Monthly Reflection August 2023: Too Big to Fail?
Blog | August 25, 2023
Many Researchers think the Online Sample world may soon find out.
In the aftermath of 5 years of heavy consolidation among sample vendors, what happens if a giant were to go bankrupt? Is that even possible? Turns out many researchers think it is.
In this Month’s reflection blog, I’ll dig into the circumstances driving this discussion and then compare it to recent industry case studies for clues on how something like could play out.
CEO Road Show
Since we launched the NavigatOR last month, I’ve been traveling around the US chatting with research leaders about their businesses. I expected to focus on operational challenges we can help support, but it seemed to go deep fast.
A huge topic of concern was Online Sample in general. Here’s a sample of comments I heard (I’ll paraphrase from memory):
- “Should we file a class action lawsuit against sample companies (for fraud)?”
- “I really hate them all. All of them are liars and never do what they promise.”
- “I’m not sure the programmatic sample business model works anymore.”
I was taken aback by the intensity of it all. It created a worrisome scenario. ‘What happens if my projects with Vendor X start consistently failing?’ To me, it’s not unreasonable to be asking these questions.
Here’s a summary of the current situation as I see it:
- Massive Consolidation has occurred in sample the last few years, eliminating many competitors.
- Those mergers were funded by debt, backed by some remarkable business valuations. By my count, at least 3 sample companies had $1bn+ valuations in 2021. But not anymore.
- As we’ve learned in the early 2000s, mergers among sample companies usually reduce feasibility, lead to awkward account manager transitions, and force technology integrations that carry methodology changes. This latest round had deep tech implications that aren’t really understood (or explained).
- In 2023, we all feel the effects of inflation, high interest rates, and a shaky economy. These things have severely hurt business valuations, particularly in tech.
- Regional bank failures forced all banks to be extra cautious about lending across the board.
- Yesterday’s ‘largesse’ is today’s massive problem for the Giants that emerged from all the M&A.
So what happens to a company with $1-2 billion dollars in debt that matures in 2023? In short, it’s a huge problem that has the highest of stakes. But it’s not localized to sample. It’s hitting every industry and the intersection of Ad Tech and Insights gives us an interesting case study.
Industry Case Study
Early in 2023, a company called Big Village Holdings filed for bankruptcy. Big Village was many things, and its diversity offers a unique comparison for the sample situation. Let’s evaluate two main components:
- EMX programmatic ad tech
- Big Village Insights (formerly the Engine Group)
This story was a fast one. In July last year, the entity announced a rebrand to “Big Village” and the integration of EMX and the Engine Group businesses. We know that this was financed by utilizing debt. It was a great idea- a true proposed integration of marketing, programmatic advertising and insights into one bundle for corporations. Eight months later, the business climate changed and the debt became unserviceable. What came next?
They filed for Chapter 11. The public disclosures told a rapid story of a debt-driven cash crunch. The coping mechanisms included delayed vendor payments that piled up incredibly quickly. Eight months after it came together, Big Village was in Chapter 11 was over.
What happened next?
What came next was a bit of an indicator of what could happen if a major sample firm with a similar M&A and debt journey failed. The business started being evaluated for its pieces since the whole could not sustain the debt. The Big Village Insights and Agency business units were split and sold through an auction process to Bright Mountain Media for a fraction of the presumed value just a year ago. The proceeds then go to service the legacy debt. Big Village Insights is a great team with a powerful history. So, kudos to Matt Drinkwater and the Bright Mountain team on an incredible move.
How should Researchers prepare?
Essentially, I continue to advocate that diversification is a necessity. Our industry has never done well with de facto monopolies. This summer lull offers a rare gift of time to strategically shift how you operate, how you work with vendors, and how trackers and other projects are managed. It may feel daunting at first. But know that it will protect you when a rainy day hits someone else’s office. In 2023, there’s been a lot of rain.
You don’t have to do this alone!
If you want some help assessing your situation and reorganizing under the realities of the moment, we’d be happy to have a chat. Or even better, hit me up at tmccarron@opinionroute.com if you want to join my Road Show this late summer/early fall.