Joe Francica (JF): Can you give a brief background and history of AGS?
Gary Menger (GM): AGS was established in early 1997 during the wave of consolidation that resulted in a void in the marketplace as only a handful of viable alternatives remained. Our first product offering was not demographics, but rather the Freeway drive time product - primarily because data in and of itself is not particularly exciting to many people. We followed that up with the demographic databases late in the spring of 1997, and have worked to expand the range of data offered since then.
Early on, we began to develop a relationship with Experian with their MOSAIC neighborhood segmentation product, which I had actually been heavily involved with during its development. This really proved to be a critical relationship, since it not only expanded our databases but also brought us the ability to integrate the Experian household databases into our estimates and projections. That relationship continues to flourish, and we are close to releasing a new version of MOSAIC to take that product to its next level of development.
At the outset, I realized that I could not effectively build the database products and sell them to users without a major capital investment in software development and sales. By focusing only on the data, we were able to offer lower pricing and lower royalties to the channel partners. What little software development we did was aimed exclusively at providing tools to the channel to assist in working with the databases. Rather than requiring them to wait for us to produce datasets to their specifications, we provided them with the tools and the data so that they could do it themselves. That is where the model really differs from most channel partner models - the relationship is one of mutual trust whereby both parties insist on a high level of integrity.
As a result, we have stayed small in terms of employees but I think
have had a much larger impact on the market than our small size would suggest.
JF: What do you feel differentiates AGS demographic data products from either Claritas or MapInfo in terms of methodology of data processing?
GM: The core demographics products - namely census data and estimates and projections - are not as well differentiated as one would expect, despite the rhetoric that you hear these days. Most of the vendors have aggressively pursued the incorporation of household databases into their models, and most tend to respect the Census Bureau projections at higher scales. In other words, these products are increasingly seen as commodities and I think that this is both inevitable and beneficial to the end user.
From a quality perspective, we believe that the AGS estimates and projections
more than hold their own against any of the competitive offerings.
JF: You have steadfastly maintained a business model whereby you sell exclusively through partners and not direct or online? Why has this worked for AGS?
GM: Having made the choice to market through a partner channel, I view it as a very simple matter of both my personal and our corporate integrity to stay that course. Most organizations that attempt to sell both directly to end-users and through a channel inevitably end up sacrificing their channel partners in order to retain a higher percentage of the sale. We said that we would not do that, and we won't. It's really that simple and I have been stubbornly dogmatic about this issue over the years.
The model has worked extremely well for us. We now have
close to one hundred partners in the channel, and despite relatively minor
marketing efforts, this continues to grow. I think that
it works because we have retained our focus on the data itself and have
been able to be very flexible with channel partners as new opportunities
have arisen. By staying small and focused, we keep our
costs low and are able to offer our partners the ability to sell reasonably
priced data to their users while providing them a substantial revenue potential.
In other words, we found and have settled into our niche in the market
- something that every business out there is trying to achieve.
JF: AGS has signed an agreement with Microsoft to supply the MapPoint 2004 product with demographics.This was obviously a major win for AGS. What do you feel was the reason for the selection of AGS?
GM: Obviously, this was a great result for AGS.We worked really
hard to win the business of Microsoft and I think we can feel justifiably
proud of that relationship.I cannot speak for Microsoft so you'll have
to ask them about the decision making process from their point of view.
However, from our perspective, we offered Microsoft some clear business
advantages - we offered quality and value, flexibility and especially a
willingness and desire to take the market in new directions. Once
again, the exclusive focus on a channel partner model was definitely a
plus for our case, as we have no products or services of our own which
directly compete with their end user focus.
JF: AGS now seems to be one of four major demographic data firms. There are several niche players as well.Can this industry continue to support smaller firms?
GM: Absolutely.Success and size are not necessarily related and the market will always be willing to adopt new product and services that offer good value and innovation. Small firms are often more able to innovate since they tend to carry much less luggage around than the larger firms.
Some of the small companies in this market space are the most interesting to work with since they tend to take more risks in pushing the frontiers. Small companies have traditionally driven this industry forward, and I think that this will continue to be the case in the future.
Each of the demographic vendors in the market today offers unique strengths
and abilities to the market place. We often find ourselves
recommending competitor databases to clients when we don't have data which
matches the client's needs. I find it distressing that there is an
increasing tendency for companies to engage in negative trash talk, but
I suppose that it is a reflection of the increased competitiveness of the
JF: Daratech just released a report saying that geospatial data make ups only 4% of the total $1.4 Billion market for GIS.This number is obviously spread among several types of data and vendors.What do you see for growth in the demographic data market in terms of different products, if any?
GM: I actually think that the 4% estimate is somewhat on the low side, since many times it is virtually impossible to distinguish from the data and the software products that utilize it. There are still some great opportunities for the data market, even the core demographic products. Segmentation products are also an opportunity and we have been working hard with Experian over the last 18 months to ensure that the new version of MOSAIC is going to be a real leap forward from previous iterations.
Beyond that, I think the market is always going to be interested in
new and different databases and data sources that help its customers gain
further insight and intelligence in behavior. We will of course
pursue these, bring new products to the market, and always welcome suggestions
from channel partners and users. They, after all, ultimately
define the market rather than us.
JF: Do you have any insights as to the ability of the U.S.Census Bureau to keep accurate counts of the population, such as what the American Community Survey is attempting to do with yearly sampling? How do you feel it could be improved?
GM: The Census, despite its flaws, is our best source of information and will continue to serve as the basis for the demographics industry. During the 1990's, the Bureau consistently underestimated the national population and I believe were somewhat surprised by the 2000 results. I think that the ACS is an excellent means by which the Census can be a more dynamic data source, especially in order to pick up local and regional trends that may not be evident from other sources. This is especially true of key demographics such as income and family structure, which has in the past been lacking between the Censuses.
I think it is yet too early to gauge the success of the program, and
therefore to make suggestions for improvement. Clearly, an
expansion of the annual sample would be a tremendous improvement but I
suspect that in this era of tightening budgets that we will have to be
satisfied with the program in its current form.
JF: As you survey the industry and the competitive situation, what are you plans for growing AGS?
GM: Growth, for its own sake, has never been our goal.
In my view, it is a natural outcome of pursuing a deliberate strategy that
focuses on the needs of channel partners and their clients.
By resisting the urge to grow, we have been able to maintain our focus
and - forgive me for using business-speak - our value proposition.
Surprisingly enough, by resisting growth, we end up fostering it.
One of the disadvantages of the channel model is that we have a reduced ability to plan for and direct our future. Our growth is a direct result of the growth of our channel partners rather than our own efforts. We will continue to focus on the quality of our products and our ability to provide the flexibility and service to our channel that they require, and trust that growth will be the inevitable result.
In other words, we believe that we have chosen the right course, and intend to stay on it.