THE 2012 HONOMICHL

TOP 50 REPORTBY Jack hOnOmichl

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T he main purpose of this annual compilation, now in its 39th year, is to accurately track spending on marketing/advertising/public-opinion research services within the United States through for-

profi t fi rms based in the U.S., and this topic is especially interesting given the economy’s continued weakness.

Th e base for this 2011 analysis is revenue reported by 204 research companies for U.S. operations only (as much as possible, the nonresearch revenues of some of these companies have been edited out). Th e largest 50 fi rms get line-item identity; the balance is based on input from the Council of American Survey Research Organizations (CASRO) member fi rms that had, on average, revenues of $5.3 million in 2011. (Larger CASRO member fi rms are on the Top 50 list.)

Th ese 204 fi rms, in aggregate, had U.S.-based revenues of $9.2 billion in 2011, up 5.1% from 2010. Aft er adjust-ment for infl ation based on the consumer price index, which was 2.9%, their so-called “real growth” was 2.9%, compared with a real-growth rate of 3.1% in 2010. If we focus on the Top 50 alone, their revenue growth also was 5.1%, or an infl ation-adjusted 2.9%. Th ese positive returns were reinforced by the state of the research industry’s payroll. Th e 204 fi rms reported 38,305 full-time employees in 2011, an estimated increase of 7.9% from 2010.

A good way to put this research industry growth into perspective is to compare it to the gross domestic prod-uct (GDP), the value of all goods and services produced in the U.S. While research spend was up 5.1%, the GDP was up just 1.7%, or a net increase of 3.4%. So the research industry was signifi cantly healthier than the economy in general—and that is encouraging. See the chart on page 25 for the annual growth of research spending over the past 24 years and to get a sense of the industry’s “real growth,” as well.

the top 50Th ere are two notable changes among the giants atop this listing. First, Ipsos, the huge French conglomerate, bought Synovate, a huge British conglomerate. Th eir U.S. operations—previously Nos. 7 and 9, respectively—when merged boosted Ipsos U.S. to No. 3 on this year’s list, with combined revenues of $624 million. Second, IMS Health, the huge U.S.-based healthcare research fi rm, dropped from No. 3 last year to No. 8 in this ranking. Th e reason, basically, is defi nitional. IMS, once a public company, now is owned by private investors, including the Canadian National Pension Plan. Th is ownership uses a more concise defi nition of “marketing research” in its fi nancial reports than had been used in prior years, and that resulted in a

smaller research-only revenue input for the Top 50 listing.As usual, there were changes toward the bottom of the

listing, as well. Two fi rms, C&R Research Services (No. 38 last year) and Peryam & Kroll Research (No. 44), decided not to submit revenue fi gures for this year’s compilation. Public Opinion Strategies (No. 35 last year) dropped off because of a decline in revenue. Th is company specializes in political polling and its revenue surges in election years and wanes in off years.

Newcomers taking these fi rms’ places are YouGov in Palo Alto, Calif., the U.S. subsidiary of a large, U.K.-based survey fi rm; StrategyOne in New York; Chadwick Martin Bailey in Boston; and Th e Link Group in Atlanta.

While the Top 50, in toto, experienced signifi cant reve-nue growth in 2011, the rising tide did not lift all ships. In fact, 18 of the Top 50 saw revenues either decline in 2011, or not increase enough to cover infl ation. Another consid-eration: Of the total Top 50 companies’ revenue growth from 2010 to 2011, 25% was attributable to just one fi rm: Nielsen. Th is is yet another indication of how dominant that organization is in the U.S. research industry.

growth ratesSince the main goal of this analysis is to calculate research industry growth (or decline), the artifi cial impact of acquisition has to be eliminated. If a Top 50 fi rm made an acquisition during 2011, either the acquired revenue was not included when calculating growth, or revenue of the acquired fi rm for the full year was included to get an apples-to-apples rate. If this is not done, not only would some individual fi rms’ growth rates be artifi cially “hyped” by purchase revenues, but also that artifi cial growth would fall to the bottom line and distort the industry fi gure.

Th is is a serious concern. Many of the Top 50 fi rms made an acquisition during 2011 and this detail is spelled out in the individual fi rms’ profi les—a good reason to read those profi les thoroughly. Only that insures a thor-ough understanding of how this industry is evolving via M&A activity.

Company LeadersA by-product of the Top 50 data collection is that it produces a profile of those executives who now manage the U.S. research industry—the face of the industry, so to speak.

Based on highest degrees received, 39 reported a grad-uate degree, and most of them (17) were M.B.A.s. Another four had degrees (such as B.B.A.s) in business subjects, like accounting or fi nance. Seven reported Ph.D.s and two are lawyers (J.D.s.). Beyond that, the most common degree is

THE 2012 HONOMICHL

TOP 50 REPORTTh e U.S. economy continues its weak recovery, but the U.S.-based marketing

research industry has found its balance. Read on to see how research leaders are

faring and which newcomers have joined the ranks of the Honomichl Top 50.

