Research Industry News December 2004

News notes

Norway-based research software company FIRM is preparing for a listing on the Oslo Stock Exchange (OSE). The initial public offering is expected to take place in 2005, though the timing will be dependent on prevailing market conditions. FIRM generated revenue of $8.5 million in the first nine months of 2004, an increase of 35 percent from $6.3 million for the first nine months of 2003. Full-year revenue for 2003 was $9.7 million; 17 percent came from Scandinavia and 83 percent from the U.S., Europe (outside Scandinavia) and Asia. FIRM’s EBITDA was $67,000 in the third quarter 2004 with revenue of $8.5 million YTD. Revenue growth for the third quarter 2004 was 38 percent relative to the third quarter 2003. FIRM has chosen Carnegie as the lead manager for the IPO.

Acquisitions

Experian, Costa Mesa, Calif., has acquired Simmons Research. “The combination of Simmons and Experian allows us to link our respective consumer marketing capabilities to offer our clients a broader range of communications solutions - from contact strategies to customer and prospect databases,” says Bill Engel, co-CEO of Simmons.

The Kantar Group  has agreed to acquire Oracle Market Research Limited (Hong Kong) and Oracle Market Information. Following the acquisition, Oracle’s operation will join Kantar’s Added Value network, and be branded as Oracle Added Value. Founded in 1994, Oracle is headquartered in Hong Kong, with offices in Beijing, Shanghai and Guangzhou. Oracle employs 130 people and had revenues of $8.4 million for the year ended December 31, 2003 and net assets at completion of the acquisition of $2.1 million.

U.K.-based MASMI Research Group  has merged two Russian subsidiaries, MASMI Moscow, specializing in quantitative research, and MASMI Mart, a qualitative research agency. The two agencies formally joined forces on November 1, 2004 and are located in office facilities on M. Semyonovskaya St. 9 in Moscow’s Bauman district, with several hall-testing facilities, three focus group studios, and working space for up to 120 staff members.

Association/organization news

On November 15, 2004 the British Polling Council  (BPC) was launched by several of Britain’s pollsters. The objective of the Council is to ensure standards of disclosure which will give consumers of survey results that enter the public domain an adequate basis for judging the reliability and validity of the results. Through full disclosure the Council aims to encourage high professional standards in public opinion polling and to advance the understanding, among politicians, the media and general public, of how polls are conducted and how to interpret poll results. The BPC will also provide interested parties with advice on best practices in the conducting and reporting of polls.

The following companies are applying to be founder members of the new organization: CommunicateResearch, ICM, MORI, NOP, ORB, Populus, TNS System 3 and YouGov.

John Barter, ex-chairman of NOP and a past chairman of the Market Research Society, has agreed to become president of the BPC. He will refer any questions raised under the rules of disclosure to an investigating committee comprising three people drawn from the subcommittee on disclosure. The following have agreed to serve on this sub-committee in a personal capacity: Simon Atkinson (MORI); David Butler (fellow of Nuffield College Oxford); David Cowling (BBC); David McKie (ex-deputy editor of The Guardian ); Nick Moon (NOP); Adam Phillips (a past chairman of the Market Research Society and chairman of ESOMAR’s professional standards committee); Colin Rallings (professor at the Local Government Chronicle Election Centre at University of Plymouth); Peter Riddell (The Times ); and Peter Kellner (YouGov).

The BPC has been modeled on the successful National Council for Published Polls (NCPP) in the U.S. and BPC members are grateful for the advice received from the NCPP in starting the BPC.

“The organizations that are seeking membership of the BPC recognize the need for uniform standards of disclosure about how polls are conducted so that consumers of poll findings have an adequate basis for judging the reliability of the findings and all the proposed founding members enthusiastically support this new Council. Once the Council is established readers of poll findings will have full access to information on how polls have been conducted, what questions were asked and how the data collected has been computed to produce the published results,” says Barter.

The formation of the British Polling Council follows the publication of an Early Day Motion signed by more than 80 members of Parliament from all the main parties which expressed regret at “the decline of self-regulation of public opinion polling companies in the United Kingdom,” concern that “there are no sufficient checks on the integrity of polling or polling organizations,” and expressed “concern at the proliferation of non-scientific/empirical polling, in particular the use of techniques designed to secure the results favored by those who commission the polls, and lack of transparency in the methodology employed.”

