The Top 25 Translation Companies and Some Really Big Revenue Numbers

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Global Watchtower

Common Sense Advisory Blogs

Posted by Renato S. Beninatto, Donald A. DePalma on June 20, 2008 in the following blogs: Business Globalization, Best Practices, Translation and Localization, Market Data
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Last month we posted Common Sense Advisory's annual ranking of the top translation companies. This year, we made it 25% better by ranking the Top 25 rather than just the Top 20. As soon as the report hit our website, we began receiving comments and questions -- as we have every year since we first published the list in 2005. Since that first list, we have trimmed more and more of the background on the numbers, the methodology, and our assumptions. The absence of such information causes some of these questions to be asked, so we decided to document our methodology in a bit more detail. Let's review the back story on our Top 20/25 list.

Market sizing. We have monitored the language market for the last 6 years. We first documented our core assumptions about the market in our January 2003 report, "Where the Translation Money Is." What we measure is what we call the "outsourceable translation budgets" -- that is, the money that companies (aka end clients) spend on translation. When we look at what companies spend, we make adjustments to account for multi-language vendors who contract out to single-language suppliers, who rely on freelancers. If money changes hands two or even three times, we do our best to count it only once.

Previous lists. Take a look at our previous lists -- 2005, 2006, and 2007. These reports list the Top 20 companies from the preceding year. For example, the 2005 document enumerates the top players from 2004. They also include more details on our market sizing methodology. And for some discussion about an earlier list, see "Just How Big Is the Translation Industry?"

Each year, when we sit down to start this exercise, we review a range of datapoints and take into account various considerations. For example:

The feds. We know that the European nion spends €1 billion in language services, the Canadian government spends some CA$300 million, and the U.S. government spends over US$2 billion. That government spending alone accounts for US$5 billion dollars in market size. Not all that work is done by LSPs.

The workers. We estimate that there about 700,000 people on the planet would call themselves "professional translators." There are many more "accidental translators" -- that is, people pressed into service when the need arises.

The data. We review statistics from multiple sources -- Hoovers, U.S. Bureau of Labor Statistics, to name just a couple -- on the number of private companies in the U.S., Europe, and Japan. Data on book publishing, such as numbers of titles translated in Europe, the U.S., Latin America, and Japan; for example, more books are translated into Spanish every year than have been translated into Arabic in the last 100 years, according to a report from UNESCO. Then there's data on Foreign Trade from the OECD, a very good indicator of demand for translation. We allocate different weights to all this data and test them against each other.

The percentages. Our own past research that gives us data on how much companies spend on translation as a percentage of their international revenues. Again, take a look at "Where the Translation Money Is" and "Beggars at the Globalization Banquet." We use estimates on the number of translation companies worldwide and their revenues. In our database alone, we have over 5,000 translation companies, and it seems like every other day we find out about a 10 million dollar company that we had never heard of.

The value of the dollar. And this year, specifically, the market was inflated by the devaluation of the U.S. dollar, the currency in which we measure the market.

Then there is element of growth. How do you estimate it? How do you project it? We interact regularly with at least 100 translation companies -- and less regularly with a universe of about 500 companies -- worldwide. We talk to company owners who want to sell their companies and with people that buy them. We review the financial statements of public companies and private companies (under non-disclosure agreements). Where can you find the financial statements of LSPs in China, Norway, Japan, the United States, and the United Kingdom? On our desk, since we interact with them on a daily basis. After doing this for so many consecutive years, we have a very clear picture of industry growth by company size, market segment, and geography.

We are pretty confident that our numbers are as close to actual spending as you can get, but we are also realists. So much of this revenue is earned by privately-held companies and spent by buyers who don't break out translation expenditures, so we're always ready to be proven wrong.

As the years progress and the industry matures, the accuracy and availability of market data will improve. But we don't expect to have reports on the number of words translated worldwide and resulting revenue in the same way you can find out how many laptops were sold in Korea last month, by which company, and through which outlets. We aspire to such granularity, but the market for language services -- as with nearly all service markets -- remains less transparent than industries that ship physical goods. As technology changes the way language services are delivered, its relatively opaque nature may change. Until then, we continue to provide estimates using a multitude of data sources, research approaches, analytical methods, and of course, our collective experience at taking the pulse of the industry – with all 10 fingers of each of our analysts.

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