For more than three decades U.S. News & World Report (USNWR) has published the rankings college students and hospitals love to hate. The past several years, however, have seen a proliferation of imitators, from Forbes to the Princeton Review, Truven to the Economist. Nevertheless, in spite of intensifying competition, the U.S. News Best Colleges and Best Hospitals rankings remain the most oft-cited and influential in the United States. The reason may have less to do with editorial considerations—after all, USNWR publishes its methodologies in full, including data sources and mathematical transformations—than with its careful cultivation of a multisided market.
Consider USNWR’s customers. The most obvious and visible are ordinary consumers; however, there are also the institutions being ranked. Consumers rely on USNWR for recommendations about where to seek care or what schools to apply to given their grades and academic interests. Because these individuals are making decisions about how to spend money, USNWR becomes an attractive place for education- or healthcare-related providers to advertise their wares. A pacemaker manufacturer has good reason to pay for page views on USNWR’s Cardiology rankings, since the site’s readers may be deciding what devices will best support their lifestyles after implantation. Advertising is one of USNWR’s principal revenue streams and the first prong of its business model.
Central to this revenue source is an operating model which supports a broad and engaged readership with unbiased advice. To maintain this “asset,” USNWR must uphold the public’s confidence in the independence and impartiality of its editorial function. Only in that way will advertisers continue to see value in USNWR’s community. Thus, the operating model beautifully supports USNWR’s goal of driving value to its two customers, consumers and advertisers, because ad revenue supports, rather than undermines, USNWR’s mission. But there is third player in the ecosystem to which USNWR must also cater: hospitals and universities.
USNWR strives to promote a productive relationship with the institutions it ranks. And for good reason. Although USNWR collects most of the data on which it bases its rankings from publically available sources, some of it also comes from universities and hospitals themselves. To encourage those institutions to participate, USNWR must also drive value to those organizations. To that end, USNWR formats its website as a sort-of consumer directory. Users of the site can search by geography and specialty to get referrals to programs which offer the services they want or need. In a sense, by taking part in the rankings hospitals and colleges get free advertising on a heavily trafficked consumer advice website.
Of course, USNWR benefits from its relationships with schools and medical centers in other ways, too. Experts from within those communities serve on USNWR advisory boards to ensure that the rankings avail themselves of the best thinking and most up-to-date research on quality and outcomes measurement. That in turn serves as a basis for sustainable differentiation. Because USNWR has access to reputable data that its competitors do not and because USNWR can draw on the collective expertise of many hundreds of thought leaders to produce the most meaningful results, USNWR can tell a compelling story to its consumer and advertiser audiences about the value of its real estate. Again, the operating model strongly reinforces the business model.
There is an additional subtler benefit to these relationships with hospitals and universities, as well. Since they contribute directly to the creation of the rankings, they are more inclined to lend credibility to their results. This fact tempers the resistance of administrators whose institutions perform badly and creates evangelists of those whose institutions perform well.
Given the beneficial reciprocity inherent in this marketplace, it’s not surprising that USNWR is careful not to disrupt the ecosystem’s balance, even as it seeks to monetize the value its website and rankings drive to hospitals and universities. To accomplish this, the second prong of USNWR’s business model consists of two distinct elements. The first is badge licensing. Hospitals or universities which perform well in the rankings may purchase “badges” from U.S. News & World Report for use in external advertisements. Beyond the sales benefit, the visibility of the badges among consumers have the resultant effect of raising the profile of USNWR’s rankings as a whole. This in turn boosts web traffic, which increases the prices of ads on USNWR’s website. Again, each element of the operating model mutually and collectively reinforces each element of the business model.
The second is the sale of exhaust data to hospitals and universities. Because USNWR collects data directly from the institutions it ranks, its dataset is unique. And because USNWR uses the data for quality measurement, it is tailor-made for peer benchmarking. As such, USNWR can actively promote the sale of its data archive to improve market transparency and drive quality improvement without risking criticism as a “pay-to-play” provider.
As an editorial outfit U.S. News & World Report is an unusual intermediary. Nonetheless, it is a great example an organization which sits at the center of an ecosystem and manages to drive individual value to all of the players in its market: hospitals and universities, consumers, and advertisers. It supports these value propositions with a robust business and operating model so aligned with one another that each player extracts value from the system without weakening the positions of other participants.