The business information sector has long been attractive, with strong and predictable growth and returns. However, a review of Plural’s database of over 100 B2B information businesses shows that industry performance continues to vary significantly by vertical.
Financial and Legal information, the historic stars of the pre-Lehman Brothers era, are struggling to return to modest growth as customers closely scrutinise spend, and price competition intensifies. Pockets of growth exist, but tend to be exploited by disruptive new entrants. Nevertheless, the importance of these information sources in user workflows and the presence of established platforms consistently deliver high margins.
Healthcare, Education and Agriculture are the verticals which offer the most promise for those looking for new sources of top-line growth. These industries are now belatedly embarking on an information revolution of their own, promising significant productivity improvements. However, many players remain sub-scale, and high-levels of investment are required to develop the necessary software capabilities, thereby dampening profit margins in the near term.
Risk and Energy have been the standout verticals over the past three years. More accurate data and superior knowledge in the Insurance and Oil & Gas sectors can drive outsized returns, while the pressure to find efficiencies and cut costs is creating new opportunities for data providers, including application of weather data to risk pricing, planning and operations.
The implications for how to compete and where to invest are significant. Focusing on growth versus profitability, technology investment versus sales optimisation, and vertical prioritisation will be strongly influenced by the vertical exposure of individual businesses.