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Market Share Leaders by Segment
B2B Trade Publishing
- Revenues of players in the B2B Trade Publishing segment grew at 2.3% in 2008 (see Table 4), less than one-third the growth of 7.6% in 2007, and less than one-third of the growth of the 2008 total information industry, excluding News. This segment, like News, still has an abundance of revenue from print advertising, a revenue stream hit hard in recent months.
- The top five companies in 2007 retained a place in the top five in 2008, with Informa moving up one spot to No. 4. Informa was the fastest growing at 18.4% in US dollars, with 25% expressed in pounds. The surging yen FX effect turned Nikkei Business Publications' growth from -1.1% in yen to 11.0% growth in US dollars.
- Print advertising revenue fell 7% in 2007 while online ad spending grew at double-digit rates and made up an increasingly large share of the total segment revenue. United Business Media (UBM) has driven its print revenue down to 24% of total revenue, with the events, data, and online businesses holding up well and UBM growing 8.7%. Paid online subscription data drove solid growth at Daily Mail's Metal Bulletin and McGraw-Hill's Platts business, leading those firms to 5.4% and 10.1% growth respectively, more than double the segment average.
Table 4. Top 10 B2B Trade Publishing Companies,
Preliminary Revenue Estimates, 2008
Company Information
- Company Information providers' revenues grew at 3.1% in 2008 (see Table 5), less than half of the 8.1% growth in 2007. Slower growth was largely a result of the economic downturns in the United States, Europe, and Asia that adversely impacted the marketing expenditures of the company information providers' customers. Marketing budgets tend to be discretionary in nature and easier to reduce in the short-term than other expense categories in response to weak economic conditions.
- The rankings of the top 10 Company Information providers did not change compared to 2007. However, No. 3 Acxiom and No. 4 InfoGROUP reported negative growth. At Acxiom, revenues from both the US and international operations declined, most prevalently in Financial Services and Travel, Media, and Telecom. At InfoGROUP, the company was distracted by the protracted litigation and negotiations around the eventual departure of founder and long-time CEO Vinod Gupta, and the slow-down in marketing and lists businesses. Harte-Hanks and D&B both grew significantly faster than the space overall. At Harte-Hanks, that growth came from providing frequently verified and very accurate data on installed computing equipment leading to preferred, highly pre-qualified leads. At D&B, the 11.0% growth was actually lower than its 20% target, but the firm is taking advantage of the secular trend of growth in online lead generation and disciplined focus on small and medium businesses that continue to shift more of their marketing spending online.
- The Company Information segment outside of the top 10 has been notable for the rise of data-mining companies scraping the web for company and executive information and social networking applications such as LinkedIn, Visible Path, and Plaxo. Company Information players have also increased their focus on building out content covering the 12 million small- and medium-sized businesses in the US that traditionally have not been served by the largest information companies.
Table 5. Top 10 Company Information Providers,
Preliminary Revenue Estimates, 2008
Credit & Financial Information
- The Credit & Financial Information (C&F) segment grew by an estimated 5.0% in 2008, to a total of $42.5 billion. This represents a significant fall from last year's growth rate of 8.5%, with players in some subsegments of the market, such as the credit ratings agencies, moving into negative growth (see Table 6).
- Top performers in the segment included Experian (18.0% growth), Thomson Reuters (10.0% growth in this segment), and D&B (7.5% growth). A good deal of Experian's growth can be attributed to its acquisition of Serasa in 2007 while organic growth is essentially flat. Equifax also benefited from a 2007 acquisition — TALX has performed very well, while revenues from its consumer information solutions business, which accounts for almost half of total revenues, fell by 8% over the first three quarters of the year, hence the 1.0% decline in total revenues. Meanwhile D&B has displayed behavior typical to credit information companies in times of downturn, positioning its products as "must-have" in these dark days. While the financial markets that Thomson Reuters serves are struggling, the company's increasing reliance on long-term subscriptions, diversity of customers, global presence, and breadth of offerings has enabled solid growth. The credit ratings players (Moody's, Standard & Poor's, and Fitch) have suffered more than the rest of the C&F segment this year, with revenues down 25.0%, 12.0%, and 15.0% respectively, due to lower activity in traditional markets, and concerns around the validity and veracity of the credit ratings data being produced by these players.
- Poorer than usual performances by companies serving financial markets in crisis was only to be expected as the year drew to a close. A fall in the amount of bank lending led to a related reduction in credit transactions (loans and mortgages), which drive demand for scoring and consumer credit reporting. Consumer credit information increasingly came to rely on portfolio monitoring services and assisting clients with workflow. Credit ratings suffered a significant decline in issuance across all asset classes. In addition to market woes, rating agencies are facing potentially new regulatory restrictions if the European Union and the SEC have their way. We see little prospect for improvement in the performance of the credit information and ratings subsegments until the end of 2009, at the earliest.