The BPC shares these concerns. For these reasons its membership will be restricted to organizations that: set out to measure the opinions of representative samples scientifically; and uphold the principle of transparency.

In agreeing to disclose full information about how samples are drawn, how raw data are weighted, and the full wording of questions and answers, the BPC seeks to demonstrate its commitment to the highest standards and greater public understanding of the methods used to conduct representative surveys. For more information visit www.britishpollingcouncil.org/press.html.

A new research strategy designed to measure advertising recall more accurately than traditional techniques swept the board at the Research Excellence and Effectiveness Awards, which were hosted by The Market Research Society  (MRS) at London’s Café Royal in October.

This approach to advertising research was developed by Robert Heath at the Value Creation Company and Pam Hyder from Standard Life. Their entry scooped both the ISBA Award for advertising research effectiveness and the David Winton Award for new technical developments in research.

Heath and Hyder’s project, which was undertaken for Standard Life, tested why it is that advertising that works on our emotions can still result in low recall levels. They compared a popular recall-based technique - claimed ad awareness - with a new approach that deduced effectiveness from recognition. Their findings revealed that claimed advertising awareness seriously underestimates the effectiveness of advertising.

The winners of the other MRS Research Effectiveness Awards were:

MRS Applications of Research Award: Simpson Carpenter.

MRS Public Policy/Social Research Effectiveness Award: TNS UK & the Scottish Executive.

MRS/ASC Award for Technology Effectiveness: E-Tabs International.

MRS/AURA Insight Management Effectiveness Award: Nunwood Consulting.

Two MRS Gold Medals for outstanding service to the research industry were also presented to Stephan Buck and James Rothman for a combined total of 67 years editorship of the International Journal of Market Research. For more information visit www.mrs.org.uk.

Awards/rankings

Perseus Development Corporation, a Braintree, Mass., research firm, has been named to Inc. magazine’s annual Inc. 500 ranking of the fastest-growing private companies in the country. In addition, Perseus has been named to the 2004 Deloitte Technology Fast 500 as one of the fastest-growing technology companies in North America, and to Software Magazine's Annual Software 500, as one of the world’s largest software companies. Perseus ranked #356 on both the Inc. 500 and Fast 500.

Saskatoon-based research firm Itracks received the Business Development Bank of Canada’s (BDC) Ongoing Achievement Award. The award comes with a $20,000 grant offered by Hewlett-Packard and a BDC Growth Potential Assessment valued at $5,000 intended to help the company achieve its growth objectives. The award recognizes former winners of the BDC Young Entrepreneur Awards for steady business growth and outstanding achievement. Dan and Garnette Weber, Itracks’ founders and owners, won the BDC Young Entrepreneur Award in 1999.

Walker Information, Indianapolis, has won the gold award for technology in the Indiana Excellence Awards for its development of The Walker SmartLoyalty System, an Internet-based CLM tool. The annual Indiana Excellence Awards are sponsored by BKD and Indiana Business Magazine. The awards program recognizes business excellence through the improvement of specific business processes.

Seattle research firm NetReflector, Inc. has ranked number 303 for its 661 percent growth from 1999 to 2003 on Deloitte’s 2004 Technology Fast 500. The Technology Fast 500 is a ranking of the 500 fastest-growing technology companies in North America based on average percentage revenue growth over five years. Last year, NetReflector ranked Number 275 on that same listing.

WebSurveyor Corporation, Herndon, Va., has been named to Inc. magazine’s annual Inc. 500 ranking of the fastest-growing private companies in the country. WebSurveyor ranks #59 on the list. WebSurveyor boasted average annual sales growth of 430 percent, compared to sales growth of 265 percent for all companies included in the list.

New accounts/projects

Maple Grove, Minn.-based Data Recognition Corporation  has been awarded a five-year, $20 million IDIQ (indefinite delivery indefinite quantity) contract with Defense Manpower Data Center (DMDC). DMDC, a branch of the United States Department of Defense (DoD), is responsible for administering surveys that assess attitudes and opinions on a wide range of personnel issues across the entire DoD community: active duty members, reserve component members, civilian employees, veterans, and family members.

