marketingnews
06.15.08
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honomichltop50
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marketingnews
06.15.08
By JaCk HoNomICHL
ECONOMY STUNTS INDUSTRY GROWTH
Given a saGGinG economy and an inflation rate that is inching up, it should be no surprise that spending for marketing/advertising/public opinion research services within the United States, while up slightly, was down significantly from the growth rate enjoyed in 2006. Specifically, this analysis—based on input from 200 research firms based in the United States— showed total revenue of $8.6 billion in 2007, up 6.0% over 2006. However, after adjustment for inflation, which ran at 4.1% in 2007, the so-called real growth was 1.9% (see chart). The comparable number for 2006 was 4.1%. If we look at the most recent 10 years (1997-2006), the annual spending growth rate after adjustment for inflation averaged 5.3% per year. The 2007 rate of 1.9% is, obviously, well below that, and the lowest we’ve seen since the slumping economy of 2001 to 2002. This is the main finding from this, my 35th annual analysis of industry growth, prepared exclusively for Marketing News.
Solid Base Changes In Listing Non-U.S. Revenue
The base for this analysis and trend data is large— 200 research firms based in the United States that have reported their revenue (U.S. only) for calendar year 2007. The main input comes from the 50 largest U.S. research firms’ revenue; they alone account for 91% of the revenue under study. Fortunately, many of the largest Top 50 firms are public, or are subsidiaries of public companies, so their financials are verifiable. The other Top 50 firms provide third-party verification of their revenue. Since several of the Top 50 firms made acquisitions during 2007, every effort has been made to eliminate artificial growth due to acquisition, either by including or excluding acquired revenue when calculating growth. The balance, 9% of revenue, is attributable to 150 Council of American Survey Research Organizations (CASRO) firms that are not included in the Top 50 (or a couple that choose not to participate). On average, these 150 firms had revenue of $5.2 million in 2007. As a group, their revenue grew by 6.2% in 2007 compared with 6.0% for the Top 50, and almost all of this was within the United States. It should be noted that as hefty as our database is ($8.6 billion), it is not the total amount spent for research services in the United States. For one, federal government agencies spend about $5 billion a year for statistical programs (mostly survey research), and only two of the Top 50 firms (Westat Inc. and Opinion Research Corp.) get a sizable piece of that revenue. Then there are nonprofit survey organizations affiliated with universities that are not included, and commercial research that is done in-house. But when it comes to commercial marketing research through for-profit firms, this analysis is well-based as the lion’s share.
Every year there is change in the list composition. Some firms are acquired or revenue drops enough to miss the Top 50 cutoff. And these openings bring new firms to light, some for the first time. In 2007, there were five additions: Hitwise, Compete Inc., Q Research Solutions Inc., Gongos Research Inc. and The Link Group. Four firms lost their own line ranking due to acquisition: Guideline Inc., No. 38 on the 2006 list, was acquired by a newly formed Opinion Research/Guideline Group, No. 15 on this year’s list; Flake-Wilkerson Market Insights LLC, No. 37 on the 2006 list, was acquired by Market Strategies Inc., No. 17 on this year’s list; Schulman, Ronca & Bucuvalas Inc., No. 41 on the 2006 list, was acquired by Abt Associates Inc., No. 19 on this year’s list; and Telephia Inc., No. 16 on the 2006 list, was acquired by The Nielsen Co., No. 1 on this year’s list. Finally, Experian Research Services (namely, Simmons Market Research Bureau), No. 30 on the 2006 list, dropped off the list in 2007. Of special note regarding list turnover is the growth of startups, many in recent years rooted in online data collection. They demonstrate how the U.S. research industry revitalizes itself via innovation and “ease of entry,” as the economists term it, especially in a financial climate where so many startups have found it relatively easy to raise capital from outside investors. Then, when a newer firm grows to an appetizing size, it usually goes public or is acquired by a larger, well-established research conglomerate. So the industry evolves, picks up energy and adapts to technological changes.
Growth Rates
The emphasis of this annual analysis is to track U.S. spending, but it should be noted that 33 of the Top 50 organizations have revenue from work done outside the United States, and that information is in the table on page H4. It is best understood by a firm-byfirm analysis, because in many cases the U.S. Top 50 firm is a subsidiary of worldwide conglomerates based in the United Kingdom, Germany, France and other faraway places—so much for the globalization of the marketing research industry. To really get a grip on this phenomenon, I suggest you read the individual company profiles that follow. In addition to describing the services these firms offer, the profiles also spell out the ownership of U.S.-based research operations and why so many of U.S. dollars spent for research services end up as profits expressed in euros, pounds and other currencies. And this is a mixed blessing; to the degree that European research conglomerates have expanded in the United States (usually via acquisitions), they are currently hurt profit-wise by weak U.S. dollars, which buys fewer and fewer euros or pounds in profits when converted. m
Jack Honomichl is president of Marketing Aid Center in Barrington, Ill., and founder of Inside Research, a market research trade publication.
