SIC 7375 Information Retrieval Services

 
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SIC 7375

Companies in this industry are primarily engaged in providing online information retrieval services on a contract or fee basis. The information generally involves a range of subjects and is taken from other primary sources, such as the original publishers of the materials. Establishments primarily engaged in performing activities, such as credit reporting, direct mail advertising, and stock quotation services, and who also create databases are classified according to their primary activity. Establishments primarily engaged in collecting databases from primary sources and reformatting or editing them for distribution through information retrieval services are classified in SIC 7379: Computer Related Services, Not Elsewhere Classified.

NAICS CODE(S)

514191

Online Information Services

INDUSTRY SNAPSHOT

Demand for electronic information has skyrocketed with the growth of the Internet, but the resulting low-cost competition has wreaked havoc with traditional subscription information services. The information retrieval business, which usually charges customers either by the amount of information retrieved or at a flat subscription rate, has traditionally served corporate and academic researchers and librarians—audiences that were used to paying a premium for professional-quality information. This stable market has been undermined, however, as similar information has come available on the Internet, often for free.

With newspaper and magazine articles routinely available for free on the Internet, old-line full-text database services like LexisNexis and Dialog have witnessed customer flight to cheaper services. As a result, competition has gotten tougher and, in many cases, revenues at traditional providers have stagnated or fallen. Mergers, acquisitions, and partnerships were frequent beginning in the early 1990s and continuing into the late 2000s as information providers adapted to the new marketplace. Nearly all likewise embraced the Internet in some form, as demand weakened for proprietary software, database connections, and CD-ROM subscriptions. Continued consolidation was expected in order for companies to remain viable.

In spite of some providers' woes, however, according to census statistics the information retrieval services industry gradually recovered from the sluggish conditions that began in 2001. Activity of online information services increased during the early and mid-2000s. Online information services became increasingly competitive, whereas information retrieval services began to diversify, consolidate, or add new products in line with demand. By the end of the decade, according to Outsell, the industry will see the most growth in search and market research segments, such as those offered by Google and Yahoo!

By 2006, according to industry statistics, there were an estimated 4,200 online information retrieval firms employing some 83,500 people. The combined industry garnered $23.7 billion in revenues that year. The average online information retrieval firm employed 20 people, while generating about $6.2 million in revenues. Information retrieval services represented the largest sector with 2,000 firms and more than 46 percent of the market. Online database information retrieval numbered 1,600 firms and held nearly 40 percent of the market. Other significant sectors included database information retrieval, and remote database information retrieval.

ORGANIZATION AND STRUCTURE

Online information services were increasingly the leading means of delivering electronic information. Other methods included CD-ROM, diskette, and magnetic tape. Online services were trademarked services that may or may not bear the same name as the companies that owned and operated the services.

Online service companies may be considered the vendors, distributors, resellers, or retailers of informational databases that were often developed by third-party database publishers. The database publishers, often considered part of the broader "information services industry," were not part of the online services industry, however, and were usually classified by the type of publishing they performed. The data in the databases may be numeric (such as financial statistics), bibliographic (citations to periodical literature), full-text documents, directory or dictionary entries, patents, images, or even digital audio and video recordings. Most online services provided multiple databases. Specialized online services may also produce one of the databases themselves. Increasingly, there were online services that provided a combination of databases that they developed along with others that they licensed to redistribute.

Online services could be categorized as either business/professional research services or personal online services. Business/professional online services may be highly specialized by offering only a single set of related databases to a niche market. They may be somewhat specialized but offer multiple databases from different sources on a similar broad subject, such as the legal online services LexisNexis and Westlaw or the scientific service STN International. Finally, professional online services may be very general and offer up to hundreds of databases on all different subjects, such as Dialog or LexisNexis. Such distributors of multiple databases were most often referred to as "database vendors," and their clients were usually corporate librarians.

The largest business segments were legal and investment. Marketing, intellectual property, scientific, and credit information service needs also composed a large portion of this market. The remainder of the industry served a variety of niche markets. For instance, many databases were tailored specifically to one industry or profession, such as chemical, health care, civil engineering, agricultural, banking, insurance, or food service. In addition, many niche services were managed by nonprofit industry service organizations.

While the business/professional services encompassed both the specialized online services and the general-subject online services, consumer information services tended to be general, offering a wide variety of databases in order to appeal to a wider market. With the emergence of the Internet, however, consumer information services became indistinct from other businesses, such as electronic publishing, Internet access services, and search engines.

Indeed, the Internet search engine is by far the most pervasive form of information retrieval system, both for businesses and consumers. Far different from the traditional information service revenue model, popular search engines were completely free to users. They instead earned money through selling advertising on the site and through electronic commerce partnerships with other firms.

Although parts of the information retrieval industry were relatively young, and therefore entrepreneurial in nature, each segment of the market tended to be dominated by one or two large firms that posed formidable barriers to smaller competitors. For instance, the market for legal information was dominated by just two competitors, LexisNexis and Westlaw, and even they have been struggling. Even niche markets tended to favor the single competitor that was first to establish a presence and to acquire ongoing access to essential copyrighted information. As a result, firms in the industry typically diversify and grow through mergers, acquisitions, or joint ventures with other companies.

Online services allowed customers using computers or computer terminals to access a remote central computer storing databases by connecting through a telephone/telecommunications network. If the customer was using regular analog phone lines, which were historically the most common method and, in the early twenty-first century, the most common means for home and small office customers, the customer's computer was then connected to the phone line with a modem, a device that made the conversion between digital computer signals and analog phone signals. Business customers were increasingly using digital phone lines, such as ISDN, for online service access, because they enabled higher speed and quality of data transfer. Customers accessed a central data bank of information by calling a local, or sometimes long-distance, telephone number, and information was then transferred to the user over the phone lines. Online services offered local dial-up numbers throughout the country to a faraway data bank by making use of any one of various data communications networks. An alternative way to connect to the online service's computer was via the Internet, especially the World Wide Web. If a customer's organization had a host computer directly on the Internet, then its users could connect to the Internet through a local area network, and no modems were needed.

Online services, which managed the databases, may charge the customer a flat monthly rate for unlimited access to the data bank. In other cases,...

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