Entrepreneurs Online in Houston. His service focuses on helping start-up businesses. Another niche service, NationBase, was introduced last month at the National Conference of State Legislatures convention. NationBase provides current information on the progress of legislation and regulations in all 50 states and in the federal government, including the full texts.
Gavin Clarkson, chief executive officer of NationBase, says the service will help ``anybody whose life or livelihood is affected by the government,'' such as highly regulated industries or issue-advocacy groups. The service includes Legislative Management System software, which allows users to manipulate the data and add confidential information such as fiscal impact or political commentary.
Mr. Clarkson says he never intended to be in the on-line business. His software has been in use for eight years, he says. But his customers had to obtain the information from state agencies or other providers who often didn't perform well. ``The tools were better than the data delivery system,'' he recalls. ``So I saw an opportunity there.''
Mr. Mead says on-line services for consumers deliver information that they could get elsewhere. But with Entrepreneurs Online, ``our value is our content, which to some extent is not duplicable.'' His customers also place a high value on the service, he says, since it aims to help them make or save money.
Other niche services offer collections of data largely available from a variety of scattered sources. For instance, in some cases Clarkson can download government data directly into his database over the telephone at no cost. He then sells the data to his subscribers.
Another new service, TradeFair, offers subscribers the full text of the NAFTA and GATT trade treaties. Jayne Levin, editor of Internet Letter, points out that those documents and millions of others are available free on the Internet, which links government and university computers worldwide. By signing on with a local on-line service, anyone can access the Internet.
Ms. Levin adds, however, that ``packaging is everything. If you can package the data in a way that people can use, you'll make money.'' Chances are, the cost of sifting through the Internet would be higher than having a niche service put the desired information at the user's fingertips. ``You will get subscribers if your service is easy to use,'' Levin says.
Two-year-old Entrepreneurs Online has 500 subscribers who pay $14.95 a month for four hours of ``connect time.'' Mead admits that that price would be too low if everyone used the full four hours. He likens the pricing concept to a restaurant buffet: Some users pile their plates high; most do not. ``We copied what's working,'' Mead says. Other services had found that customers like a flat fee so they don't have to watch the clock.
Telescan offers customers several payment choices: flat rate, hourly, or by document. But the on-line industry is moving more toward flat rates, Brown says. NationBase is carried on WorldCom, owned by Wolf Communication Company of Houston. The cost is $995 yearly, plus a charge for downloaded information based on volume. Clarkson says he charges by volume rather than time because improving technology is accelerating transmission.
Only a few years ago, the fastest rate for downloading data from the host computer to the subscriber's desktop model was 300 bits per second (baud). Today, 14,400-baud modems are available. Even faster speeds will soon be possible, Clarkson says.
Niche services not only corral relevant information, but they help subscribers find what they want quickly, saving them from ``information overload.'' Telescan spent $1 million to develop software ``search tools,'' Brown says. Subscribers specify up to 40 criteria in choosing stocks to analyze. That way, their on-line time is more productive. Brown attributes several hundred thousand dollars of the company's monthly income to use of the search software.
Entrepreneurs Online manages to offer its service without owning a computer. Instead, the company has a ``strategic partnership'' with Telescan. For a share of the revenues, Telescan maintains the Entrepreneurs Online databases, provides customer support, and even handles billing.
Telescan's cut is ``not onerous,'' Mead says. In fact, from an operating point of view, he figures that Entrepreneurs Online is coming out 5 percent ahead. And Mead says he has avoided several million dollars in development costs. Further, Telescan continues to update its technology, which automatically benefits Entrepreneurs Online subscribers. ``It's a great deal for us,'' Mead says.