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Loislaw.com: Great Service, But Can It Survive the Competition?

Several years ago, when I was in law school, I was given a free subscription to both Lexis-Nexis and West Law. The service allowed me to scan the electronic archives to help me better understand the law. Although, I'm sure the purpose of the free service was to hook me into purchasing their service when I left law school (of course, it didn't work too well, as I instead became an Internet analyst).

Last year, another similar service had its IPO: Loislaw.com (LOIS) . The site has 1,800 databases with about 8 million documents (yes, lawyers like to burn forests). You have access to federal and state statutes, case law from the states, and Supreme Court decisions dating back to 1899.

The pages are completely hypertexted, making it easy to navigate. Of course, it has sophisticated searching technologies. There is even a personalized alert system that notifies you when relevant documents hit the databases.

Originally, the company used traditional media, like CD ROMs, to distribute its content. But in 1996, the company shifted its focus mainly on the Net. Interestingly enough, because the Net allows for a lower cost structure, Loislaw.com saw an opportunity to cater to the small law office market (firms with 20 or fewer lawyers). These firms always need to find ways to reduce costs.

Loislaw.com generates revenues by selling annual subscriptions. Pricing ranges from $690 to $1,176. According to the company's financials (which were released yesterday), there was $2.3 million in subscription revenues in the fourth quarter of 1999, which was up from $1.2 million in the same period a year ago. The sequential growth rate was 25 percent.

However, the biggest threat to the company is the fierce competition. Both Lexis-Nexis and West Publishing are billion-dollar powerhouses. Lexis-Nexis has been in business for over 25 years and West Publishing has been around for over 100 years. As for Loislaw.com, it was founded in 1987.

True, Lexis-Nexis and West Publishing have not focused on the small law firm market, but they likely will in the future. After all, Lexis-Nexis and West Publishing are currently translating their content to the Web. They know the future is the Net and they are expending many resources on this transition.

Once this is complete, Loislaw.com will lose its advantage. And investors may, in fact, become hanging judges.