BY Jack hOnOmichl

Continues on page 22 >

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Annual Growth in Research Spending Within the U.S.

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a B.A. Judging from where their degrees were earned, six of this year’s Top 50 executives are foreign nationals. Th e male-to-female ratio is 43-7. By age, the Top 50 executives range from a low of 37 to a high of 71 and the average age is 52.8. So the composite Top 50 fi rm leader is male and 53 years old, and holds an M.B.A. or similar business degree. Very few have any academic background in the social sciences. Only three of this year’s Top 50 leaders were new to their jobs, so industry leadership is stable.

research spending Beyond the ListTh is analysis focuses on spending within the U.S. for marketing/advertising/public-opinion research through for-profi t companies based in the U.S., and the 2011 compi-lation of 204 companies’ revenue totaled $9.2 billion. However, this is just one part—albeit the largest part—of the estimated total spending on research services in the United States.

Beyond this analysis, there is spending for “statistical programs” by agencies of the federal government, which amounted to $6.2 billion in 2011, down 1.4% from 2010. Th is is a sharp reversal from the two previous years, both of which saw increases of 13%. (Note: Th e cost of the 2010 U.S. Census is not included in these fi gures.)

This huge flood of federal spending impacts the Top 50 list, primarily, through three firms: Westat, No. 4 on the list, which gets about 90% of its revenue from federal agencies; ICF International, No. 10, which gets about 70% of its revenue from the feds; and Abt SRBI, No. 14, which gets about 65% of its revenue from government projects. All three showed extraordinary revenue increases in 2011 and those increases totaled $105.9 million, or about 26% of the total Top 50 list’s increase of $400 million year over year. So while the total federal spending was down significantly in 2011, this shift to for-profit firms helped boost the commer-cial industry’s fortunes. As noted earlier, one giant firm, Nielsen, alone accounted for about 25% of the increase from 2010 to 2011. So just these two factors explain about one-half of the commercial industry’s growth last year.

If we take the total federal spend of $6.2 billion and subtract the estimated $662 million that is already refl ected in the 204 fi rm total of $9.2 billion, via Westat, Abt and ICF,

that leaves a net of $5.6 billion to add on—or a total spend estimate of $14.8 billion.

Also not refl ected in the 204-fi rm total is the reve-nue from at least 20 not-for-profi t survey research centers, usually affi liated with universities. Th e University of Chicago’s NORC and the University of Michigan’s Survey Research Center are prime examples. In toto, these orga-nizations probably do something north of $200 million in survey research, but it is likely that at least half of that is based on projects funded by agencies of the federal govern-ment. So let’s add just $100 million to the running total.

Many large commercial consumers of marketing research do work in-house to cut costs, using focus groups, commu-nity panels and the like. Th ere is no way to estimate the reve-nue that this underground work represents, had it been fi elded by commercial vendors, but it is safe to say that $200 million more should be added to our running total.

Numerous other marketing services fi rms—like consultancies and advertising agencies—have internal research departments to back up their project work. Th ey could easily add $100 million to the running total. Numerous states—especially those heavily dependent on tourism revenue—fund large survey projects and the tendency there is to use local universities to keep the money in state. And then there are the foundation funding directed toward social research, the Pew Research Center being a conspicuous example; freelance conductors of focus groups; commercial research fi rms that do not belong to CASRO; political polling done by campaign strategists; and so on. Th is adds another conservative estimate of $100 million.

So it is easy to identify a huge pool of at least $500 million of additional research spending beyond the revenue accounted for in the Top 50 analysis, which brings the total market estimate up to $15.3 billion. Put another way, the Top 50-plus-CASRO’s total of $9.2 billion represents about 60% of the whole U.S. research spend.

Company Profi lesTh ere follow profi les of the individual Top 50 fi rms of 2011 and they describe the variety of services that the fi rms off er, along with their 2011 M&A activity and their plans for the future. To really grasp the scope and variety of the U.S. marketing research industry, read on. m

Methodologyinvitations to market research fi rms with estimated annual U.S. revenue of more than $10 million are sent in January of each year requesting revenue information for the prior calendar year, a company profi le of activi-ties and other company metrics. top 50 rankings are based on U.S. revenue. the rate of growth from year to year has been adjusted to account for revenue gains or losses from acquisitions or divestitures. Verifi cation of revenue is required of each private fi rm for ranking by a third party, generally its outside accounting fi rm. For further information, call larry gold at 847-525-0707 or Jack honomichl at 847-382-3246.

* Employment estimate includes Top 50 fi rms plus CASRO member fi rms not included in the Top 50 listing.

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THE MARKETING RESEARCH

Employment Picture

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JAcK HoNoMicHl is founder of the Inside Research industry newsletter, a market research trade publication based in Barrington, ill.

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