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Online research firm aims to break Japanese mold with global market quest

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Staff Writer

Market analysts say Japanese internet firms rarely succeed overseas, and there haven’t been many who have proven them wrong so far.

But Macromill Inc., Japan’s biggest online market researcher by market share, with 10 million consumer monitors around the world, is determined to change that notion.

“We will break the conception that Japanese companies can’t become global. That’s one of our goals,” Scott Ernst, the chief executive of Macromill, said in an interview with The Japan Times last month.

Founded in 2000, Macromill is known for providing quick and reasonable online research through its own automated system, as opposed to the extensive and detailed research services offered by its bigger rivals.

Tokyo-based Macromill went public in 2004, using the cash to expand domestically. But growth took off after it was bought by a U.S. investment fund in 2014 that shifted its focus to the global market and took it private.

Macromill, which relisted on the Tokyo Stock Exchange earlier this year, has grown its global presence thanks to steady business and bold mergers and acquistions.

Ernst is optimistic about Macromill’s goal of global conquest, saying the need for digital research will only accelerate in a world where consumer behavior is becoming more diverse and complex as use of the internet and social media grows.

One key to winning will be to widen the platform for global research through mergers and acquisitions and apply its strengths — speed and cost-effectiveness — to that platform, said Ernst, who has been leading the company since October 2015.

Global outlook

Macromill’s persistence in the worldwide market is obvious to those viewing its website and earnings reports. The logos proclaim that it aims to become the “first truly global digital research company.”

This motivation derives from the way consumer behavior is changing and the business opportunities those changes offer, Ernst said.

“Clients are increasingly dissatisfied with traditional research providers whose systems are too slow, too expensive to deliver against the value of proposition in an increasingly digital world,” he said.

These days, the internet has made it easy for people to access a variety of data and purchase products from around the world with just a click or a tap.

“But the paradox is that it’s only made life harder for our clients. It’s increasingly complicated for our clients to get a good sense of what consumers care about and where consumers are living their lives,” Ernst explained.

His clients are thus desperate to find a “trusted adviser” who can help them market their products, he said.

Ernst has a digital marketing background and was formerly head of market research firm Millward Brown Digital, which is part of London-based Kantar Group, the world’s No. 2 research firm.

He said he chose to lead Macromill because he saw a chance to create a global enterprise.

“When we think about the traditional research providers in the space, it’s dominated by companies with a strong basis in the U.S., Europe,” he said. But Ernst saw the chance to create the next great research company coming out of Asia.

Blazing growth

While there may be an opportunity for digital research firms to profit in a global market, the question is whether Macromill can do it.

Ernst said Macromill’s earnings performance in recent years shows the company is on the right track.

In the past four years, the company has more than doubled its sales to ¥35.5 billion in fiscal 2016 from ¥17.1 billion in 2012, and seen operating profit leap 77 percent to ¥6.8 billion from ¥3.8 billion in the same period. Overseas revenue now accounts for 28 percent of overall revenue, up from 10 percent in fiscal 2013.

The dramatic growth is attributed mainly to M&A and partnership moves, including the purchase of Dutch research firm MetrixLab for ¥17 billion.

Macromill returned to the TSE in March after going private in 2014 following its buyout by U.S. investment fund Bain Capital Private Equity LP for ¥51.3 billion.

Ernst said the time is ripe for Macromill to go public again, as it is looking to increase its global presence.

“We believe being a public company allows us to maximize the market opportunity . . . “It also allows us to maximize market value” because it would bring in more talent and investor funds to the firm, he said.

He added that Macromill aims to become the largest market research company by revenue in Japan and enter the global top 10. Right now it is the second-biggest in Japan and 12th worldwide.

The market is apparently receptive. Macromill’s shares are nearly 51 percent higher since the relisting and closed at ¥2,551 as of Friday.

To grow the firm further in the global market, while continuing to focus on effective research services, Ernst said the company will actively seek out more M&A opportunities.

“We have a strong pipeline of M&A opportunity” both in emerging and mature markets, he said.

