Expert networks refer to a type of business that connects companies with expert resources or

subject-matter expert A subject-matter expert (SME) is a person who has accumulated great knowledge in a particular field or topic and this level of knowledge is demonstrated by the person's degree, licensure, and/or through years of professional experience with the s ...

s, such as academics, C-levels, founders, and high-level officials to provide valuable information, data, or assistance.

Background

The phrase "expert network" was originally coined by Mark O'Connor of

Yankee Group Yankee Group was an independent technology research and consulting firm, founded in 1970 by Howard Anderson. The firm "was one of the analyst industry’s most prestigious boutiques through the dot.com boom, with 70 analysts on the payroll in 2006 ...

in presentations introducing his August 1997 Management Strategies report, ''Knowledge Management: People and the Process''. The first known published appearance of the phrase in this context is in the April 1999 Yankee Group white paper ''A Knowledge Perspective: The Knowledge Management Product and Service Domain.'' In the December 1999 publication, "Knowledge Evolution: Tools of the Trade," clients were advised to utilize Expert Networks to "Understand who the experts are throughout the organization (including the extended organization), and more appropriately employ that expertise within a broader range of business contexts for better decision making." The first expert networks used internal databases and phone books, just like standard recruitment firms. With the growth of

LinkedIn LinkedIn () is an American business and employment-oriented online service that operates via websites and mobile apps. Launched on May 5, 2003, the platform is primarily used for professional networking and career development, and allows job s ...

and other online sources, expert networks have become increasingly reliant on custom-sourcing experts online. Since the early 2000s, a rather large industry has sprung up facilitating "expert" connections, or providing connections to industry or subject matter experts with whom a single individual or organization has no pre-existing relationship with. GLG, one of the oldest and largest expert networks and was founded in 1998.

Internal expert networks

Some consulting and investment companies have built up their own network of experts whom they can utilize on an as-needed basis.

Primary research platforms

Platforms that provide not only expert interactions but also surveys which can be launched from a central interface. These SaaS platforms typically add additional features to the primary research such as messaging, transcription and other advanced AI.

Business models

There are three aspects of business models for expert networks: (1) revenue models, (2) sourcing models, and (3) operating models. Expert networks may apply two different revenue models: subscription-based and transaction-based.

Revenue models

Transaction-based

The most common revenue model is "pay-per-use" where an expert networks invoices the client per hour of expert consultation, times the "credit" price of the expert. The expert network then pays a part of this to the expert.

Subscription-based

The traditional revenue model was to offer subscriptions to clients. This model still represents a large share of the industry, notably for GLG. The client pays for a predefined number of "credits" at the start of the contract year, which are run down as expert consultations are made. The network keeps the difference between the subscription fees collected and the hourly rates paid out.

Sourcing models

When sourcing experts to connect with clients, an expert network may use either an Internal database, or custom recruiting (or a combination). Whereas expert networks traditionally relied on internal databases of experts, business models have tilted towards 'custom recruiting' of new experts for each particular case. This was enabled by the rapid growth of LinkedIn in the years following the global financial crisis of 2008.

Operating models

Expert networks structure internal operations differently, along models that transcend their revenue and sourcing models. These have been classified in five categories, each solving the task of supplying relevant experts to customers: * Standard expert networks * DIY marketplaces * Expert Q&A companies * Crowd-funded expert calls

Commercial expert networks

A primary example of expert networks are investor networks that are in the business of

primary research Research is "creative and systematic work undertaken to increase the stock of knowledge". It involves the collection, organization and analysis of evidence to increase understanding of a topic, characterized by a particular attentiveness t ...

. These firms connect

buy side Buy-side is a term used in investment firms to refer to advising institutions concerned with buying investment services. Private equity funds, mutual funds, life insurance companies, unit trusts, hedge funds, and pension funds are the most commo ...

investors, consultants, and business decision-makers with industry experts. Consultations between expert network clients and experts may be in the form of "face-to-face meetings, phone calls, teleconferences, video conferences, r

email Electronic mail (email or e-mail) is a method of exchanging messages ("mail") between people using electronic devices. Email was thus conceived as the electronic ( digital) version of, or counterpart to, mail, at a time when "mail" mean ...

exchanges." According to a 2009 report by Integrity Research, there are at least 38 investor expert network providers worldwide. Although most expert networks operate across verticals and geographies, recent trends point towards specialized expert networks serving a particular geography or vertical. In recent years, as sell-side research has become increasingly "scarce and less influential,"

institutional investors An institutional investor is an entity which pools money to purchase securities, real property, and other investment assets or originate loans. Institutional investors include commercial banks, central banks, credit unions, government-linked co ...

have turned to expert networks to gain "new insights and a competitive edge" within a compliant framework. According to a 2011 report published by TABB Group, 81% of investment professionals believe that "talking to experts" is a legitimate, value-adding part of the investment due diligence process. Investor expert networks became more widely used after the implementation of

Regulation Fair Disclosure Regulation FD (Fair Disclosure),
Retrieved January 25, 2011. ordinarily referred to as Regula ...

in 2000, which made it harder for

to get

market moving information Market moving information is a term used in stock market investing, defined as information that would cause any reasonable investor to make a buy or sell decision. It is also sometimes referred to as material information. When a public company ...

directly from publicly traded companies.

Hedge funds A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as ...

were early adopters, but the use of expert networks quickly spread to all types of

, including

mutual funds A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV ...

pension funds A pension fund, also known as a superannuation fund in some countries, is any plan, fund, or scheme which provides retirement income. Pension funds typically have large amounts of money to invest and are the major investors in listed and priva ...

bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Becau ...

s, and

private equity firms A private equity firm is an investment management company that provides financial backing and makes investments in the private equity of startup or operating companies through a variety of loosely affiliated investment strategies including lev ...

. The investment community continues to be the largest consumer of expert network services. In 2020, expert network companies generated an estimated $1.5 billion in revenues, according to a report by Integrity Research.

Investor expert network legal compliance issues

One of the biggest challenges faced by expert network operators is legal compliance with regard to the information passed from information provider to researcher. Several expert networks have made headlines in relation to improper information disclosure and

insider trading Insider trading is the trading of a public company's stock or other securities (such as bonds or stock options) based on material, nonpublic information about the company. In various countries, some kinds of trading based on insider informati ...

allegations. Networks have taken different approaches to the compliance puzzle. Some spend millions reaching out to publicly traded companies and others don't allow employees of publicly traded companies to consult at all.

Investor expert network controversy

The Fall 2009 indictment of individuals associated with hedge fund FrontPoint illustrated the compliance challenges of speaking with sources directly. The individuals had initiated access with a Dr. Yves Benhamou, board member of an ongoing clinical trial. Though these began as formal engagements through Guidepoint (an Expert Network), their exchanges with Dr. Benhamou would become less formal and more specific. They stopped going through the network, opting to contact one another directly, and they allegedly culminated in the portfolio managers coaxing inside information from Dr. Benhamou and Dr. Benhamou obliging. The circumstances illustrate one of the core challenges of primary research in general and a central plank of the expert network platform. The investigations resulted in allegations against Primary Global Research LLC. While the United States expert networks were weathering the storm of the insider trading investigations, European expert networks have not been nearly as affected and have been seen as alternatives, experiencing growth and investment.