InfoInnovation

GlobalSpec: detailing the "what" and "how" of a vertical search role model

In any discussion of vertical search, GlobalSpec is bound to come up as one of the prime role models. Though it is privately held, and funded primarily by Warburg Pincus, its rapid growth has been well-known (and widely envied) for  years. One of the highlights of Infocommerce 2007 was a detailed presentation by chairman and CEO Jeffrey Killeen, rich in both the statistics and the philosophy behind the company’s ongoing success.

According to Killeen, the story (like many Web successes) began with seeing the Mosaic browser - and recognizing the potential link to catalog data. From then on, there was a consistent tripartite focus – engineering, workflow, and e-media. The initial product, SpecSearch (parametric search on electronics parts catalogs) is now the largest database of its type with more than 2 million products searchable. Two years ago (it seems longer – perhaps because of the high profile of vertical search in that time period) came the Engineering Web – a curated collection of websites, tied together by a proprietary taxonomy, that was originally created to drive more frequent use of SpecSearch (which, like all GlobalSpec offerings, is advertiser-supported and free to users). There are now 3.6 million registered subscribers, 3 to 4 million unique monthly visitors, and (from a beginning just two years ago) 5.9 million opt-in newsletter subscriptions representing 2.3 million unique subscribers. The result is a rich environment for hard sales leads and contextual advertising.  GlobalSpec has further capitalized on its premier position by creating an ad network providing additional inventory to its advertisers. Killeen quoted a five year compounded revenue growth rate of 70%, positive cash flow for the last two years, and progress (“half-way”) toward a target EBITDA of 35-plus percent.

Underlying this success have been some consistent principles, chiseled in stone. “Things we are intensely commited to”: 1) a registration model optimizing the value of clickstream data, built with careful attention to the value exchange with users (registration in exchange for increased productivity), patience, and derivative businesses (e.g. e-newsletters); 2) a default to user-centricity in any trade-off between user and advertiser needs; 3) a “what are we solving for now” management approach that has followed multiple life cycle phases (product model/vertification; early audience build; cash flow break-even; audience/advertiser scale with sales force expansion and new product rollouts; and EBITDA increase via flat headcount and continued high degree of innovation); and 4) “managing from the perspective of a blank sheet of paper.” “Things we said no to”: software as a product, e.g. product lifecycle management (PLM) and product data management (PDM) a la IHS; user-paid models; price-cutting; private-labeling; other verticals (“for now”); “weak” M&A opportunities; “premature” strategic sale.  When that sale does come, it will be one of the great value-creation stories of the post-Mosaic information industry.

Edmunds: an online re-invention success story

Keynote speaker George Kang, executive director of automotive buyers’ guide publisher Edmunds Inc., described a business transformation that evolved from early online experimentation to current success in lead generation and advertising on the Web.   In the past six years, Edmunds’ revenue has grown about 40% year over year (1300%).  Its audience has grown from 2 million to 13 million unique monthly visitors. 

A pivotal early decision (in 1995) was to make its entire database of automotive information, including the key element of dealer invoice pricing, freely accessible on the Web.  Then, online-car-buying pioneer Autobytel offered to pay for lead generation [Historians please note: this was, at least to my recollection as someone who was watching closely at the time, was the first significant lead-gen deal on the Web.]  Lead-generation to online and offline automotive retailers developed into a robust revenue stream.  Since then, Edmunds has spun out additional sites – InsideLine (for enthusiasts), CarSpace (community), and AutoObserver (industry commentary) for better segmentation and targeting. 

In 2001 Edmunds introduced its first online advertising, strictly endemic (i.e., in this case, automotive-related).  And it saw that the car buying process – including an initial research phase during which consumers learn what vehicles are available, form their opinions on those models, and design their consideration set, before ultimately choosing and buying a vehicle – created different consumer needs for marketing messages at all stages.   

More recent innovations have included the development of “true market value” pricing, attempting to show what most people are actually paying (i.e. the actual purchase point between MSRP and deal invoice); consumer-validated market intelligence reports; and dealer ratings and reviews.  Along the way, Edmunds has resisted pressures from its advertising and lead-gen customers (e.g. dealers that have been subject to negative reviews) and maintained editorial independence.  In terms of marketing and discoverability in the Age of Google, it’s over 800,000 pages of content online help drive favorable search engine rankings.  As traffic has grown, Edmunds has, by design, held down the volume leads delivered to dealers, keeping it in line with advertising traffic, in order not to delete the value of leads delivered.

Kang emphasized some consistent principles to which Edmunds’ success can be attributed:  empower consumers, then monetize; stay true to the mission if it is bringing value to the audience; look for insights using your internal data; look for stress points in the market; drive value by using data as a lubricant to ensure that business is run at optimal level.   No startling insights there, perhaps, but certainly an excellent set of themes with which to lead off the conference.