The seeming ubiquity of search engines, smartphones and free news websites has made it easier than ever for people not only to answer burning questions, but also to research topics in detail, while keeping up with current events. That's a major migraine for conventional publishers, as their customers are increasingly loath to pay for content that they can access for free elsewhere.
Meanwhile, industrial machinery, social media and mobile devices are throwing off vast quantities of data that may hold important insights for organisations, but are tedious and time-consuming to comb through. And yet access to meaningful data has never been more important, as globalisation has spawned more competition across the industrial spectrum.
Niche markets and a specialised offering
These developments present significant challenges for purveyors of information. Several have responded by focusing on highly specialised information that can't be found elsewhere, bite-sized data that can be rapidly analysed to inform decisions and strategies, and differentiating themselves through a niche focus and working to dominate a particular market segment. The companies that have adapted to these trends deserve another look from investors seeking to future-proof their portfolios.
Several authorities have highlighted an increasing emphasis among organisations on gathering and assessing information that is tailored to their needs and relevant now. "As the need for business intelligence becomes more focused on real-time insights rather than historical or periodical information... there is now higher demand for advanced specialised data analytic services," reports the Organisation for Economic Cooperation and Development in its 'Data Driven Innovation: Big Data for Growth and Well-Being' report. These insights can help a corporation get its product to market more quickly and provide an early-mover advantage, write the authors. They also expect the value of data to increasingly stem from advanced analytical techniques such as simulations, data visualisations and predictive analytics, prompting data providers to focus on these skills. There's a similar trend among event organisers, who look to dominate niche market segments and where there's less competition and they can hold 'the must-attend' event.
Informa (INF) has seen strong demand for content, data and networking as customers seek to gain a competitive advantage, justify their investment decisions and gather supporting evidence for strategies. As part of its plan to accelerate growth, it has sharpened its focus on niche networks and communities and placed greater onus on tailoring offerings to specific customers. For instance, the business intelligence division increasingly targets communities within larger industries such as pharmaceuticals and financial services. The academic publishing arm is targeting professors and students in highly specialised fields who may have fewer textbooks to choose from and may be more willing to splurge on relevant textbooks and journals. And the knowledge and networking division has prioritised engagement with clients within sectors such as life sciences and technology.
Multiple acquisitions have supported its efforts: buying publisher Light Reading has bolstered its range of specialist technology, media and telecoms information products. Management also expects its agreed £1.2bn purchase of US rival Penton to strengthen the group's ties to specialist communities and add more than 100 specialist digital and print insight products, including 'Farm Progress', which provides state-specific agronomy information to US producers in 13 states and regions.
Anglo-Dutch professional information giant RELX (REL) has pursued a similar strategy, focusing on data-driven solutions that help clients make decisions, rather than reference tools. For instance, its MedMal software provides malpractice attorneys with invaluable information on similar lawsuits and their outcomes, the size of past settlements, lists of expert witnesses, judges' historical rulings and an estimated chance of winning. They can even assess the standard of medical care a patient received - a critical element of medical negligence claims - without recourse to expert (and often costly) medical opinion.
Its other information products, which include LexisNexis, can analyse thousands of data sources including bankruptcy filings, criminal records and property leases, helping government agencies to crack down on unemployment, identity and welfare fraud. And motor insurers can use its risk-assessment tools to appraise people's automotive records, peruse their financial history, and even assess their driving behaviour using in-car telematics - key criteria for premium underwriting.
Other media groups have also bet on specialist information. Progressive Digital Media rebranded as GlobalData (DATA) after it acquired a healthcare information outfit with that name, and bolstered its range of retail, academic, consumer and financial data by acquiring a quartet of businesses from Informa in 2015.
Meanwhile, Design Week and Marketing Week publisher Centaur Media (CAU) has sold peripheral products to focus on a handful of key brands. And events giant Ascential (ASCL) earns more than 40 per cent of its turnover from information services such as WGSN - a fashion-trend forecasting product - and Groundsure, which assesses environmental risks. It recently acquired One Click Retail, an e-commerce analytics provider with clients including Unilever, HP and Nestlé.
Software dash
Software companies have also scrambled to satisfy information-hungry organisations. Arria NLG (NLG), which specialises in translating complex mechanical readings into easily understandable language, recently signed a deal with global earthquake forecaster GeoCosmo to turn seismic measurements and algorithms into status updates and alerts. First Derivatives (FDP), which provides the tools to make sense of huge volumes of data, has partnered with Thomson Reuters to provide real-time analysis of very large financial data sets and both pre-built and custom analytics of data from more than 70 exchange, broker and vendor sources.
Moreover, Cisco uses its digital marketing products to wade through internet data to identify and qualify leads based on keywords, while Utilismart has deployed its technology to collect, process and analyse information from energy meters and sensors. Another company, Fusionex (FXI), has built an intuitive 'big data' analytics platform - users can simply type in a question and receive insights - that clients can tailor to their particular requirements. For instance, an Asian holiday resort uses the platform, called GIANT, for real-time marketing and to analyse customers' social media posts and online reviews, personalising their holiday experiences and informing the group's investments in food, entertainment and lodging. It believes the tool can help it foster loyalty among customers, encouraging future visits and lifting revenues.
IC VIEW:
The sheer volume and variety of available information threatens to overwhelm organisations, fuelling demand for specialised, digestible data. The media and technology companies that successfully address that need are likely to overtake rivals and become indispensable to customers. The specialised data sector remains relatively small, but we expect a rush of established companies and start-ups to increase its size over the next few years. Software providers may boast stronger growth prospects, but media businesses tend to carry less demanding valuations and offer more significant incomes. Investors who back the right business in this mushrooming sector are bound to enjoy a tidy return.
Favourites
RELX is a quality outfit, although a punchy consensus forward rating of 20 times forward earnings could limit short-term upside. We're more bullish on GlobalData, which is growing quickly and targeting attractive markets. Another solid bet might be Wilmington (WIL), which provides specialist information, education and networking to professionals and has helped them to navigate shifting regulations in industries such as financial services. Its focus on specialist markets has spared it a clash with Bloomberg and Thomson Reuters, and it offers a solid growth outlook and a tidy income at a cheap rating.
Outsiders
The forward ratings of Fusionex and First Derivatives price in their strong growth forecasts. Arria has been hit hard by the oil and gas downturn, although it has made strides towards diversifying its business, while Informa still has work to do to revive growth. We remain bearish on Euromoney Institutional Investor (ERM), given the depressed backdrop in financial, energy and commodity markets. The publisher's latest bet on specialist data may not help matters: it has agreed to acquire FastMarkets, a provider of real-time metals market information including price assessments and futures prices to traders and risk managers.
