The state of the online info services sector

Online information services sectorProviding customers with information had been a lucrative growth industry for some time before the global recession struck.

The ease of access to news, corporate information and directories created an entirely new industry based on rapid communication of current data. However, despite this newfound reliance on information among the public, government and corporate sectors, 2008-09 proved a difficult period for the providers of such information.

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While the internet made communicating information easier, it also created an avenue for the provision of information for free to those that wanted it, generating revenue via advertising. Despite growing preference among advertisers for online ads, advertising spending in general collapsed in 2008-09, causing growth to stall. The recovery is due to begin in 2009-10.

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In 2009-10, despite a struggling Australian economy, the industry is set to grow at 4.7% as confidence returns and clients regain their willingness to invest in premium information providers distinct from those offering access to data for free.

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The ease with which adventurous entrepreneurs can start up an online company also means that this current downturn presents itself as an ideal opportunity for making money. Establishment growth is set to outstrip revenue in 2009-10 at 5.2% as many individuals (some of whom may have lost work from other sectors) look to offer information to a niche market hungry for data.

Also, this desire for up-to-the-minute and longer-term news considered analysis, is driving imports of information. In particular, the news sector is driving this trend. Companies such as the Associated Press and Reuters are increasingly centralising their news-gathering operations. As such, more information is available from overseas than ever before. This is also being fed by a greater demand from Australians for news and information from beyond national borders, pushing imports up to around 50% of domestic demand.

Beyond 2010, the industry is set for a second renaissance, as information becomes pivotal to the information economy, and the internet becomes the key means of delivery. Therefore, growth is set to exceed 10% for the five years to 2014-15.

While 2008-09 was a poor year by industry standards, the long-term upwards trajectory is likely to be resumed as soon as the economy shows signs of recovery. Consumer and business demand for information is becoming constantly greater, as is their need for that information to be current and easily accessible. As soon as consumer sentiment and corporate profits begin to increase, it is likely that growth in demand for online information providers will once again reach double-digit levels.

Key success factors:

  • Use of production techniques that add value to base product(s). Develop value added and associated products linked to the database, which are sold at a higher price to subscribers or on an access fee basis.
  • Ability to vary services to suit different needs. Ensuring that the database is able to be accessed existing and potential clients’ hardware and software.
  • Having a cost-effective distribution system. Having a cost-effective mode of delivery, using the internet, with reasonable cost and meeting clients’ access requirements.
  • Company’s product is user/consumer friendly. Having a system associated with the database which allows for easy access and analysis by clients.
  • Access to highly skilled workforce. Having skilled staff in both the data input and delivery and site maintenance stages.
  • Provision of superior after sales service. Provide some back up training, manuals and other assistance to clients, online or through call centres or help lines, to provide high levels of customer service and satisfaction.
  • Production of premium goods/services. Providing a database of significant value in terms of type, quality, timeliness and cost-effectiveness to clients.
  • Undertaking technical research and development. Undertake on-going research and development on existing and new products to provide an ever evolving, and valued product.

Robert Bryant is the general manager of business information firm IBISWorld.

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