If you are reading this, then you've probably figured out that our industry now has its own social networking site; CommonGround. CommonGround was built to become THE global community for property due diligence professionals and my hope is that this goal will be reached as rapidly as possible. What makes CommonGround different from other social networks is its exclusive dedication to the property due diligence industry.

Most of us are aware of the successes that MySpace and Facebook have enjoyed recently. What many people are not as aware of are that thousands of niche communities also exist for very targeted audiences of professionals who are involved in similar lines of work. These niche communities provide rich and highly focused content that help their members perform their jobs at a higher level. By joining a business community, members will be able to contribute and consume content, ask and answer questions and establish themselves as an industry thought leader within a certain geography or subject matter. These communities exist already for doctors, lawyers, IT professionals and even airline pilots. Why not for property due diligence professionals?

So log on and check it out. Take a few minutes to set up your own profile and start looking into the various discussions, blogs, downloads, podcasts and events. Pose a question or answer someone else's. For the next few weeks, the name of the game will be to get comfortable navigating the site and begin building your own personal network. After that, its anyone's guess where the community decides to take itself.

My hope is that this platform will provide our entire industry with a valuable service that improves the quality of environmental due diligence everywhere. But how we get there will be up to the community itself. Community members will determine the community's success themselves based on individual involvement and cooperation. Some people will be "lurkers" who quietly observe others without saying much themselves. Others will get very involved right away, constantly searching for ways to use the community to promote their brand or expertise. If we are to learn anything from observing other professional communities, it is that the people who benefit the most are the ones who get engaged early and stay engaged over time.

If you are reading this, then you've probably figured out that our industry now has its own social networking site; CommonGround. CommonGround was built to become THE global community for property due diligence professionals and my hope is that this goal will be reached as rapidly as possible. What makes CommonGround different from other social networks is its exclusive dedication to the property due diligence industry.

Most of us are aware of the successes that MySpace and Facebook have enjoyed recently. What many people are not as aware of are that thousands of niche communities also exist for very targeted audiences of professionals who are involved in similar lines of work. These niche communities provide rich and highly focused content that help their members perform their jobs at a higher level. By joining a business community, members will be able to contribute and consume content, ask and answer questions and establish themselves as an industry thought leader within a certain geography or subject matter. These communities exist already for doctors, lawyers, IT professionals and even airline pilots. Why not for property due diligence professionals?

So log on and check it out. Take a few minutes to set up your own profile and start looking into the various discussions, blogs, downloads, podcasts and events. Pose a question or answer someone else's. For the next few weeks, the name of the game will be to get comfortable navigating the site and begin building your own personal network. After that, its anyone's guess where the community decides to take itself.

My hope is that this platform will provide our entire industry with a valuable service that improves the quality of environmental due diligence everywhere. But how we get there will be up to the community itself. Community members will determine the community's success themselves based on individual involvement and cooperation. Some people will be "lurkers" who quietly observe others without saying much themselves. Others will get very involved right away, constantly searching for ways to use the community to promote their brand or expertise. If we are to learn anything from observing other professional communities, it is that the people who benefit the most are the ones who get engaged early and stay engaged over time.

Last summer I made a blog post in which I stated that there were three (3) pillars to EDR's business strategy. These pillars are content, workflow solutions and community. Nearly everything we do at EDR should create value in one of these three areas or else it's probably not worth doing.

Since then, much of the news coming out of EDR has been about workflow solutions (EDR OnDemand, PARCEL, Vapor Intrusion Screen) and community (CommonGround) while content has not been talked about as much. However, behind the scenes, a ton of work has been going on related to expanding our underlying database to include more categories of important environmental content. After all, our company name is Environmental DATA Resources so we can't forget that everything we do is predicated upon having an unmatched core database. To give you a sense of how this core database has grown, consider the following statistics:

• There are over 46 million records in EDR's database yet only 13 million of these (28%) are aggregated from publicly available government databases.
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  The majority of EDR's records (over 33 million) come from other sources and most were created via scanning and digitization efforts that have been going on for the past decade. For example, over 1.5 million "image records" exist as a result of scanning hardcopy historical maps and aerial photographs while another 1 million records where created by EDR's Data and Content Development Group.

But perhaps most impressively, over 20 million database records have been created by scanning and digitizing historical city and business directory publications dating back to the 1800's.

As a "content company" these efforts are extremely important. I believe that some day in the near future, Google, Yahoo! and Microsoft will make it possible (and very easy) to search the publicly available EPA or state environmental databases and have the search results displayed on a map (which of course is what has been EDR's business for the past 15 years). On the surface this might seem like a very scary thing for a company like EDR. In reality, however, I think the opportunities here are much greater than any perceived risk.