Table 6. Top 10 Credit & Financial Information Companies,
Preliminary Revenue Estimates, 2008
Education & Training
- The Education & Training (E&T) segment grew by an estimated 6.5% in 2008, with the top 10 companies showing higher growth (8.5%) than the E&T segment as a whole.
- Pearson Education and Kaplan were 2008's big winners, with growth of 17.0% and 15.0% respectively (see Table 7). Pearson is riding the postsecondary wave better than its major competitors, McGraw-Hill, Cengage Learning, and Houghton Mifflin, which grew by 3.7% on average. Pearson's growth is also due to acquisitions and partnerships (for example, the acquisition of Harcourt International, which broadens the company's reach in the UK, Australia, New Zealand, and South Africa, and the acquisition of Harcourt Assessment, which complements Pearson's existing assessment business). The company is well placed in the areas of this market that are growing most rapidly - digital content and assessment content and tools — and has also made smart geographic moves such as its partnership with the Ministry of Education in Jordan to develop a system that supports the creation of test items and tests in Arabic. Kaplan's growth is due to the strength of the assessment and test prep markets and to acquisitions. Acquisitions included The Study Group in October 2008, which expands Kaplan's offerings of test preparation for the bar exam in 30 states, legal training provider Altior in July 2008, and Pro Linguis, a provider of educational services to students and adults in Switzerland, in July 2008. Scholastic, which displayed the largest negative growth (-7.0%) of any of the top 10 companies in this segment, is in the midst of moving more of its assets to the digital arena, and is still print-heavy. Poor sales of key products such as READ 180 (attributed to "a challenging market") and lower sales productivity were contributing factors in a year that saw double-digit declines in industry-wide sales of supplemental curriculum products.
- Factors driving growth include consolidation through acquisition (in the postsecondary market in particular) and an increased emphasis on testing and assessment. Since the US school systems set their public school K-12 budgets mid-year, the full effect of the economic recession has not yet been felt in this segment.
Table 7. Top 10 Education & Training Companies,
Preliminary Revenue Estimates, 2008
Legal, Tax & Regulatory Information
- With all due respect to the other players in the Legal, Tax & Regulatory Information (LTR) segment, there are really only three information providers whose results matter in determining the overall growth rate in the segment: Thomson Reuters, LexisNexis, and Wolters Kluwer, which collectively account for over 70% of segment market share. Despite the current economic slowdown, we estimate the market to have grown 6.5% in 2008. The factors that traditionally have smoothed out revenue fluctuations in the sector are still present: a large portion of revenues tied to annual or multi-year subscriptions, a customer base that is traditionally counter-cyclical, and diversifying product portfolios.
- Slowdowns in corporate finance and real estate transactions have affected businesses that are dependent on volume levels, such as Wolters Kluwer's Corporate and Financial Services unit. LexisNexis' growth in the large law sector, while healthy, is somewhat behind last year's rate. Thomson Reuters is showing signs of weakness in the small firm and government markets. An increasing number of layoffs at law firms and even the collapse of some high-profile law firms are a sign that the poor economy for corporations is beginning to affect the professional services industries that serve them.
- Once again, currency effects distort results in this sector. In both their reporting currencies and in dollars, we expect growth rates of 11.0% and 6.0% for Thomson Reuters and LexisNexis respectively. Wolters Kluwer's results are reported in euros, however, and a flat revenue picture in native currency translates to a 14.0% gain when measured in dollars.
Table 8. Top 10 Legal, Tax & Regulatory Information Companies,
Preliminary Revenue Estimates, 2008
Market Research, Reports & Services
- The Market Research, Reports & Services (MRRS) segment grew by an estimated 7.9% in 2008 (see Table 9), with segment revenues rising from $30.7 billion in 2007 to $33.1 billion in 2008. Growth in 2007 was 9.6%. The top 10 companies grew by 10.4% in 2008, almost a third less than the 13.7% growth in 2007. Revenue estimates in the first half of 2008 for the full year were more robust; many were downgraded in the third quarter. The segment continues to demonstrate reasonable growth even during economic turbulence, as we have seen in other economic downturns. Most companies continue to report organic growth rates in the 5% to 8% range.
