Reuters to put its core business on the Internet
How sure are we this is a smart idea?
Pinch us. Reuters stock has been climbing since yesterday when, according to a Reuters report, so it must be true, it announced a £500 million plan to shift its core business to the Internet. This sort of announcement, by anybody, usually does have a happy effect on the stock price, but depending on what you reckon Reuters' core business is, shoving it on the Internet might not actually be an obvious recipe for success. The reverse, maybe. Reuters uses a global network of reporters to sell news, and although Bloomberg is the closest obvious enemy, the Internet itself is a bigger threat, because whatever it is you sell on the Web, the rule is that someone, somewhere, is giving it away for free. Reuters itself could also be seen as its own competition, because the Web has provided it with mechanisms to broaden its own distribution. Stories from the wire services are becoming more commonly used as differentiators, but the more of the same differentiator you have, the less effective it is, and the more the price goes down. Reuters isn't entirely informative about the nuts and bolts of its four year plan to migrate its services to "Internet technology." According to CEO Peter Job: "The Internet has...enabled us for the first time to start serving an infinitely wider market, including individuals making financial decisions at home and at work. It has also allowed us to adopt a more cost-effective model for our base business." The infinite nature of this market for a finite product is dubious - how many different places can you stand having the same information fired at you from before you get sick of it? And how much will you pay? The viability of this not terribly clear plan isn't at all clear. Reuters' planned flotation for its Greenhouse Fund, which invests in Internet startups, and the possibility of an IPO for its Instinet electronic brokerage look more convincing. But are these core? Or indeed, are the 50-50 joint venture with investment community Multex.com, or a wireless-related venture with Aether Systems core? Perhaps Reuters, which announced pre-tax profits of £632 million and warned of a £300 million reorganisation charge, is cannily redefining where it's core's at. ®
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