Divergent Futures

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Tax season's finale brings a thundershower of cash—and it's Block that cleans up. But Intuit is grabbing the future.

Divergent Futures

It's no mystery why Intuit is paying so much more attention than Block to the potential for Web-delivered tax-preparation services. While the Web is a threat to Block's retail offices, it's just another distribution channel for TurboTax, the top-selling tax-preparation program. Block, too, has some well-regarded tax software, but the revenue Block derives from software is insignificant by comparison to Intuit—and more to the point, is insignificant as a percentage of Block's total tax revenue (less than 5% of Block's $1.7 billion in tax-related revenue last year). It's Block's retail stores that are its cash cows; those stores bring in billions in revenue each year, and Block's executives—no fools—are concentrating on ways to leverage that real-estate presence. Specifically, they're trying to make Block into a broader brand known for all kinds of financial advice, not just tax advice.

Still, if Block's recognizable office storefront is a clear strength—a thing consumers are comfortable with, and that they might patronize for a new kind of service in the future—it's also a limitation. The stores are pretty crummy looking--a fact Block's own chief executive, Mark Ernst, noted recently in acknowledging that Block's biggest challenge lies in preserving its "brand relevance." That's code for not becoming stodgy and old-fashioned.

Certainly a more concerted internet effort would position Block in a place where the future is happening. It's no coincidence that both Block and Intuit have found their online customers tend to be first-time customers who have done no business with them in the past. In part, this ability to attract new customers may explain why Intuit, though less asset-rich than Block and less than half Block's size in revenue, nevertheless strikes Wall Street as being worth roughly the same as Block: $8 billion.

Too, there is a certain logic in building a company on the assumption that productivity gains in information technology will continue to outpace productivity gains in human labor. The human system Block is built upon is stable and can stand, but will it fly? Not like Intuit.

This article was originally published on 2002-05-01
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