Below content is authored by Darian Shirazi for forbes.com -- I'm just saving it for the record/sharing post-removal
Original from forbes.com 2013-08-19 13:43. Retrieved from yahoo cache 2013-08-22 00:20
From the movie Boiler Room: "Hey these are the D&B cards. These are our leads...These are good leads. People on these cards buy stock."
If you're not a small business or a credit risk specialist, you've probably never heard of Dun & Bradstreet. An organization founded in the mid-1800′s and headquartered in the small town of Short Hills, New Jersey, Dun & Bradstreet ("D&B") provides information about businesses to banks, sales teams, marketing teams, insurance companies, and any business looking to transact or work with other businesses. In a nutshell, D&B is the system of record for business information worldwide; they provide lists of businesses and verified owner contact information to marketers. However, D&B has become a 'necessary evil' – companies think D&B's data is abysmal but it has been a trusted source for so long they're forced to stick with it. One senior financial executive I spoke with believed 80% of all D&B data was inaccurate, fabricated, or stale. Despite universal complaints with regards to D&B's data quality, why have they been able to sustain their business and remain the market leader in the business data market? In short, D&B has built a monopoly.
This market is massive. D&B itself generates $1.66B in annual revenue and other companies in the business data space — including brands like Bloomberg, Moody's and Reuters — are responsible for a significant portion of the S&P 500. In the last 100 years, D&B processes for collecting information about businesses have remained for the most part unchanged. With thousands of telemarketers worldwide, D&B calls 200 million businesses each year and surveys basic business information from businesses including business owner, verified phone number, address, and business category.
D&B is a publicly traded private-sector company yet 60% of small businesses, when asked "What do you think of when you hear Dun & Bradstreet?" respond with "government organization." This is the problem with how business data has taken shape in the US economy: D&B has not only created a brand that people identify with "government organization," they have also used their DUNS number (Data Universal Numbering Service) as a unique identifier that essentially serves as a small business' Social Security Number.
When a business applies for credit, a bank account, to become a State or Federal contractor, or even wants to build an app for Apple's iOS store, the business must submit its DUNS number. Without a DUNS number, a business essentially cannot operate. The DUNS number is free, but once a business creates the number, there are a whole host of products that a business must purchase to ensure it has "verified" itself with D&B.
Why is this a problem? The unique identifier for obtaining business credit is controlled by a private organization — it isn't regulated and it allows a private organization absolute control over the growth of the business economy worldwide. Want to ensure you have a good business credit score? That'll be between $39.95 and $169.95 a month to ensure your credit is "trustworthy." And in turn, you'll have to give up all the information about your business which D&B will then resell to banks and other companies looking to sell your business more services that you don't necessarily want.
This lack of regulation has become such a problem that a Federal lawsuit was brought against D&B and the courts ruled in D&B's favor because (I'm paraphrasing here) "to switch from DUNS numbers to a new unique government-regulated would cost the government 'tens of billions of dollars' and would lead to significant bureaucratic problems systematically throughout many organizations within Federal and State governments." On top of this monopoly D&B has created over the past century, customers of D&B data are fed up with the lack of quality and innovation. D&B isn't a technology company and yet it collects data – it relies on businesses giving up their information through survey calls and antiquated methods.
With the advent of big data technologies, technologists now have the ability to use modern web crawling, indexing, and distributed systems to create alternatives to D&B, but building a successful business in this market is tough. Many companies that look to tackle the problem are either undercapitalized or impatient with regards to the complexities of the problem. A few of these companies innovating in this space include:
- Radius (disclosure: my company): small business data and prospecting software for sales teams; fate: several Fortune 500 customers, growing revenue, 40 employees
- TargusInfo: provides verified business information; fate: acquired by Neustar for >$700MM
- InfoGroup: provides business lists; fate: >$300MM revenue
- Jigsaw: provided crowdsourced data about large and medium-sized businesses; fate: acquired by Salesforce.com for $175MM, mediocre data quality but decent alternative to D&B
- Factual: provides large data sets, founded by successful and brilliant entrepreneur Gil Elbaz, raised >$20MM from Marc Andreessen and others; fate: still building
- Hyperpublic: provided business data in an API format; fate: lack of data quality, raised too little money and underestimated the difficulty of the problem, acquired for <$15MM by Groupon
There are other companies in this space and this is one of the few remaining data-driven markets where the leader isn't a technology company. The problem with this space is that it isn't one which can be disrupted by ONLY the best product or the best data like many other markets. So many businesses are tied to the DUNS number that significant value must be provided in alternative data sets for customers of D&B to justify the costs of switching away from D&B. Entrepreneurs, small businesses, and large companies need access to better business data and now that the technology is available to provide a better alternative to D&B, it is time to compete.
In part 2, I'll explore how new types of data and products in this market can displace D&B's monopoly.