Farmington Hills, Mich.-based research firm MORPACE International, Inc., announced the award of its Management, Organizational and Business Improvement Services (MOBIS) schedule from the General Services Administration. The schedule, contract number GS-10F-0618P, will enable MORPACE to provide consulting, facilitation and survey services as a prime contractor to federal agencies.

20/20 Research, Inc., Nashville, has added market research firms Verus Group, Evergreen, Colo., and Bunofsky Research Group, Staten Island, N.Y., to its list of online Qualboard software subscribers.

The Joint Industry Committee for Audience Research in Belgium, CIM, awarded the contract for ongoing radio research in Belgium for the years 2005-2006 to Germany-based GfK. In addition to the conventional data consumption collection method using interviews, GfK will also measure radio consumption electronically, using the new MediaWatch technology.

New York-based media firm GroupM and Simmons announced the expansion of a comprehensive multi-year agreement under which media agencies MindShare and Mediaedge:cia will use Simmons research data, including the Simmons National and Hispanic Consumer Survey as well as the Teens and Kids studies.

Perseus Development Corporation, Braintree, Mass., announced that The U.S. Naval Personnel Development Command (NPDC), the U.S. Coast Guard, and Sandia National Laboratories are implementing Perseus SurveySolutions/EFM (enterprise feedback management) to enhance training practices across the country.

Millward Brown Poland  has won a tender to conduct radio audience research in Poland. The contract involves interviewing 92,000 respondents annually, and the main study will be supported by a biannual diary panel. Proprietary software will be used to present data to radio stations, advertising agencies and media companies, and will enable clients to carry out reach and frequency analysis.

The Maine Office of Tourism has selected Davidson-Peterson Associates, a Kennebunk, Maine, research firm, to manage the state’s first Internet research program for its tourism site, www.visitmaine.com.

Beiersdorf, Inc. has renewed its contract with ACNielsen U.S., Schaumburg, Ill., and will retain ACNielsen as its preferred provider of syndicated sales information and consumer insights. Beiersdorf is a manufacturer of skin care and health care products, including brands such as Nivea, Eucerin, Aquaphor, Curad, Futoro and Basis.

New companies/new divisions/relocations/expansions

Manhattan-on-Rouge Communications, LLC  has opened for business, offering opinion and market research, public relations, and marketing communication services. Contact Rob Hilliard, principal, at P.O. Box 291, Clarkston, Mich., 48347-9932. Phone 248-320-1846. Web www.manhattan-on-rougecommunications.com.

Company earnings reports

At Rochester, N.Y.-based Harris Interactive, revenue for its fiscal first quarter 2005 was $40.7 million, up 22 percent from the same period a year ago. Internet revenue for the quarter was $24.2 million, up 35 percent over last year. For the fiscal first quarter, Internet revenue comprised 59 percent of all revenue and 73 percent of U.S. revenue. Organic revenue (excluding $2.6 million of WirthlinWorldwide and $1 million of Novatris revenue) was $37.1 million, up 11 percent versus $33.3 million in revenue for the same period last year. Organic Internet revenue (excluding $1 million from Novatris and $0.2 million from WirthlinWorldwide) was up 29 percent from the $17.9 million of Internet revenue reported a year ago. For the quarter, organic Internet revenue increased to 62 percent of the total organic revenue while traditional organic revenue contracted nine percentage points from a year ago.

Total operating income for the quarter rose 34 percent to $2.6 million, or 6.4 percent of revenue, compared to operating income of $1.9 million, or 5.8 percent of revenue reported in Q1 fiscal 2004. Net income for the quarter was $1.7 million, or $0.03 per share, up 35 percent from the $1.3 million, or $0.02 per share of net income reported in Q1 of fiscal 2004.

HI Europe revenue was $9.8 million, up 52 percent from the same period a year ago. European Internet revenue, now more than 25 percent of the total revenue, was $2.5 million (including $0.9 million from Novatris), up substantially from the $0.3 million of Internet revenue reported last year. Organic European revenue (excluding $1.0 million each from both WirthlinWorldwide and Novatris) was $7.7 million, up 20 percent versus $6.4 million in revenue for the same period last year.