The fact that most of EDR's content comes from sources other than government databases provides some level of insulation in a Google dominated world. Additionally, user generated content continues to aggregate with EDR's platforms allowing clients to save and re-consume their contributions in the future.

The real opportunity for information company's (like EDR) and domain experts (like environmental professionals) will come when there is complete ubiquity of environmental information on the web and the opportunity will lie in the ability or willingness to deliver context and provide answers to those with questions. Who's going to be there when someone Google's their home address and finds out that there is a leaking underground storage tank next door? Who is going to answer this person's questions and help guide them towards resolution? Who is going to take Google's search results and add valuable context to the local loan officer, attorney or business owner?

Realtors have been asking themselves these same questions as property listings continue to become available online at sites other than the local MLS. Perhaps closely following this industry will provide EDR and our environmental consulting partners with a window into our collective future?

Today EDR has announced and will begin implementing a reorganizational plan which has been developed over the past few months. This plan is a direct response to the decline in real estate transactions we have witnessed since the credit crunch began in August 2007. As I have mentioned in earlier blog posts, and despite the benefit of a growing customer base of environmental professionals, the volume of monthly transactions in the marketplace has declined by 8 percent. This reorganizational plan has several elements to it which I will now attempt to outline.

Twenty seven positions across the company have been eliminated causing layoffs. However, 7 of these people have been offered new positions within EDR and all will have a few days to consider their new offer. I expect that once their decisions have been made, the net number of layoffs will be between 20 and 22. To put this into some perspective, EDR's employee base has grown by 30 people since February 2007. These layoffs will reduce this to about 10 to 12 new positions created since last year.

This reorganization plan will also include a restructuring of our outside sales team. Since the 1990's, EDR's field sales team has been organized by geography with each sales person having an assigned territory. Going forward, we will shift to a new sales model that is organized not by geographical boundaries but instead by customers. Sales professionals will now be assigned specific customers for which they will be responsible. The goal of this new sales model is to better align EDR personnel with our clients businesses in order to develop stronger individual relationships and mutually beneficial partnerships.

In addition to the downsizing and reorganization on the employment side, a new operating plan will also be implemented for the remainder of this fiscal year. This new operating plan calls for cost reductions in areas including advertising, promotions and events and will reduce total operating expenses to a level similar to last year.

As you might imagine, a situation like this is difficult for everyone involved, most especially those people who have been laid off. I wish each person the best of luck as they begin seeking new employment and career opportunities and offer a "thank you" for their contribution to EDR's success over the years.

Going forward I believe that EDR's employment and operating plan is now aligned with the current state of the real estate markets. Since 1998 we have enjoyed a commercial real estate market that has been in near constant expansion. This changed virtually overnight last August and the ripple effects are still evident. My hope is that this period of contraction will be shallow and short lived and that our markets will begin expanding again later this year.

For three days this week, some colleagues and I attended the Software & Information Industry Association (SIIA) Summit in New York. The event pulled together a broad range of business executives from both the content world and the software world to discuss emerging trends and the rapid rate of change that the internet has brought upon all of us.

For me, the best part of the conference was seeing firsthand that the things EDR is dealing with are the same things that all other content companies are dealing with and essentially confirming that we're not "off the reservation". For example, there was a lot of discussion about how content companies must expand into the software space in order to add value to our content. Increasily, content must be delivered into applications that then help the consumer work with the information more efficiently in order to, ultimately, make better business decisions. In EDR's case, simply dropping a report into someone's lap won't cut it in the future. Instead, our content must instantly and seemlessly be delivered electronically into workflow tools. Here our content co-exists with other content elements to create a more valuable experience for the user.

Two other major themes of the conference were "community" and the role of "user generated content". Today a large percentage of our employees and customers are members of various social networking communities. The biggest of these are obviously MySpace and FaceBook. Both communities are great for personal social interaction but neither really provides a lot of benefits to businesses communities. This is causing the creation of literally thousands (or more) niche business social networking communities built around very precise business areas. Communities exist now for oncologists, scuba divers and model train enthusiasts. Members in these niche communities now have a place where they can go that is geared exclusively towards very finite topics and activities and, as a result, the user experience is much more valuable. The result is that these niche communities then become a place where very specialized user generated content is created and shared and everyone in the community benefits.

I think the property due diligence industry is perfectly suited to benefit from these rapid changes and trends made possible by the internet and broadband connectivity. Like all other industries, we too can expect to see continued convergence between content, software and community.

