Why free research won’t kill high-value analyst firms

Most vendors think that analyst influence is highly concentrated. Our annual surveys of vendor executives typically suggest that they feel that just two analyst firms (Gartner and Forrester) hold around 60% of all analyst influence on buyers worldwide: the number rises to over 90% when we add in AMR Research, Burton Group, Current Analysis, IDC, iSuppli, Ovum and Yankee.However, our surveys of hundreds of CIOs (indeed, close to 1000) show that analyst influence is actually more widely distributed. They are big differences across country and industry but, even so, many analyst firms are being used and many CIOs have their ‘pet’ favourite advisors.

Furthermore, the research showed that there was a big difference between what we call the lower midmarket (enterprises with between 1000 and 3000 people) and large enterprises (with over 5,000 employees). Lower mid-market firms are much more likely to use free research, that they find online, and they are less likely to subscribe to high-cost, high-value analyst firms. However, those firms that reply on free research are also much less positive about analysts. They find free research much less useful than larger firms find their paid research to be. So that means that even though smaller firms might even be reading more research, and drawing on more firms, that free research is found to be less useful, and therefore is less influential.

That means that there’s no strong or reliable correlation between being read and being influential. This was true in the 1990s, when Aberdeen’s readership outstripped META’s. It’s true today: the traffic going to a website is driven as much by the principles of search engine optimisation as it is by anything else.

When HFN charted the traffic hitting the web sites of some firms, we though that was pretty smart. We have been collecting the same data outselves for three or four years but we pour the numbers into databases. We never charted the data. It showed that smaller firms that place a lot of emphasis on getting web traffic do that quite successfully. Gartner and Forrester, like Lighthouse, focus on firms with revenues over $1 bn. The sales process is different there from the lower mid-market. Those enterprises use the web to look for analysts, and smaller analysts can use the net to level the playing field and get read by those businesses. Often, their research will fit the spot wonderfully. Sometimes it will not, partly because search engines are only as good as the parameters give by the user.

Our regression analysis does not support the thesis that there is a linear relationship between a firm’s web traffic and influence on buyers. What web traffic does show is the effort that firms put into the net, since that drives the rate at which visitors arrive. It is also suggestive of the awareness that firms have in the type of mid-markets firms that use the net. However, as the saying goes, you can lead a horse to water but you cannot make him drink.

The patterns of analyst influence are very complex. Our jobs would be much simple if web traffic was a reliable index of comparative influence. Sadly, it is not.