For the third quarter 2004, Arbitron Inc., New York, reported revenue of $82.0 million, an increase of 8.8 percent over revenue of $75.3 million during the third quarter of 2003. Costs and expenses for the third quarter increased by 7.0 percent, from $44.1 million in 2003 to $47.1 million in 2004. Earnings before interest and taxes (EBIT) for the quarter were $33.7 million, compared with EBIT of $30.6 million during the comparable period last year.

Interest expense for the third quarter declined 36.7 percent, from $2.9 million in 2003 to $1.8 million in 2004, due to reductions in debt between the two periods.

Income tax expense was lower in the third quarter primarily because reserves for tax contingencies were reversed during the quarter due to guidance in a recent IRS notice. Also, the valuation allowance on deferred tax assets related to state net operating loss carryforwards was reduced due to higher actual and projected taxable income in the applicable states. The net benefit of these changes during the quarter was $4.2 million. Finally, the effective tax rate for 2004, exclusive of these discrete events, has been reduced from 39.0 percent to 38.5 percent to reflect a reduction in the expected state tax rate.

Net income for the quarter, which includes the $4.2 million impact of the tax adjustments, was $24.2 million, compared with $17.0 million for the third quarter of 2003 and net income per share for the third quarter 2004 increased to $0.77 (diluted), compared with $0.55 (diluted) during the comparable period last year.

In the third quarter 2004, Arbitron paid the final $25 million outstanding on its revolving credit facility and reduced its long-term debt to $50 million.

For the nine months ended September 30, 2004, revenue was $223.6 million, an increase of 7.5 percent over the same period last year. EBIT was $81.5 million, compared to $76.6 million in 2003. Net income for the nine months was $50.9 million or $1.62 per share (diluted), compared with $41.1 million or $1.35 per share (diluted) during the comparable period last year.

Greenfield Online, Inc., Wilton, Conn., reported net revenue for the third quarter ended September 30, 2004 of $12.0 million, a 70 percent increase compared to $7.0 million for the third quarter ended September 30, 2003. Revenue for the nine months ended September 30, 2004 was $30.9 million, a 76 percent increase compared to $17.6 million for the nine months ended September 30, 2003.
Gross profit for the third quarter ended September 30, 2004 was $9.5 million, or 79 percent of revenue, and increased 112 percent compared to $4.5 million, or 63 percent of revenue, in the same period a year ago. Gross profit for the nine months ended September 30, 2004 was $23.4 million, or 76 percent of revenue, and increased 103 percent compared to $11.5 million, or 66 percent of revenue in the same period a year ago.

Adjusted EBITDA, a non-GAAP financial measure, for the third quarter ended September 30, 2004 increased 176 percent to $3.0 million compared to $1.1 million in the same period a year ago. Adjusted EBITDA for the nine months ended September 30, 2004 increased 136 percent to $6.9 million compared to $2.9 million for the same period a year ago.

Operating income for the third quarter ended September 30, 2004 increased to $2.3 million from $480,000 in the same period a year ago. Operating income for the nine months ended September 30, 2004 increased to $4.7 million from $1.1 million for the same period a year ago.

Net income for the third quarter of 2004 increased to $1.2 million compared to $335,000 for the third quarter of 2003. Net income for the nine months ended September 30, 2004 increased to $3.3 million compared to $1.2 million in the same period a year ago. The third quarter of 2004 includes a non-recurring, non-operating write-off of approximately $1.0 million to related-party interest expense of a debt discount on Series C-2 Preferred Stock redeemed in connection with the company’s initial public offering.

Sales bookings in the third quarter, defined as new signed contracts for online survey work, reached $12.5 million, up 87 percent over the same period a year ago and up 3 percent from the second quarter. Bid volume, defined as the total value of online survey projects submitted for bid by clients, during the three months ended September 30, 2004 was $77 million, up 107 percent over the same period a year ago and up 16 percent from the second quarter. Fourth-quarter backlog, defined as signed contracts for online survey projects to be completed and delivered to clients during the three months ending December 31, 2004, is approximately $10 million as of November 3, 2004.