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In the hubbub of artificial intelligence (AI), it is relatively easy to identify the early winners of what is emerging as a disruptive technology. The Gafam are part of it. But the story thickens when it comes to pushing the reflection a little further, because the variables are too numerous, sometimes even too new, to have a clear vision. It seemed interesting to us to adopt an original point of view in the current debate by looking at the case of Wolters Kluwer.
When the chatbot ChatGPT was opened to the general public, investors quickly took to their heels to flee listed companies that were in danger of losing big. Among the victims were a few groups offering verification and reformatting services, such as the American Chegg, the first expiatory victim of the AI era. But publishers and European professional content providers have also been shaken, like Pearson, Relx and, therefore, Wolters Kluwer, the Dutch professional publishing giant. If an artificial intelligence is capable of producing presumably qualitative content, what use would these companies be, after all? This epidermal reaction is not devoid of common sense. However, voices were quickly raised to remind us that the supply of professional information requires a base of high quality content, which users cannot doubt. Ask ChatGPT 3.5 what it thinks of cow eggs, and see!
A nice cash machine
As a knowledge platform, Wolters Kluwer is perhaps, and counterintuitively, on the right side. Its content, protected and of high quality, is precious. The group has already been using artificial intelligence solutions for a long time to enhance the appeal of its solutions. In short, he does not fall from the clouds in the face of recent upheavals. Moreover, Nancy McKinstry, its general manager, repeats over and over again that the deployment of new AI tools will only increase the value of the services offered by her company. She has no interest in asserting the contrary, it goes without saying, but Wolters Kluwer has a few assets to put forward.
Financially, the Dutchman is a superb profit-producing machine. Profitability ratios have been on an upward trend for ten years, the balance sheet is healthy and a large share of income – 80% – falls on a recurring basis thanks to subscriptions. This solid base has enabled the company to strengthen the technological part of its activity over time, by bringing new digital tools to demanding customers, who operate in sectors where approximation is not allowed. A third of revenue is generated from the tax and accounting professions, 27% from the health professions and 24% from the governance and compliance field. Legal, with 17% of revenues, completes the picture. Since this year, a fifth division has been added to, or rather borrowed from, existing branches to stick to the demand of the time around ESG and societal performance. Margins are high, especially in health and tax, the clientele is loyal and partly captive, and geographic diversification gives pride of place to the notoriously dynamic North American market, which generates 64% of revenue.
Expressed in a trivial way, the challenge for Wolters Kluwer is therefore to know whether this mechanism will continue to operate as efficiently in the era of artificial intelligence or whether any model of open-access chatbot will be able to respond to the questions of a tax expert or the needs of a clinical researcher at little or no expense. From our perspective, organized and reputable knowledge keepers definitely have the opportunity to leverage AI to strengthen their position rather than being crushed by the machine.