YouGov (LSE: YOU), the market research and data-as-a-service (DaaS) business, was founded by Stephan Shakespeare and Nadhim Zahawi just after the late-1990s internet bubble had burst. Its original aim was to bring political polling into the internet age.
Traditionally, market research and political polling relied on methods such as telephone polls and face-to-face street interviews. Notoriously, voters are reluctant to admit to voting Tory when questioned, because they feel embarrassed. Answering questions online would reveal their true preferences, it was thought.
Existing pollsters argued that YouGov's samples were skewed as they would naturally favour tech-savvy younger people, but YouGov made the best predictions for both the 2001 and 2005 general elections.
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For Shakespeare and Zahawi, the political polling was a loss leader for their far more lucrative business offering research into corporate brands. YouGov's polls were often quoted in the media, which raised awareness and was effectively free advertising.
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YouGov listed on the Aim junior market through a placing at 135p (implying a market capitalisation of £18 million) in 2005. The management then used the capital raised to launch BrandIndex, a daily, brand-tracking platform that was always on. BrandIndex now tracks consumers' perceptions of more than 27,000 brands across 56 markets worldwide, powered by a panel of more than 30 million registered members. Respondents are paid in points or cash for filling in the surveys.
The key insight was that the platform could collect valuable data and sell subscriptions to many clients: brands, marketing groups, agencies, management consultancies, even hedge funds looking for an edge on how consumers were switching loyalties. This proved phenomenally successful. In the decade to 2023, revenue quadrupled, while profits grew from less than £1 million to £45 million. The share price rose in value 25 times, creating tens of millions of capital gains for the co-founders.
Is YouGov under threat?
Problems started to emerge a couple of years ago, when marketers began to question the quality of the data. YouGov admitted that the rise of “survey farms”, where people in low-income countries were paid to click through surveys, fraudulently picking a random answer, has been a major challenge. More recently, these human survey farms have been replaced by “AI bot farms”, where the fraud has been automated. This has created a major headache for YouGov, as paying customers lost confidence in market research.
In response, YouGov focused on more rigorous identification and verification, but that has made the process of signing up to a panel more onerous, running the risk of discouraging people who don't want the hassle, leaving a higher percentage of bots in the pool. On the most recent results call, management talked about investing to improve the experience of panellists. Relatedly, some of YouGov's customers could be tempted to bypass BrandIndex and instead use AI to create data that is almost free and instantly available. A CEO planning a major acquisition is unlikely to rely on such synthetic data, but if AI produces results that are “good enough” most of the time, the threat to YouGov is clear.
A second problem emerged after management bought German research firm GfK's Consumer Panel Services business for €315 million in July 2023. Rather than asking what people think, the newly acquired business (now called Shopper) focuses on what people actually buy. Shopper's customers, the corporations that buy the data, tend to be in the fast-moving consumer goods (FMCG) and retail sectors, who are reluctant to spend on market research when interest rates rise and household finances come under pressure. Shopper has high fixed costs, paying tens of thousands of households rewards for recording their shopping behaviour. When the division's sales missed targets, those fixed costs meant a profit warning followed.
So the GfK business looks to have been dearly bought. YouGov paid around ten times EV/Ebitda, a key measure of value in acquisition deals. That's two and a half times YouGov's current EV/Ebitda of four times. Of the proceeds, £50 million were funded with a placing at £9.20 per share – the current price is £1.73. Management has acknowledged the poor performance, launching a strategic review that will look at both a possible disposal of Shopper or deeper integration into the core group. In the meantime, YouGov has committed to putting £6 million into Shopper as investment is required to sustain growth. That may well be the correct strategic choice, but it will result in a hit to margins at a time when the division's revenues have fallen 2% on an underlying basis.
So investors are seeing downward pressure on group earnings per share (EPS). Management has expressed confidence that the payback will be rapid and margins will rebound, with the first wave of its “value delivery plan” producing a forecast £2.5 million of profitability by the 2027 fiscal year. Later, the company will seek to exploit AI to drive a “step change” in margins. Over the last decade, operating margins averaged 12.5%, compared with 8% in 2025, according to ShareScope. Thus, even a return to the ten-year average would be a positive and a significant improvement, and drive a fundamental re-rating. That said, management teams always exude confidence during the investment phase of a turnaround situation. Management has said it expects improving margins, but has been more cautious about saying what it expects future revenue growth to be.
YouGov does seem to own unique assets, selling access to a massive “living” database of consumers' opinions. AI has the potential to automate and reduce the cost of gathering this data. But the potential of AI to improve performance is yet to show up in the numbers. Last month, the company reported underlying revenue up just 2% to £195 million and adjusted profits before tax were down 30% to £17 million. The board has decided to scrap the dividend once the company has refinanced its £160 million net debt and aims to launch a buyback instead. That's certainly a bold decision with net debt at 2.1 times Ebitda and EPS forecasts declining.
YouGov's problems pre-date the rise of AI, though. There was a nasty profit warning when the shares fell 40% in June 2024, when the company warned that revenue growth was below expectations. Management blamed increased price competition and pressure on clients' budgets. Unfortunately, that warning came three months after management had reassured investors that the sales pipeline was healthy, with more than 75% of revenue committed.
Co-founder Stephan Shakespeare stepped back into the CEO role in early 2025 to turn things around. Yet the share price has continued to decline and the board has begun looking for a new boss. Shakespeare is expected to remain in the role until the firm is “well positioned for its next stage of growth”. He currently owns less than 2% of the group, and his planned departure even as the turnaround fails to gain momentum is unlikely to be seen as a vote of confidence. Moreover, his personal stake is down from 8% in November 2020, as he sold most of his shares at a price between 900p and 1,150p – receiving more than £50 million in value before the stock's significant decline in 2024. More recently, he has been buying, in August and October 2025, but only 126,000 shares, worth significantly less than half a million pounds. Currently, the shares are trading on a price-earnings (p/e) ratio of five times forecast earnings, indicating scepticism about the turnaround plan. The shares are also trading below their 50-day moving average.
How YouGov made a classic mistake
YouGov looks like a classic case of a successful business running into problems after using debt to fund a poor acquisition. Investors reacted badly to the move to scrap the £10 million dividend and replace it with a share buyback, with the shares down another 10% following the first-half results, which came out at the end of March. If management can turn things around, then investors will be richly rewarded – but if performance continues to struggle, then that buyback increases balance-sheet risk. Management describes YouGov's balance sheet as “solid”, but the reality is that £418 million, or three-quarters of total assets, are represented by goodwill and intangible assets. Deducting that sum from shareholders' equity reveals that tangible net assets are a negative £232 million. As a data business, YouGov wouldn't be expected to have a balance sheet full of property, plant or equipment, but the lack of backing from tangible assets wouldn't matter if revenues were growing strongly and the most recent acquisition was deemed a success. That's not currently the case.
The shares peaked at £16 at the end of 2021 and the share count has only increased 5% since then. The risk/reward ratio is well understood by the market and I don't own the shares, but I am keeping a close eye on the stock. In these situations, I prefer not to try to call the share-price bottom, but to wait for evidence that the firm can return to its record of revenue growth. An investor might miss out on the first 10%-20% of the bounce, but is also less likely to “catch a falling knife”.
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