U.S. RESEARCH REVENUE GROWTH
Year Base No. of Research Firms 140 147 152 150 156 159 157 162 169 174 183 174 181 180 187 197 188 193 207 200 % Revenue Growth Year-to-Year 7.8% 4.8 8.9 7.6 10.6 9.3 9.5 9.2 5.7 12.6 11.6 10.1 9.0 4.0 3.5 5.6 9.9 5.5 6.6 6.0 “Real Growth” (after adjustment for inflation) 3.7% 0.0 3.5 3.4 7.6 6.3 6.9 6.4 2.7 10.3 10.0 7.9 5.6 1.2 1.9 3.3 7.2 2.1 4.1 1.9
The sluggish growth rate in 2007 calls for further examination. If you look at the Top 50 firms, 21 saw revenue decrease in 2007 vis-a-vis 2006, or did not grow enough to cover the 4.l% inflation rate. Of the very large firms, the one with the most impressive revenue growth was Westat, with 10.4%. Of the bottom half, with rankings of No. 26 through No. 50, 12 saw revenue decline. So those firms with revenue of $34 million or less really took a hit in 2007. One reason for this is that, with rare exceptions, the smaller firms specialize in ad hoc survey research— and such spending is easily curtailed during hard times. Conversely, the huge conglomerates, with rare exception, get the lion’s share of their revenue from syndicated services rooted in huge databases, most of which are under contract. And this business tends to weather economic slowdowns well. With the exception of Westat, all of the top 10 firms on this year’s Top 50 list are either publicly listed companies, subsidiaries of larger public companies or—in the case of Nielsen—a private company that makes some of their financials public. Six are foreign-owned if you include Nielsen, which has both Dutch and U.S. home bases. All are global in reach, except for Westat, which does not do work outside the United States.
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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U.S. Rank 2007 2006 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 5 4 6 7 8 9 10 11 13 12 14 15 38 16 17 18 20 20 37 18 19 17 19 41 20 21 22 23 23 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 23 21 22 26 25 24 40 34 27 28 33 36 39 32 31 44 34 42 43 47 46 28 45 48 49 50 Organization The Nielsen Co. IMS Health Inc. Kantar Group* Westat Inc. IRI TNS U.S. Arbitron Inc. GfK AG USA Ipsos Synovate Maritz Research J.D. Power and Associates* Harris Interactive Inc. The NPD Group Inc. Opinion Research/Guideline Group Opinion Research Corp. Guideline Inc. comScore Inc. Market Strategies Inc. Market Strategies Inc. Flake-Wilkerson Market Insights Lieberman Research Worldwide Abt Associates Inc. Abt Associates Inc. Abt SRBI Inc. OTX Burke Inc. MVL Group Inc. Knowledge Networks Inc. National Research Corp. Directions Research Inc. Phoenix Marketing International Lieberman Research Group ICR/Int’l Communications Research Morpace Inc. MarketCast Data Development Worldwide C&R Research Services Inc. Informa Research Services Inc. National Analysts Worldwide Service Management Group Market Probe Inc. Hitwise Walker Information KS&R Inc. Bellomy Research Inc. MarketVision Research Inc. Public Opinion Strategies Compete Inc. Savitz Research Companies RDA Group Inc. Gongos Research Inc. Q Research Solutions Inc. Marketing Analysts Inc. RTi Market Research & Brand Strategy The Link Group Headquarters New York Norwalk, Conn. Fairfield, Conn. Rockville, Md. Chicago New York New York Nuremberg, Germany New York London Fenton, Mo. Westlake Village, Calif. Rochester, N.Y. Port Washington, N.Y. Omaha, Neb. Princeton, N.J. New York Reston, Va. Livonia, Mich. Livonia, Mich. Little Rock, Ark. Los Angeles Cambridge, Mass. Cambridge, Mass. New York Los Angeles Cincinnati Jupiter, Fla. Menlo Park, Calif. Lincoln, Neb. Cincinnati Rhinebeck, N.Y. Great Neck, N.Y. Media, Pa. Farmington Hills, Mich. Los Angeles New York Chicago