In late September, Macromill announced it will buy U.S. research firm Acturus Inc. and take a minority stake in W&S Holdings Co., a Tokyo-based researcher that also operates in Southeast Asia.

But an M&A strategy does not come without financial risk, and Macromill is no exception.

As of the end of June, Macromill had goodwill value assets estimated at ¥46 billion that were generated through complex M&A deals.

Goodwill is the difference between the purchase price of a firm and its net worth at current market value. Although Marcomill’s business is currently doing well, it might have to post huge impairment losses if it goes through a downturn.

The firm said its group firms have been doing well and its auditor has not seen a risk from impairment losses in the past eight quarters.

Eye on innovation

In the coming years, Macromill will be focusing on interpreting its data to provide useful insights amid rising client demand, Ernst said.

Another competitive edge, the CEO said, is the company’s size.

Macromill isn’t as big as research giants Nielsen and Kantar yet but is “big enough to be globally relevant yet agile enough to be adaptive to clients,” he said.

Still, one thing the firm needs to work harder on is facilitating the adoption of new technologies, such as AI.

“AI is absolutely an opportunity as well as a threat,” he said.

He said AI can be incorporated with automated research systems to improve speed and efficiency, which are the core elements of Macromill’s service.

However, innovative firms always emerge with new technologies. While Ernst sees his company as a challenger and disrupter in the industry, there will be competitors “looking to disrupt us.”

“The speed of innovation is accelerating, so we need to continue to fund R&D to make sure that we maintain and extend our competitive advantage. That’s one of the things that we need to do better,” Ernst said.

This section runs exclusive stories on top business leaders and executives interviewed by The Japan Times.

Key events in Ernst’s life

1982 Graduates from the University of Pennsylvania’s Wharton School of Business with a bachelor’s degree in economics, marketing and entrepreneurial management.

1999 Becomes vice president of Personify Inc.

2002 Becomes president of Compete Inc.

2009 Becomes a member of board of advisers at SocialSphere Inc.

2010 Becomes a member of board of advisers at Performable Inc.

2010 Becomes a director at Massachusetts Innovation and Technology Exchange.

2012 Becomes director at mySupermarket Ltd.

2013 Becomes president of Millward Brown Digital.

2014 Bain Capital buys Macromill Inc.

2015 Becomes CEO of Macromill.

2017 Macromill relists on the Tokyo Stock Exchange.


Advice to foreign biz leaders: ‘Dive full in’

Macromill was founded by Tetsuya Sugimoto in 2000 and has grown into a major online research firm. Scott Ernst became CEO of Macromill in October 2015, giving him the chance to lead a Japanese company for the first time. The Japan Times asked Ernst to describe his experience being the foreign leader of a Japanese business.

Has it been hard getting Macromill to adopt your management philosophy?

My approach has been to bring a client-orientation and focus on vision to Macromill. It’s not been terribly different to build and grow a Japanese company than my experience in the U.S. I generally have a strong opinion about just about everything but not an exclusive right to the good ideas.

What that means is that I need to be patient and let our team present their points of view before I offer my opinion.

What I really tried to do, in the first two years of my career at Macromill, is to embrace the uniqueness of Japanese culture but also maintain my style and my approach because it’s important for me to be genuine. So far so good, I think.

Do you have any advice for other foreign execs who might find themselves in a position like yours?

My advice to new CEOs coming into a Japanese company would be dive full in, embrace all of the elements of the culture that are really unique and special and recognize that we are all similar at the base level.

We are motivated by quality of life, a successful career or making an impact on the market. My observation, as a person who’s been experiencing both cultures, is that it’s incredibly exhilarating, challenging and absolutely worthwhile.

What are some of the unique things about Japanese companies and their culture?

What I love about Japanese business culture is the emphasis on long-term relationships and the sense of loyalty built on trusted partnerships.

I don’t think Japanese executives truly appreciate how special this is and how envious Western leaders are of the strength of the personal connections that are created here in Japan.