Once the calendar changes each year, we at Leinhäuser begin talking once again about trends in our business. Three themes continually come up in these discussions. Each of them is hardly new. But we think that they will become increasingly important and play a key role in our business this year.
The trend of increasingly complicated tasks is anything but new. But we think it is starting to really pick up speed. At first glance, it may seem to be an unwelcome development. But we consider it to be a very positive change – if not a necessity for many providers of language services seeking to justify their existence. It involves the tighter and tighter link to customer processes that is required in order to prevent a service provider from becoming something like an interchangeable part. In the past, providers of language services were entrusted with a small portion of the internationalization process chain. Today, they are being handed increasingly larger and more complex jobs to do. This will ultimately mean that the demands being placed on an individual company to provide holistic services to customers will continue to climb. This development continuously poses new challenges to the industry. Here a few examples of what we are talking about:
- Google, the company that some companies view as the devil incarnate for the machine translation platform Google Translate it has created, has actually begun to play into the hands of language service providers: It used to be possible to apply a few magic tricks and gain an edge in Google’s search results. That all changed with the Panda update in 2011. As a result, websites with high-quality content have gained the inside track. By contrast, the technical sleight of hand (which is goes by the name of black hat SEO) has been sidetracked by Google. If you want to stand out from the crowd in today’s online world, you’ll have to offer relevant content – and you will probably have to do it in several languages to boot. In many cases, customers will order SEO optimization as well when they internationalize their websites. This change means one thing for language service providers: completely new business opportunities. And there is no secret about the reasons for this. Your typical SEO agency – that is, an online company without any linguistic skills – simply cannot handle the multilingual requirement. Sure, a SEO agency can use WDF*IDF analysis to determine which terms in a text have to be used more frequently. But it will need a native speaker to take on the delicate task of honing the texts and writing them in a manner that reflects the brand itself. This represents a paradigm shift that will pay off for language service providers.
- Our customers realized long ago that YouTube could impact the ranking of their content. YouTube is the world’s second-leading search engine, following Google. That’s why around 300 hours of video material are uploaded to YouTube each minute. But localizing audio/video content is a complex process. You need a few tools and skills to translate multimedia content from one language to another. Here, too, a shift in contract volume to complex projects is occurring.
- This is also the case for transcreation. Some language service providers still think that transcreation is just another word for “creative translations.” But it is simply much more than that and is a very difficult job to do!
Improved outside impact
In 2017, translation companies will market themselves in an increasingly professional manner. In a fragmented market like ours, a company simply has to stand out from the crowd and extol its skills. The design and user experience of many websites are much better today than they were just a few years ago. Most companies have also ventured into the world of social media. All of these changes require time and new resources. But they also create a presence on the Web and, thus, business potential. Not all companies have the necessary time and resources (not to mention know-how). In particular, small companies are having a tough time. This brings us to the next trend of the coming year:
Accelerated market consolidation
In December 2016 alone, no fewer than four major takeovers and mergers were announced. At the beginning of the month, the Berlin-based service providers think global GmbH and Milengo Ltd. became one.
A day later, the United Language Group, a company that sent shockwaves through the market by acquiring Merrill Brink in April 2016, announced that it had acquired Language Select, a provider of telephone interpretation services.
The next announcement came in mid-December when the Belgian company Xplanation took over the Munich-based service provider Matrix. Another major merger.
But the biggest deal of them all was the acquisition of the listed company Lionbridge Technologies Inc. by H.I.G. Capital. The transaction volume of this acquisition alone was $320 million. H.I.G. Capital is an investment company that has about $21 billion under management.
We think that we will have to get used to such announcements and, above all, the frequency of them. In light of its total size, the translation business is much more fragmented than most other global industries. It has tremendous economies-of-scale potential. Other service sectors (marketing and PR) blazed this path decades ago.
One thing about these deals has really caught our eye: the increased quality of the companies that appear on the buyers side. We are increasingly seeing companies that come calling with sacks full of private equity – that is, we are talking about professional investors who apparently now view our business as an interesting playground. This is what H.I.G. Capital is all about. The same is true for the financing of the United Language Group. A deep-pocketed parent company, the Northern Pacific Group, is working in the background here. This is creating a completely new type of momentum and a completely new type of transactions (see Lionbridge).
Put simply: 2017 will be exciting!
About Udo Leinhäuser
Udo Leinhäuser has a degree in translation and works as an online marketing and search engine optimization expert for Leinhäuser Language Services. He was a managing partner of the translation company until the end of 2012 and since then it has been managed by Heike Leinhäuser, the other acting partner. Udo Leinhäuser currently works as an independent consultant in the translation industry for various customers. In addition, he is a part-time author and editor of guide books for private pilots. E-mail address: email@example.com.