Waiting For Go..I mean Consolidation

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New York – Our internal database of research providers passed 2,600 firms in July, giving the lie to our expectation of pending consolidation in the alternative research space.  We have been calling for consolidation for so long that we feel like Vladimir and Estragon in Waiting for Godot.

In previous posts we have documented the growth of alternative research beginning with the end of fixed commissions in the 1970’s, and the explosive ‘Spitzer effect’ in 2003.  We thought for sure that research firms would exit the business as the pot of settlement gold proved to be an illusion.

Meanwhile, our database keeps growing.  From December 2008 through July 2009, our internal database has grown 35% from 1,965 firms to 2,643 firms.  Our client-accessible database has grown 50% from 797 firms to 1206 firms.  Not all the additions are new firms.  Most are existing firms that we have discovered, have developed services for financial analysts, and/or are increasingly of interest to investors.  They don’t just do fundamental research — they can be industry consulting firms, survey firms, ESG specialists.  We also track niche database providers and consulting firms.  Basically, any firm that can contribute to the research process, and potentially be paid for by commissions.

The fastest growing segments are within our primary, specialized and economic categories.  Within primary research providers the fastest growing segments are expert networks and survey firms.  The number of expert networks we track has grown from 25 in December to 40.  (Note: these are firms which have expert networks as their primary service and do not include firms like Epocrates where expert networks are an add-on to their primary research capability.)  Our coverage of survey firms has grown from 23 firms to 58.

In the specialized category, the fastest growing segments are ESG (18 to 33) and industry consulting firms (79 to 135).  Other segments such as litigation analysis, corporate governance and commodities research are growing fast, but are still small niches.

In the economic category, growth is coming from firms specializing in government/legislative analysis (surprise!) which have increased from 10 firms in December to 18.

We have also been adding research firms located outside the US.  Since December our coverage of European firms has increased 100% from 135 to 263 firms.  Our coverage of Asia Pacific based firms has grown 200% from 28 to 74.

Because most of the firms we are adding are existing firms, the growth of our database of research firms is not conclusive evidence.  Nevertheless, it is a long wait for the consolidation we expect…

Special thanks to Amy Campbell, our database manager, for the preparation of this article.

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