Calabasas, Calif. Philadelphia Kansas City, Mo. Milwaukee New York Indianapolis Syracuse, N.Y. Winston-Salem, N.C. Cincinnati Alexandria, Va. Boston Dallas Bloomfield Hills, Mich. Auburn Hills, Mich. Old Bridge, N.J. Charleston, S.C. Stamford, Conn. Atlanta Web Site nielsen.com imshealth.com kantargroup.com westat.com infores.com tnsglobal.com arbitron.com gfk.com ipsos-na.com synovate.com maritzresearch.com jdpower.com harrisinteractive.com npd.com infousa.com opinionresearch.com guideline.com comscore.com marketstrategies.com marketstrategies.com fw-mi.com lrwonline.com abtassociates.com abtassociates.com srbi.com otxresearch.com burke.com mvlgroup.com knowledgenetworks.com nationalresearch.com directionsresearch.com phoenixmi.com liebermanresearch.com icrsurvey.com morpace.com marketcastonline.com datadw.com crresearch.com informars.com nationalanalysts.com servicemanagement.com marketprobe.com hitwise.com walkerinfo.com ksrinc.com bellomyresearch.com marketvisionresearch.com pos.org compete.com savitzresearch.com rdagroup.com gongos.com whoisq.com marketinganalysts.com rtiresearch.com the-link-group.com U.S. Research Revenue1
($, in millions)
06.15.08
Percent Change From 20062 7.9 % 8.6 3.5 10.4 2.1 2.8 6.0 1.3 3.5 6.9 5.2 8.2 -3.6 10.1 4.5 0.7 21.3 26.0 6.3 11.0 -3.5 12.5 -16.8 -27.5 6.8 32.6 8.0 -1.6 5.7 1.9 1.4 26.5 28.1 -6.5 -4.7 2.0 6.8 9.8 -6.7 -12.1 22.4 -3.6 50.0 10.4 -9.5 14.4 10.1 -48.5 53.6 -2.6 -5.5 24.3 8.3 -3.0 -3.9 5.3
Worldwide Research Revenue1
($, in millions)
Non-U.S. Research Revenue1
($, in millions)
Percent Non-U.S. Revenue 48.5 % 63.5 66.0 — 37.2 82.2 3.9 80.1 77.9 71.1 16.1 29.2 29.1 24.0 39.7 45.7 — 11.7 5.8 8.1 — 18.8 — — — 6.8 11.5 — — 9.7 — 4.0 — 3.0 13.6
U.S. Full-time Employees 9,715 2,034 2,600 1,935 1,464 2,000 1,092 1,039 800 832 632 620 879 860 546 458 73 370 309 234 75 208 279 150 129 184 217 193 180 181 120 137 76 195 150 36
$2,173.0 801.0 526.8 467.8 441.0 379.8 338.5 319.7 281.2 250.4 187.4 184.5 161.0 160.4 124.7 97.5 26.8 77.0 75.7 53.4 22.3 71.0 55.1 33.0 22.1 50.8 47.0 42.3 37.3 37.3 37.2 33.5 30.1 28.8 28.7 25.1 25.0 23.6 23.5 23.3 22.4 21.7 21.6 21.2 17.1 16.7 16.4 15.5 14.9 14.8 13.7 13.3 13.0 12.8 12.2 11.9
$4,220.0 2,192.6 1,551.4 467.8 702.0 2,137.2 352.1 1,603.0 1,270.3 867.0 223.3 260.5 227.0 211.1 206.7 179.5 26.8 87.2 80.4 58.1 22.3 87.4 55.1 33.0 22.1 54.5 53.1 42.3 37.3 41.3 37.2 34.9 30.1 29.7 33.2 25.1 25.3 23.6 23.5 23.3 23.0 41.4 49.9 25.5 21.0 16.7 16.4 15.5 14.9 14.8 16.8 13.3 13.2 13.6 12.2 13.3
$2,047.0 1,391.6 1,024.6 — 261.0 1,757.4 13.6 1,283.3 989.1 616.6 35.9 76.0 66.0 50.7 82.0 82.0 — 10.2 4.7 4.7 — 16.4 — — — 3.7 6.1 — — 4.0 — 1.4 — 0.9 4.5 — 0.3 — — — 0.6 19.7 28.3 4.3 3.9 — — — — — 3.1 — 0.2 0.8 — 1.4
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1.2 — — — 2.6 47.6 56.7 16.9 18.6 — — — — — 18.5 — 1.5 5.9 — 10.5
80 121 189 73 134 115 75 180 198 95 80 33 100 50 97 63 77 39 43 39
honomichl top 50
Total All other (150 CASRO companies not included in the Top 50)3 Total (200 companies)
$7,828.7 $774.3 $8,603.0
6.0 % 6.2 % 6.0 %
$17,638.0 $870.1 $18,508.1
$9,809.3 $95.8 $9,905.1
55.6% 11.0 % 53.5 %
32,883 3,370 36,253
*Estimated by Top 50 1U.S. and worldwide revenue may include nonresearch activities for some companies that are significantly higher. See individual company profiles for details. 2Rate of growth from year to year has been adjusted so as not to include revenue gains or losses from acquisitions or divestitures. See company profiles for explanation. 3Total revenue of 150 survey research companies that provide financial information on a confidential basis to the Council of American Survey Research Organizations (CASRO).
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www.nielsen.com