- Nielsen Media & Consumer Services continues to be the market share leader, with WPP second. IMS moved ahead of TNS in 2006, and maintained its position in 2007 and 2008. WPP's acquisition of TNS will move it into second place in 2008. WPP is reporting two months of revenue (November and December) that include TNS. TNS revenue is estimated for the first 10 months, based on half-year revenue, painting a negative growth picture for TNS because it compares 12 months of 2007 to ten months of 2008. It also inflates WPP's Information, Insights, and Consultancy business by adding in two months of estimated revenue from TNS, hence the 33.4% growth rate. IMS Health and GfK both reported slower growth, with guidance of 6% revenue growth, while Ipsos and Synovate continue to show stronger growth of 15% to 17%. Corporate Executive Board's (CEB) estimated growth is down in 2008 compared to 2007. 2008 guidance is a growth rate in the range of 5.1% to 6.4%, compared to 15.7% growth in 2007 — we believe that full year results will be at the lower end of that guidance range. The company's growth declined over the last few years due to a number of factors, including a soft US market from which it derives approximately 70% of its revenue. Corporate Executive Board's revenue excludes its IT practice, which is included in the IT & Telecom Research, Reports & Services segment.
- US business was down for the majority of the players, especially those companies headquartered outside the US. Most companies are reporting much stronger business outside the US, particularly in emerging markets. This held up the segment well until October, when the US financial crisis began to affect businesses outside the US as well. Healthcare was not as strong for many of the companies as the US pharmaceutical industry had a tough 2008. Media measurement did well for many companies, as advertisers were keen to sharpen their focus on advertising ROI.
Table 9. Top 10 Market Research, Reports & Services Companies,
Preliminary Revenue Estimates, 2008
IT & Telecom Research, Reports & Services
- The IT & Telecom Research, Reports & Services (ITTRRS) segment performed well, growing an estimated 8.7% in 2008 (see Table 10) from $2.8 billion in 2007 to $3.0 billion in 2008, down slightly from a 9.1% growth rate in 2007. The top 10 companies' revenue grew by 9.4% in 2008, reduced from a 13.4% growth rate in 2007. Revenue estimates in the first half of 2008 for the full year were more robust, but many were downgraded in the third quarter. Overall, the segment continues to perform reasonably well given the current economic turbulence, although growth is weaker than last year, which is not unexpected.
- Gartner dominates as the market share leader, followed by IDC and Forrester. The top three are all performing well, although estimates for the full year did fall below mid-year estimates. Gartner's projected 2008 growth rate is less than 2007's because of its divestiture of the Vision Events business. Yankee Group dropped from eighth place down to 10th with Burton Group and TowerGroup each moving up a rank. Yankee Group's downward movement is due to it scaling back its business from legacy products to its "anywhere" topical research platform. Burton Group continues to gain with a strong 15.0% growth rate, although this is lower than in previous years. TowerGroup is holding its own in the eye of the financial services market hurricane. Client counts are holding steady but spending is down as its customer base is struggling in the current economic environment. Informa Telecoms & Media group was growing 58% mid-year with 4% organic growth. This group continues to perform very well based on strong growth in its events and research businesses, and we can expect it to finish the year with just over 37% growth.
- Revenues from US vendor-centric businesses (those serving IT and telecom suppliers) have been down for all companies in 2008, especially IDC and Yankee Group. User-centric firms in the US saw revenues hold up much stronger, as evidenced by stronger growth rates at Gartner, Forrester, CEB, and IDC Insights. International business has been profitable and companies such as IDC that have a strong footprint outside the US benefited from strong growth abroad. The Asia Pacific region is a particularly hot spot for all the companies; growth in that region reflected each company's aggressiveness in pursuing the region. The meltdown in the financial services sector affected all the companies to the extent that business is focused on the financial services vertical. TowerGroup is one company in the top 10 that is singularly focused on this area of the market.
Table 10. Top 10 IT & Telecom Research, Reports & Services Companies,
Preliminary Revenue Estimates, 2008
News Providers & Publishers
- The News segment, weakened by intensified competition from internet advertising rivals, the concurrent changing news consumption habits of end users, and the consequent movement of revenue away from legacy media, has been battered by the recession. We had forecast a 6.6% decline in revenue and have now decreased our year-end estimate to a decline of 7.5% overall, largely due to the effects of the consumer downturn; this is a steep drop-off from already negative growth of 2.5% in 2007. The consumer spending downturn has been accompanied by an overall slowing of ad spending, with both classifieds and retail advertising suffering more in the second half of 2008 than in the poor first half. Fourth quarter numbers will confirm that when released in early 2009. The decline is happening across the board, in the top 10 players and below, with almost all companies showing declines (see Table 11).