It has now been nearly five full months since this blog's inception and during this time I have made fourteen entries. Three of these entries included my comments and thoughts regarding the state of the ESA industry; an industry that has clearly been directly impacted by the credit crunch. Now that the calendar fourth quarter has concluded and the numbers are in, I thought I would share what EDR is seeing in the U.S. due diligence market.

First and foremost, transactions are down. After showing strong year-on-year growth for most of 2007, ESA projects contracted in the fourth quarter by 7.4%. During the same time frame however, the number of environmental consulting firms ordering from EDR moderately increased. So at the end of the day it appears that a larger number of environmental consultants are competing for work in a transactional market that has gotten smaller.

This decline in transactions started off in the CMBS arena and for a while the only environmental consultants being directly impacted were those who focused on portfolio securitization projects. As evidence of this, only $6.2 billion in securities were issued in October as compared to over $34 billion in August. However, the situation quickly spilled over into other due diligence sectors including small balance lending, M&A and corporate real estate development. McGraw-Hill Construction is forecasting a 6% decline in commercial construction in 2008.

Today the type of commercial real estate buyer or investor is changing as well. Gone are the highly leveraged buyers and replacing them are the all-cash and low-leverage buyers. As a result, many environmental consulting firms are redirecting their sales and marketing efforts towards the foreign investor, REIT and institutional markets. This seems to be playing out most notable in the retail and hospitality asset classes.

Nearly everything I am reading is forecasting more of the same for 2008. The U.S. economy has certainly slowed with some predicting a 50/50 chance of recession this year. But whether we go into a recession or not almost doesn't matter. Even if we avoid a technical recession, the business and lending environments have changed and the ESA market this year will not look like it did last year.

These cycles are inevitable and seem to occur roughly every 7 years. During these times a few things tend to occur. First, there will likely be some consolidation in the environmental consulting industry. Second, as already mentioned, consultants will redeploy their sales teams to target markets that are relatively active. And third, firms will closely analyze their business processes to identify work areas that could be further automated.

My guess is that the companies who execute the best in these areas will come out of this cycle stronger and better positioned for the next phase of expansion.

For years EDR's product strategy has been similar to that of many other information publishers; bundle separate products together to provide a "one-stop-shopping" experience for customers. Throughout the 1990's and early 2000's, this strategy worked well for both customers and EDR. Customers benefited because they could acquire more necessary information at one time and at a reduced cost. EDR benefited because as customers chose to purchase more bundled information packages, our revenue per project steadily increased. For a while this was a win-win strategy for everyone. However, like most business strategies, I believe this one has run its course and in the coming years will gradually fade away.

When customers purchase an EDR product they don't really want that product but the relevant information contained within the product. The product is simply a pre-packaged way of delivering this information in a form that is easy to use and work with. Pre-packaged products were necessary because the technology didn't exist to automatically extract content and display it in a more useful way. Instead, the "extraction" was performed by humans who reviewed a product, determined what was important and then manually extracted the important information and imported it into an electronic work application. Today that technology is here and is being used more frequently each day.

As clients continue to automate work processes, they are making new demands on their information suppliers. These demands go straight to the manner in which information is requested, delivered and worked with. For the first time, clients are requesting that relevant content be unbundled from a pre-packaged product and streamed directly to them. But it doesn't stop with simply streaming all content electronically because not all content is equally valuable. Today, clients are also demanding that information providers distinguish between content categories based on value and relevance. Highly important information must be treated differently from "background" information that doesn't really help improve business decision making.

Business models based on the concept of "unbundling" are everywhere. From fractional ownership of airplanes and vacation properties to RSS feeds, people today can access more of what they want without having to purchase the entire plane, house or newspaper. At first glance this has been a scary thought to businesses based on the one-stop-shop philosophy. After all, doesn't it explicitly imply a lower revenue per customer? Yes it does. However, it also allows a product or service to be accessible to a larger audience.

Recently an article was forwarded to me that talked about major business technology trends to watch for. One of these trends was, you guessed it, unbundling. Besides discussing the benefits of unbundling and other trends, the article emphasized the following point:

"Technology alone is rarely the key to unlocking economic value: companies create real wealth when they combine technology with new ways of doing business."

Over the next few years, advancements in technology will force new business models in the real estate information industry. Gone will be the one-stop-shop provider of pre-packaged products and replacing this will be the information publisher capable of seamlessly delivering critical content instantly and in a way that is completely compatible with how the consumer wishes to receive and work with this content.