Investors, advisors, consultants and executives are forever seeking information to make better decisions, provide better advice and fact check their opinions. How they have gathered insights has evolved dramatically over the past few decades. Before the days of the internet any information was good information, be it from a faxed report, conversation with a broker or a roadshow.
Today we find ourselves in a world where we are surrounded by information. Type any question into Google and find hundreds of pages of articles, blogs, website pages filled with different opinions and unverified “facts”. With this, the challenge has moved away from finding information to cutting through the noise, to find the information that matters. The information that completes the picture of reality that allows you to make a more informed decision.
In the early 2000s, this paved the way for a new industry to emerge, the Expert Network industry. Born in the late 1990s, out of the US, the industry provides access to Expert insights across a variety of industries. Investors, consultants and industry executives can speak directly to those involved within industries and through their own independent line of questioning. All while structured in a strong compliance framework in line with the requirements of both competition and financial regulators. An industry expert can tell you what matters and what information is critical; cut through the noise if you may.
The industry has grown at a CAGR of over 15% each year over the last decade and over 20% in 2021 at the height of the COVID pandemic. It is now worth $2.2 billion and according to several leaders in the industry will likely grow to beyond $6 billion by 2030. The robustness of the industry is such that the same market headwinds that have haltered growth of other Information Services providers, have been the wind in the sails of Expert Networks as consumers of research move their spend to Expert Networks. One example is MiFID, where regulations diverted research spend of investors to independent research providers such as Expert Networks away from the Sell-Side research departments.
The second is COVID, which drove more and more consumers of research to explore Expert Networks or increase their use of them. Expert consultations take place over the phone and when travel was restricted and the subsequent decline in appetite to attend events such as roadshows occurred, they became an attractive substitute for those who had not been exposed. This movement shows no sign of reversing.
Technology will be key in determining the key players in the space and driving growth in the industry. The current technology capabilities across the industry as a whole are lacklustre. Rapid growth and inelasticity of demand has led to a reliance on large, high quality, human research teams with the likes of Third Bridge, Alphasights and GLG. There are some leaders here with the likes of Inex One, an aggregator platform that allows its clients to access multiple providers on a single platform giving fast, diverse and global access to experts, as well as a few players developing AI matching technology. Technology will be the key factor in determining the market leaders of the future. Those that invest and invest in innovative features that automate a lot of the complex and human driven processes in the space, will position themselves strongly. Naturally, it is the players outside of the top 5 that are showing the ability to do this more effectively. The question then remains, is what will be the next driver of the industry? Two things we believe are a given. Firstly, the industry has enough exposure to drive its own growth as opposed to relying on external factors driving clients to use the industry and, secondly, alongside growth there will be a changing landscape.
Market Consolidation is inevitable and a new openness to non-organic growth in the industry is already happening. For example, VisasQ the Japanese Headquartered Expert Network, acquired Coleman, an American Headquartered provider, for $102 million in 2021. 2019 saw a 30% increase in the number of Expert Networks with several regional players in the likes of Southeast Asia, Australia, Africa and South America establishing a strong local offering that was competitive to the global players’ offering. The establishment of strong local players, the growth of 100 providers to 200 since 2019 and the first major acquisition in the space all suggest some consolidation in the space through M&A activity, as well as the elimination of stagnant players.
We also expect to see a far more diverse user base for Expert Network services. Throughout the earlier stages of the industry these services were used by Management Consulting and Private Equity firms. Asset Managers, Hedge Funds and Superannuation Funds came later, and we are now seeing growth in the Corporate space with companies using this service to get insights into potential new markets, diversification opportunities and technology trends. The compliance elements of the corporate segment are more sensitive, but with the right framework and processes, a compliant and effective offering can be provided. It could well be this segment that becomes the significant driver to making the market size $6 billion by 2030.
Nobody can be certain about what the next major driver is. Nobody expected a global pandemic and few people outside of the industry would have seen it as a growth driver to the Expert Network industry. There could very well be another macroeconomic event, pandemic or macro political situation that could drive the next growth element or the opposite. Nonetheless, the above will be key factors over the next 5 years in determining the next stage of growth and the landscape of the space. One thing is blindingly obvious; the industry shows no signs of slowing below double-digit CAGR and that it will continue on its path to become a dominant segment of the Information and Research Services space.
