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Two Divergent Strategies from the BIG PLAYERS

GFK’S SALE OF FOUR DIVISIONS TO IPSOS HIGHLIGHTS

On 30th July 2018, Ipsos announced the acquisition of four divisions of GfK’s custom research business, including customer experience, experience innovation, health, and public affairs.

The deal, worth €105 million, is for a combined business currently worth around €200 million. This acquisition will involve Ipsos absorbing nearly 1,000 GfK custom research employees across 25 countries.

The deal involves two highly divergent strategies from two of the largest research firms in the industry, and industry observers will be keen to see how these two strategies play out in the next few years.

The GfK strategy looks to be more in tune with the general developments in the industry – that is, towards big data and analytics. Peter Feld, Chief Executive Officer of GfK, commented that this will transform GfK into a “truly technology-enabled data analytics provider”. They will retain their retail audit and media measurement divisions, allowing them to leverage off data sets, panels, and to focus on the analytics linking the various sources.

GfK’s move is recognised as a desire to drop the more competitive custom research business, which is associated with lower margins. Custom research is much harder to automate and has far more competition from the full range of agencies, large and small.

Ipsos already has a sizeable custom research business and is, in a sense, having to commit itself to the growth of this sector of the market. The acquisition will provide an immediate boost in its revenues and remove an existing competitor in the same tier. The question, though, is for how long that revenue boost can be sustained, as changes will inevitably lead to a review of business allocation across agencies.

Furthermore, the GfK divisions that Ipsos has bought duplicate much of the current business. Ipsos already operates in healthcare, customer experience, innovation, and the public sector, and has its own specialist divisions and proprietary solutions for these lines of business.

Ultimately this is yet more consolidation at the top end of the industry, and while there will be an immediate boost in Ipsos’s revenue, the longer benefits to Ipsos will have to come from gaining ‘staff efficiencies’.

The market research industry will need to wait to see how these two players, currently ranked 7th and 8th in the global rankings, develop over the years with their quite different strategies. The GfK strategy is very much a ‘private equity’ rationale of focusing on core profitable businesses, leveraging more on technology and less on people, and operating in a less contested space.

Ipsos maintains its focus on the more labour-intensive custom research, sometimes dependent on individual talent within the organisation. This might seem like a less favourable strategy, but Ipsos retains a more diversified business with considerable cross-sell potential.

GfK, on the other hand, runs the risk of being trumped by any new analytics technology that could be introduced to the market and could disrupt today’s technology.

Who will be ahead in 10 years’ time – a company more dependent on technology, or one more dependent on people? •