To get to Lexis-Nexis headquarters, you drive from the small Dayton airport past miles of cornfields until the highest thing on the horizon is the occasional water tower. Eventually, you reach the corporate offices: a group of somber gray buildings nestled amid a grove of oak trees. And you get your first inkling of an answer to an intriguing question: Given its 25-year head start, why hasn't Lexis-Nexis become the dominant provider of information services on the World Wide Web?

The question has broad relevance because so many companies with long-standing franchises are trying to figure out how to move them onto the Internet. But Hans Gieskes, president and chief executive of Lexis-Nexis, appears tired of the question. He's a big, quiet man, with a big, quiet office, filled with furniture so soft you wonder how you'll ever get out of it. "It's simple," he says. "We weren't interested. We're not out here to take every dollar we can make. We never wanted to be another Yahoo."

Mr. Gieskes, a native of the Netherlands, pronounces "Yahoo" as "ya-HOO." He talks of noblesse oblige when describing his company's role in nurturing the on-line information business. A colleague says that, six months before Yahoo went public in April 1996, Lexis-Nexis engineers already had developed an Internet search engine. But, he tells a reporter visiting from San Jose, Calif., Lexis-Nexis scrapped the project. The company, by the way, aspires to just 6% annual revenue growth.

Something tells you you're not in Silicon Valley any more.
 

Lexis-Nexis may be an object lesson for how not to think about the on-line economy.

For decades, Lexis-Nexis has provided a huge database that subscribers could tap into electronically. The company has been spectacularly successful, reaching some $900 million in annual revenue, according to analysts. (The company was acquired by Anglo-Dutch publishing giant Reed Elsevier for $1.5 billion in 1994 and no longer provides revenue numbers.) But the whole proposition was expensive for subscribers. Customers needed dedicated terminals, which had to be loaded with huge amounts of Lexis-Nexis software, and had to dial in over expensive telephone connections.

Now, with the advent of the Web, much of the expense has gone away. Just about everyone who wants to buy on-line information already has a computer that they can use. Potential customers already have Web browser software, which they probably got for free. And Internet connections cost just $20 a month.

But Lexis-Nexis has somehow managed to miss the noisy wonder of the Internet. It has continued to focus on its traditional customers, the professional researchers who could justify the expense. Even with them, the company has taken only modest steps to take advantage of the efficiencies that the Web provides in delivering information. Meanwhile, the company has ignored the market for research among nonprofessionals, whose interest has exploded because the Web has made so much information available at little or no cost.

Like many companies, Lexis-Nexis is focusing on those who are its customers, rather than those who could be. In the process, it is pursuing a market that is growing a few percentage points a year while avoiding one that is growing 10 times as fast.
 

It's not quite right to say that Lexis-Nexis has broken every rule of the Internet economy. It's more accurate to say that it has remained splendidly aloof while the world has changed. Other sources in the information business have increasingly connected to each other, creating an enormous, well, Web of resources. But Lexis-Nexis has been busy stockpiling its ones and zeros in a single location, Building One of its corporate offices. While almost everyone else gives content away to try to build market share, Lexis-Nexis continues to charge sky-high prices.

Lexis-Nexis' slow progress has created opportunities for competitors such as the Dow Jones Interactive Publishing business of Dow Jones & Co. to sweep in. The surge in information available on the Internet is eroding Lexis-Nexis' key advantage, the size of its database. And Lexis-Nexis is even losing some of the sources of its content because it finds it can get higher royalties elsewhere.

Lexis-Nexis "isn't dead yet, but they're terribly complacent," says Maureen Fleming, senior analyst for research firm Gartner Group.

It's not that there aren't cautionary tales for Lexis-Nexis. In the publishing world alone, Microsoft has overwhelmed Encyclopedia Britannica, and Amazon.com has surprised Barnes & Noble. And Lexis-Nexis lacks the brand name of B&N or Britannica.

"People have never heard of Lexis-Nexis," says David Curle, senior analyst for Outsell, a research group that tracks the information-services industry. "The value of the Lexis-Nexis approach is very clear to Lexis-Nexis, but it isn't always clear to everyone else."
 

If any of these troubling thoughts has invaded the walls and the minds of Lexis-Nexis, no one is about to admit it. "What the Web has brought this company is a great opportunity," Mr. Gieskes says. "We don't see it as a threat."

He says the Internet has made life simpler for his salesmen by popularizing the notion of on-line information retrieval. Because Lexis-Nexis' software developers can piggyback on the capabilities of Internet browsers, their work is now easier. And Lexis-Nexis' Universe, the version of its software that is based on Internet browsers, is far more straightforward to use than its old system.

