Consolidate or die? M&A among panel companies

The merger of GMI and Lightspeed Research has created one of the world’s largest on-line panel companies.  Of course mergers and acquisitions in this business are not new; in the last few years we have seen Research Now & e-Rewards and Ciao & Greenfield come together, among others.

Anyone attending an ESOMAR conference in the last few years, or even viewed the number of on-line panel sponsors to this publication will see the huge array of panel companies who, at least on the face of it, provide essentially the same commoditized service – access to consumers who are willing to take part in surveys for a fee.

So is the recent M&A activity the result of an oversupplied, stressed market?

Terry Wiley from Lightspeed comments that there are too many panel companies in the more mature Asian markets such as Japan and Australia, but “SE Asia is still wide open although traditional online methods are restrictive in many emerging markets and suppliers will need to look at alternative methods such as mobile\”.  He goes on to point out that M&A activity for which his own company is currently engaged with GMI is “a strategic necessity. Lightspeed/WPP saw strengths in technology with GMI, as well as providing expanded coverage in key markets such as India and Latin America\”.

James Rogers from Toluna comments that Asia is like the 3rd installment for the on-line panel industry (after the North America, and Europe).  The opportunity for Asia is that it can learn from the development of the on-line research industry in the other regions.  The rate of adoption of on-line research as a method has been much faster in Asia since a lot of the technology can be imported from the West.  The level of competition has also kept pace with the rate of growth, so hence a need for some consolidation. “The quicker you get hold of resource through acquisition, the better” comments Rogers.

Some see the recent mergers as a natural process, not unlike the consolidation that has been observed with the main stream research agencies – mergers of large players such as Synovate and Ipsos to provide better regional coverage for Ipsos in Asia, TNS and RI for economies of scale, or the acquisition of Saffron Hill to provide Added Value specific local market coverage and access to specialist skills.

Many of the drivers of integration are for regional coverage.  The merger of Research Now and e-Rewards provided strong coverage in both Europe and the US, while other acquisitions are for filling gaps in specific markets where some regional players can be weak, e.g. Indonesia, Thailand, and the Philippines.

James Burge from Research Now comments that acquisitions are also for specific buy valtrex 1gm online capabilities, for example their recent acquisition of Conversition in the area of social media.

But mergers are a far more efficient way of scaling up – it is very expensive and even ‘intimidating’ for a panel company to attempt to scale up through organic growth alone.  Mergers also provide the economies of scale and frees up resource for further R&D within the panel companies.

Mergers in panel companies present some unique challenges.  As ‘technology companies’ the integration of panels and IT can be quite challenging and can take 1 to 2 years to complete.  Depending on the terms and conditions that panel companies have with their panelists, they might need to be re-invited to the panel.  Jason Buchanan comments that while 5-6 years ago the technologies of panel companies were more homogenous, as technologies developed they have diverged, meaning technologic integration is now more challenging.

Less predictable is how well two panel companies can be integrated from a cultural standpoint.  Many panel companies are fairly recent start-up businesses, and such companies have quite a unique culture of entrepreneurialism and the people within these companies can be “extremely opinionated”.

James Burge comments that ‘a merger of equals’ tends to work better culturally, since they tend to be at the same stage of development or maturity whereas a larger firm acquiring a smaller start-up company it can take time to work towards common values and working styles.  These though are not unique to panel companies and would also apply to most companies going through M&A.

Standing out from the crowd

As a more commoditized product, the scope for differentiation among on-line panel companies is somewhat limited.  The main areas that panel companies seek to differentiate themselves are a) end-to-end client service quality from advice in survey design through to delivery of data, sometimes even in charted form, b) their technology, e.g. river sampling, other capabilities in social media, and programming, and c) price – while one would expect a commodity such as panel-based surveys to have found their own price level, price differentials still exist making this partly a differentiator between companies.

Philanthropy is also an important element of on-line panel companies.  While such initiatives can help to differentiate companies in the main stream, CSR is often part of the philosophy more progressive technology-based companies which includes panel providers.  More than one of the on-line panel companies for example donated funds to the Japan Earthquake & Tsunami appeal.

Most expect further consolidation in the industry.  Enemies will have to become friends, and some advice “don’t burn your bridges, because there is a high chance of acquisition.”

Terry Wiley sums it up “Get specialized, get big, or get out!”