“We’re talking about a data model if executed properly is very powerful, very lucrative,” said moderator Russell Perkins, head of InfoCommerce Group, kicking off one of the best sessions at BIMS last month, titled Everyone in the Pool.
“What I mean by that is it’s pooled data, user generated or crowdsourced,” he said. “But it’s even a bit more selective than that. We’re paying attention to the people who are submitting the data to us and trying to make sure they’re in the industry or know what they’re talking about. We’re the mechanism that lets them exchange data among themselves. The key is it’s much more of a known bunch of people who are submitting the data to you. It’s a little more defined and a little more B2B.”
The three speakers—Adam Manson, director of data valuation at Business Valuation Resources; Jim Fowler, founder and CEO of Owler; and Regina Glick, vice president of marketing at CompStak—all use different models to achieve success in this area but also agreed on many of the important points.
Getting into this pool cannot be done overnight. It takes some work to build up value.
“When we were starting out, we realized that relationship building would be pivotal,” said Manson (pictured). “We identified two strong associations with the same goals and interests that wanted to collect user data but didn’t have the technology or financial means to do so. We thought we could do this. We developed strong partnerships with both, so they would promote us and their members trusted us.
“It’s a slow process and it builds. Early on we weren’t afraid to tell [a person with good data], ‘We’ll send someone to your office, we’ll document it for you, write up the transactions. You get all the access and we’ll do all the work.’ You have to go above and beyond to get things built.”
Fowler (pictured) previously built up the cloud-based, contact management service Jigsaw. He said his crowdsourcing ventures have the Tom Sawyer effect. “You’re basically getting people to paint your picket fence for you—and sometimes asking them to pay for the privilege of doing so. It’s tricky. You have to really pay attention to the motivation of why people are giving you information. Crowdsourcing really works when they’re motivated to give you the right answer. It doesn’t work when they’re motivated to give the wrong answer.”
As far as jumping into the pool, he pointed to Wikipedia, asking, “Where do you start? There has to be some bit of value there. You have to spend some time and seed it…
“I’ve seen a lot of people try morphing their existing business into a crowdsourcing model—it’s very, very difficult to do. It should be a completely separate line item [in your business]. For those of you thinking of getting into implementing crowdsourcing, you want to keep that model really, really clean, without any requirements of the basic core model—or just start a company from the ground up.
“Our founder would sit in [real estate] broker meeting where people would start swapping data,” said Glick. "He knew that he could find a better way.' But he also knew that he would “have to deliver value, and a value that is recognizable."
Glick said that they do a lot of legwork in a city before opening for business. "We’ll go into markets in advance and start networking, calling people we know, getting references. We did that in Baltimore. In New York, it started with a few thousand lease comps. You can’t just open up a website and say come in. You build up to a certain point so that when we launch we have value."
The data has to be high quality, clean and reliable.
“We will never get 100% clean data,” said Glick (pictured). “If you can get like 80/20 you’re doing something really right. Long before we get the data, we have to vet them before we let them in. Our analysts"—they have 25 data scientists and researchers—"are able to dig down into it, reviewing every record that goes into our database, making sure it’s reliable… We also try to incentivize our members to look for problems.”
But, she added, CompStak will take the data in any format—“pdfs, pictures, on backs of napkins. Mail it to us and we’ll take it. Ease of use is important [for our customers]… Every barrier you put in place reduces the odds of them using you.” Added Perkins: “You do what you have to do to bring in the data.”
“You don’t have control of what’s sent to you,” said Manson. “You can provide guidance. You do have control of what you publish to your market—what your audience sees. We’re pretty strict on how to send data to us. There’s a certain methodology. Revenues to one person isn’t revenues to another person. There are specific data conventions on how we collect information.
“We’ll have an open dialogue with any contributor; we have an analyst that reviews the inbound data, combs through it and reaches out with questions. We can also ask for support documents, if we need to see a closing or p/l statement.”
Manson said they've even recently “gone to a second set of eyes after it’s reviewed by one analyst. Not necessarily data errors, maybe this business sold for half the asking price, Why? It’s important to us that everything that goes in is accurate and vetted. Our reputation is on the line.”
Fowler agreed. “The buyer at the beginning is going to be very skeptical of crowdsourcing information.” It has to be solid.
Who do you value more, the data giver or the data buyer?
“Who do you message when they come to your site, the people who are contributing the data or the people who will buy the data?” Fowler asked. “This is the single biggest marketing position problem to solve in the crowdsource model.”
While you do have to talk to both, he said definitively that “Contributors are 10 times more important than the buyers. You have nothing to sell without them.” He’s done that at both Jigsaw and Owler. He also said that experts who get more individual users will prove more valuable than “folks who can drive six-figure deals. If you’ve got the smack, the buyers will know where to come get it.”
“Contributors are so much more valuable,” Glick said. “We’re not selling the data to our contributors. Data is more valuable than cash.”
“With our model, we’re always seeking to get contributions first,” said Manson. Some larger intermediaries might not want to submit information—they just want to buy it. “Who’s been our market so far? People who don’t participate in transactions but need to value things. People who need to appraise private companies.”
Manson advised to “always work through advisors not business owners. Intermediaries will do multiple transactions. Business owners might be hesitant to send information to us, where someone who has participated is more familiar with our company and what we do and more comfortable to send that information to us.”
How are you driving revenue?
“Revenue is a beast once uncaged must be fed,” said Fowler. The hardest part of the crowdsourcing model is getting distracted by that. At Jigsaw, we were going to charge every sales person $25 a month, [knowing they could] come in and say, ‘We can expense this.’ That was driving a half million dollars of recurring revenue.”
But then they realized they could “do a seven-figure deal with a huge company" instead. Looking back, he said he “never would have allowed our contributors to contribute money—only data. You must stay laser focused on why they will give you the data. That’s the hardest thing to make happen in crowdsourcing. If you take your eye off the ball at all…”
Manson said that “we work with business intermediaries who are actually facilitating these business transactions, business brokers, M& A advisors, and we collect this information and create pricing multiples for appraisers who are valuing these private companies.” They also sell online tools, books and guides on how-to topics, hold training and enter into licensing agreements.
“We’ve built this marketplace where brokers, appraisers and researchers who are in the commercial real estate space can upload data they have on commercial leasing deals,” said Glick. “We clean it up, put it back on the platform and allow them to download it with the points that they’ve earned with the data they’ve given us. We’re monetizing that data by selling it through our enterprise subscription platform to lenders, landlords and investors in the commercial real estate space.”