Yet Universe, like Lexis-Nexis itself, operates in its own world. For other information services, just as important as the content available on the Internet has been the Web's use of hypertext to link previously isolated bits of information. That means that someone who finds data on, say, ringworm, can easily link to information on other skin conditions on the same Web site or jump to pictures of ringworm on another site. Hyperlinks make a profound difference in how people gather information. But Lexis-Nexis doesn't use hypertext. Using its database feels more like searching for a series of unique documents in a filing cabinet, rather than connecting to a web of related sources.

In addition, Lexis-Nexis didn't introduce its browser-based software until October 1998, putting it a year behind competitors. The company still seems unenthusiastic about Universe. "Our customers aren't ready for a browser interface, even today," says Rich Van Vleck, vice president of corporate strategy. Companies often say customers aren't ready for new technologies—when it's actually the companies that aren't ready. But Mr. Van Vleck seems to truly believe that browsers are a fad—even though Mr. Gieskes acknowledges that there are more than 100 million of them installed on personal computers at businesses around the world. Mr. Van Vleck says business owners are more interested in keeping their employees off the Internet than in providing them access.

The company is unworried partly because of the size of its database. It has 25,000 unique sources of information and nearly two billion discrete documents. Its stash includes decades-old archives of thousands of magazines and newspapers, as well as public records from most states, all state AP newswires, and more articles from Reuters than even Reuters has archived. This trove of stuff is much beloved of lawyers, journalists, corporate librarians, and anyone else who needs accurate and exhaustive information on a given topic. Customers also are comfortable with Lexis-Nexis' system for finding information. "When our customers tell us there is so much on the Web for free, we say, Here, do two searches at the same time, one on the Web, one on Lexis-Nexis," Mr. Gieskes says. "It's a very easy contest."

Mr. Van Vleck lists the companies that have tried, and failed, to compete with Lexis-Nexis in business information since the Web became such a focus of attention back in 1995. "When is the last time you heard of PointCast?" he challenges. "Now you hear about Northern Light. They've done a great job with content, but they're not dislodging any librarians from us. Even with IBM, there was lots of hoopla about them entering the market, then in 18 months they folded."

Lexis-Nexis' size has also fed its complacency. Simba Information Group, a research firm that tracks the information-services industry, estimates that sales of the Lexis division catering to the legal industry were $510 million in 1997, up 5.3% from 1996. That makes it the second-largest on-line information provider to the legal community, behind West Publishing's Westlaw service. The Nexis service, designed for corporate users, brought in an additional $350 million in sales, making it the largest provider of on-line information to businesses, Simba says.

But Lexis-Nexis' current advantages carry a heavy price. When company officials argue bigger is better, they try to illustrate their point by providing a tour of the Building One data center. Tour attendees gather in a closet-like room surrounded on three sides by what appears to be bulletproof glass. Behind the glass are many, many employees, peering at monitors, changing tapes, and walking among rows of raised-floor computer cabinets with seeming reverence. "This is going to blow you away," the public relations person says as the guide begins to speak. And it does, but not the way the PR person had hoped. The overwhelming impression left by the tour is: This company is carrying a mind-boggling amount of overhead.

By listening to its customers, professional researchers, Lexis-Nexis has created a list of databases so large it's hard to fit on a single Web site. It's difficult for a nonprofessional to know where to go. When looking for a profile on a congressman, would it be better to look in "reference" or "legislative"? Will a nonprofessional have the patience to look for a source of information from a list that's three pages long?

The Internet gives every employee with a personal computer and a network connection the ability to receive on-line information at his desktop, and the number of Internet users is growing exponentially. Meanwhile, the number of professional users has stayed about flat. The new user class wants information but doesn't need all of Lexis-Nexis' 25,000 discrete sources of information. The new users only need access to the handful of sources that help them do their jobs. For many of them, the Web, with all its shortcomings, is all that they need. What Lexis-Nexis offers feels like too much, too late.
 

While Lexis-Nexis deliberates, its competitors have moved ahead. Dow Jones Interactive, for instance, has grabbed the end-user corporate market by the throat. With the exclusive copyright to the Wall Street Journal—about the only source of information that every business client would agree is critical—Dow Jones runs one of the few Web sites that is successfully charging for information. Dow Jones is also much more comfortable with the advertising model that drives the Web—even, audaciously, investing in a well-placed advertisement in the middle of the Reed Elsevier home page. "Dow Jones has a big first-mover advantage on the Internet," says Bill Bass, analyst for Forrester Research. "This is Dow Jones' game to lose."

That's not to say that Dow Jones hasn't made mistakes of its own. The company stumbled badly with Telerate, a proprietary on-line service for financial professionals. Telerate failed to respond to growing competition from Reuters and Bloomberg and neglected to invest in new technology. After a string of losses, Dow Jones finally unloaded the division in March 1998 for $510 million in cash and stock—less than a third of what it paid for the company.