- News Corp.'s performance certainly stands out in the top 10, with a 35.5% growth rate. However, the lion's share of that is due to the full-year impact of its Dow Jones purchase, with a smaller impact of a better-than-average Australian advertising market. Axel Springer's 6.5% growth rate can also be attributed entirely to acquisition, as its year-to-year comparisons were largely flat. It is the US companies that have experienced the greatest revenue declines, with revenues for Gannett, the largest newspaper company in the world going into 2008, at a preliminary 13.0% decline, McClatchy at a 17.0% decline, and Tribune at a 13.0% decline, largely due to a steep and early fall in revenues from print advertising. UK-based companies such as DMGT and Trinity Mirror started 2008 better since the economic downturn hit later in the year than in the US, but their second-half results will be adversely affected as the UK economy has quickly and deeply turned downward. Schibsted, with its diversification and trans-national expansion, is weathering the downturn a bit better than its peers, with a 2.0% growth rate, but will be hit by the same macroeconomic factors going forward.
- Overall decline in the consumer economy has reduced ad spending globally. Print ad declines have sped up as marketers continue to shift spending to trackable online and event media, yet online revenue growth rates have slowed dramatically, reflecting publishers' too-great reliance on bundled (print and online) ad sales. Online revenue yield still falls much lower than print yield for the same number of readers. Younger readership has gone — definitively — online and taken with it the hope of restoring lost print revenue.
Table 11. Top 10 News Providers & Publishers,
Preliminary Revenue Estimates, 2008
Scientific, Technical & Medical Information
- The Scientific, Technical & Medical Information (STM) segment grew at 8.4% and outperformed the information market's growth of 2.3% (see Table 12). When excluding geophysical data providers, the remaining traditional STM subsegment grew by 6.6%.
- As in 2007, the fastest-growing companies in the STM space were the geophysical players, with CGGVeritas increasing revenues by 13.1%, Petroleum Geo-Services by 26.6%, and TGS-NOPEC by an impressive 44.1%. This was due to increasing exploration activity as the search for new oil, gas, and mineral resources continues, and the increasing monetization of value-added digital services such as data processing, which we now include within our segment definition. Of the more traditional STM players, IHS was the top performer with growth of 25.0%, which was due to the acquisition of businesses such as Jane's and Global Insight, successful renewal rates on top of a strong subscription base, and movement into the Asia Pacific region. Informa experienced good organic growth and customer retention, and put several multi-year contracts in place with major customers. Wolters Kluwer Health, reporting 7.7% growth when converted to US dollars (partly due to reporting in euros), is accelerating the restructuring of this division to improve performance and also made a major acquisition (UpToDate) during the year and appointed a new CEO in order to migrate to online and software solutions more rapidly.
- While we did not see any major consolidation of bigger players on the scale of last year's acquisition of Blackwell Publishing by Wiley, there was important M&A activity involving disruptive players. Wolters Kluwer Health acquired medical point-of-care publisher UpToDate, whose projected 2008 revenues of $80 million were larger than many observers expected. Springer's acquisition of open access pioneer BioMed Central (BMC) was transacted at a multiple comparable with an acquisition of a journal publisher using conventional business models, suggesting that the open access model has reached sufficient robustness to withstand the rigors of the open market. Outsell's view is that the Springer/BMC deal will be looked back on as a pivotal point in the evolution of the post-internet scientific communications market. It suggests that STM publishers will use hybrid business models as a means to move beyond library budgets. Looking ahead, the STM segment as a whole is highly consolidated, so we expect acquisition strategies to focus on adjacent sectors, niche portfolio extensions, and innovative disruptors.
Table 12. Top 10 Scientific, Technical & Medical Information Companies,
Preliminary Revenue Estimates, 2008
Search, Aggregation & Syndication
- The Search, Aggregation & Syndication (SAS) segment achieved 16.1% growth in 2008 which, though lower than our original forecast of 18.9%, is still quite strong. Underlying this performance is a slowdown in growth that occurred in the second half of 2008 and is likely to continue well into 2009 (see Table 13).
- Google continued to consolidate its lead in the segment as it gained five more percentage points of share and now accounts for over 45% of the segment's total revenue. That said, its growth continues to slow, though at 31.0% it remains quite healthy. Microsoft (MSN) was the only other top 10 company that grew market share in 2008 and it led the pack with 39.0% growth. However, because the company's fiscal year ends in June, these results do not reflect the sudden economic downturn that occurred in the third quarter of 2008. The company's performance in the calendar year 2008 tells a slightly different story, with growth dropping to just below 24% — still better than the segment but behind Google. Currency exchange rates again impacted results significantly in 2008 — especially in results reported in euro and yen. For example, Swets saw its US dollar growth rate soar to 13.3% although the company is estimated to have grown only 2% in its local currency.
- The SAS segment remains primarily driven by the migration of advertising dollars online and, while the overall advertising market has slowed considerably with the economic contraction, the migration remains strong. Therefore, the economic climate is only having a moderate impact on the segment's performance as search advertising continues to log very healthy growth.
Table 13. Top 10 Search, Aggregation & Syndication Companies,
Preliminary Revenue Estimates, 2008
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