CEO Patrick Spain Reveals Hoovers' Revenue and Business Model Details

Ten years ago Hoovers was a little Texas-based print, business
directory publisher. Now they're one of the top three most
successful sites selling online content in the world. CEO
Patrick Spain gave us a tour of his business model...:

Q: What percentage of Hoover's income comes from the various
revenue streams (membership, advertising, corporate enterprise
sales, etc.) and how do you see that changing over the next 12
months?

Spain: In the last quarter, 45% of our revenue came from
subscriptions (enterprise and individual), 39% from
advertising, 6% from e-commerce, 7% from licensing and
syndication to 3rd parties, and 3% from print publications.
As far as trends go, we rather like this balance. We'd like
to see the e-commerce revenues a little higher, but we've
really only just started in that area, and we're still
learning. As that figure rises, we expect there to be a small
drop in revenues from advertising.

Q: What tactics are Hoover's using to continue driving great
traffic to their site?

Spain: The most effective tactic is word of mouth. It's the
least expensive, and the most powerful. We rely on colleagues
in offices talking about us as a great source of information,
and in order for that to happen, we have to outdo the
competition - provide more free content than our competitors,
for example. Having said that, if you build it they won't
necessarily come. But we're lucky to have had close
partnerships with AOL from early on - our content is placed at
key points throughout their site, with plenty of links back to
us. That's great for the Hoover's brand, and it's been the
single best way of obtaining new users for us, although we're
starting to reach saturation point as far as this is
concerned. Five years ago it accounted for over 50% of new
sign-ups.

Q: What percentage of site visitors end up being paid
subscribers and what tactics work to increase that percentage?

Spain: At the moment we have around 3 million regular users,
and 250,000 paid subscribers. Our primary focus is not to
encourage people to subscribe - we're more concerned with
providing the necessary tools to help businesspeople make
decisions and, more and more, act upon those decisions. To
encourage subscriptions, however, we try to make it clear to
users what content they'd get if they were paid subscribers.
Non-subscribers conducting a search for, say, companies in a
particular field would be presented with only the top few in
the list and then a door that they'd gently bump against --
the door only opens for subscribers.

Q: What do you say to everyone who says "it's impossible to
sell content online"?

Spain: I tell them to look at us, at the Wall Street Journal
Online, and at Consumer Reports. That's numbers three, two
and one respectively in this field. We've all been able to do
it, with high-value proprietary information. And look at AOL.
AOL customers aren't just paying for access, they're paying
for content too - and they know it! If AOL customers will pay
for content then other people will - the key is obviously
providing the RIGHT content, and some of us have managed to do
that without bundling it in with Net access.

It's really very simple: what people really want from content
is to be entertained or informed - if you can provide one or
the other (or both) then you're winning. And if you can show
value at the same time then people will pay.

Q: Which of Hoover's channels are most popular?

Spain: Business Information is the most popular, followed by
Company and Industry News, and then IPO Central, part of the
Money Channel.

Q: A year ago it seemed like every site had to have a "MyNAME
OF SITE" Option to increase visitor stickiness. How has that
feature worked for Hoover's and how are you coping with the
public backlash against having to remember and input user
names and passwords everywhere?

Spain: In fact only a small minority of users personalize the
site. The highest instance I've ever heard of is 20% - we
don't even come close to that. If users do choose to
personalize though, they can opt to store a cookie on their
hard drives - if they don't change servers or PCs then they
only have to enter their passwords once.

We've learned a lot from the 'My Hoover's' option - we
originally thought that the more choice we gave people the
better. In fact, what we found was that our users want
something simple - we were providing too much choice. Also,
whereas personalization options currently appear in three or
four elements of the site, we've found that it's preferable to
group them all together -- one place where individual users
can tell us what information they want, and how they want it
delivered to them. We're taking this into account as we work
on rev. 2.

Q: Are Hoover's planning major improvements in any particular
site section in order to stay competitive -- for example the
Business Links section is kinda weak?

Spain: I don't disagree with you about the Business Links
section - our strengths don't lie in that area right now.
While it might be a directory of 15,000 links, the
searchability is not as good as we'd like it to be. Elsewhere
on the site - in the Company channel, for instance - our
search mechanisms are able to apply a certain amount of logic.
Many people, for example, spell the company name 'Procter and
Gamble' incorrectly, and our search tools will make allowances
for this. Similar tools have not yet been applied to the
Business Links section, though, so searches are only
successful if the terms are spelled exactly the way they're
spelled in the listings. We're working on this, of course,
but it's not simply a matter of applying the exact same tools.
We're also looking to expand the number of links available.

Elsewhere, we'll soon be adding much more company information,
aiming to cover all the publicly trading companies in the
world. We're also developing the Travel channel, which is
currently only in its first iteration. As regards the
searchability of the whole site, we're experimenting with
natural language search mechanisms, and working closely with
readers to see if they're a viable option for us.

Q: You publish just 4 online newsletters now (compared to The
Standard's more than a dozen). Will you continue to launch
more?

Spain: We actually have a dozen; it's just that you don't know
it yet! When we acquired Powerize we acquired nine industry-
based newsletters that intend to continue developing. We'll
continue to add more in the future.

Q: A lot of people are saying wireless content is mainly hype.
However Hoover's has some content that might be incredibly
useful on a wireless platform -- for example IPO info. What
are you doing in the wireless arena and when do you expect it
to actually make money for you (vs. just a sexy news release)?

Spain: First we asked our customers "Hey - do you care about
wireless content?" Forty percent said "yes," but not to
everything. They wanted the sort of information that would be
useful to them if they were in a hurry - on their way to a
meeting, for instance, not having had the time to research the
company or the person they're meeting with - basic company
facts, maps, the top two or three headlines. And so that's
what we intend to provide. There's still a lot to be decided
about exactly how wireless content is going to work as a
revenue stream - at the moment we're happy to look at it as an
extension of the service we offer to our customers, and an
improvement of the relationship they have with Hoover's.

Q: Will Hoover's begin carrying broadband content a la On24?

We're still trying to figure out our broadband content. We're
aware that, right now, you don't see people looking at
audio/video all day in the business world, and we think that's
largely because it's not convenient enough from many sources.
We think the key to making broadband content appropriate to
businesspeople is to make sure that it's searchable and
indexable, and that it has sufficient text behind it - we'll
be bearing this in mind as we introduce broadband content to
Hoover's.

Q: Hoover's has recently launched its UK site. Will Hoover's
be moving into other countries and, if so, which ones?

Spain: We aim to have basic sites up and running in Germany,
France, Italy and Spain within the next six months. Given the
Net access figures in those countries, they're the best ones
for us to be exploiting at the moment. Initially these
European sites will be stand-alone, but we'll be integrating
them into World Hoover's over the ensuing months, just as
we're currently doing with the UK site.

Q: You still publish print products, then - what do you see as
the future of that division?

Spain: It takes one and a half people to run that part of the
business! As long as there's a demand for our print products,
we'll keep on producing them.