But with the Internet, company executives have been careful not to make the same mistakes. In 1994, when the explosive growth of the Web was something few people anticipated, Dow Jones Interactive sent its editors and technical staff on a Merry Prankster sort of road tour in two rented vans, driving through the country to discover what its customers wanted. "We started to see that people were talking and thinking about the Web already," says Tim Andrews, vice president and editor of Dow Jones Interactive. "They also told us they wanted just one product that could be used all over the company. Librarians have special needs, but they use the same tools to get at information that the CEO does. Both want to get information quickly and accurately." His customers also wanted to be able to combine internal data with data gathered from Dow Jones and selected Web sources.

Dow Jones Interactive listened: The company introduced a browser interface product more than a year before Lexis-Nexis did. Dow Jones Interactive includes access to 2,000 Web sites that it has identified as high-quality sources, and it indexes these sites three times daily. Mr. Andrews says subscribers have grown to 600,000 from 50,000 over the last four years. He won't discuss revenue. Simba Information estimates that revenue rose only 4.2% in 1997, because the company appears to be using aggressively low prices to grab market share.

To understand how fast Dow Jones is advancing on Lexis-Nexis, you need to go no farther than the Washington, D.C., offices of communications firm Fleishman-Hillard International. The company is one of the two customers Lexis-Nexis suggests would share their experiences with the Universe product (the other is Lexis-Nexis' neighbor in Dayton, NCR). At Fleishman-Hillard, Universe is on five desktops, all belonging to research professionals. All five employees also have Dow Jones Interactive on their PCs. What's more, every one of the office's other 120 employees have Dow Jones' Dow Vision, a 90-day archive of major newspapers, on their desktops. Dow Jones is converting these employees to Dow Jones Interactive at no additional charge. Lexis-Nexis' reference site turns out to be a good reference for Dow Jones, too.

While Dow Jones is an aggressive rival in the business user market, Lexis-Nexis also is experiencing death from a thousand cuts from Web-based information services. Magazines and newspapers around the world are busy creating on-line versions of themselves, and many have begun to archive material dating back several years. For much of the corporate market, the Web offers good enough information with good enough search engines with which to find it.

In 1994, Lexis-Nexis lost its exclusive rights for electronic delivery of the information in the New York Times, so it has nothing to match the clout that Dow Jones has because of its ability to provide access to the Wall Street Journal archives. The existence of the Web also means that content owners are much less likely to accept the kinds of royalty deals that Lexis-Nexis offered them in the past; content owners now have their own ways of distributing their material. "It used to be that Lexis-Nexis offered 20% royalty rates and kept 80%," says Mr. Bass of Forrester Research. "Now, that ratio has about flip-flopped."

Mr. Gieskes acknowledges that the royalty issue is broad. "We have over 3,000 active licensing agreements," he says, "many of which were written in a day and age when we said, You allow us to store your data on a mainframe in Dayton, Ohio, and we'll allow access from people using dedicated terminals." All those deals have to be renegotiated to make sure it's legal to deliver the content via the Internet, he says. Ms. Fleming at the Gartner Group says some key content providers have simply refused, wanting instead to tap this market for themselves.

Not everyone at Lexis-Nexis is stubbornly resisting change. Jim King, vice president of corporate strategy for the Nexis division, is one dissenting voice. He has been with the company only three years, a short enough tenure to resist the complacency that fills the hallways here. "I don't want to be the steamship captain when the electric turbine comes by and causes our little boat to sink," he says. "A year ago we were on that path." Mr. King feels the company was too closed and missed its chance to be Yahoo, among other things. "What we're doing over the next year," he says, "is investing significantly in catching up."

But Mr. King is facing high hurdles in getting Nexis to catch up to the likes of Dow Jones: a parent company that won't listen, a database so huge that it's next to impossible to re-engineer, and the torrid pace of technological innovation.
 

On the flight out of Dayton, the pilot announces that the city is "the cradle of aviation." Back when the Wright Brothers owned a state-of-the-art bicycle shop in town and first began to think about flying machines, Dayton was the Silicon Valley of its day. But the aviation business settled elsewhere, and, these days, Dayton is a restful place.

In Silicon Valley, companies rise out of nowhere, then crash and burn. Employees end the day millionaires—or not—depending on what happened to their company's stock price that day. In Dayton, by contrast, NCR plods along, having been left behind by other computer makers. Just up the road is Ohio Art, proud makers of Etch-A-Sketch, a product that hasn't changed in 40 years.

Lexis-Nexis' continued growth, modest when compared with its many Internet-based competitors, reveals just how far the gap is between "Internet time" and the clocks some companies use. Faced with so many competitive pressures, Lexis-Nexis may have to reset its clock—sooner than its executives think and whether they like it or not.