Why Investing In the Language Industry Is a Safe Bet

20 July 2021

The Investment community is focused on the language services industry for good reason — and you should be too. While any investment has both opportunities and risks, financial returns in the language space have delivered consistent growth, profitability and cash year over year. Pegged at USD 55 billion in overall revenue in 2020, the space is expected to grow at a compound annual growth rate of six percent from 2020 to 2028. 

Here at Nimdzi, we provide support services to investors, language service providers and enterprise customers. Specifically for the investment community, we provide industry insights and reviews, opportunity analyses, SWOT analyses, technology assessments and strategic planning. We provide these services in support and partnership with our mergers and acquisitions activities. No one knows the language industry, the players and customers in it better than Nimdzi.

No investment is entirely risk-free but investing in the language industry tends to be a safe bet — and here’s why:

  1. The language industry touches all other industries. Language and communication is at the heart of everything that we humans do. Especially as globalization increases, any form of communication between people from different language backgrounds — whether in written, spoken or signed form — presents a need for language services. In this way, the language industry is not tied to a specific sector but is a supporting industry that is the secret driving force behind successful globalization and international relations in all other industries.
  1. The language industry is extremely resilient. This is because by nature, the language industry does not create anything from scratch. It is a transformational industry. Whether a company ships one thousand or one hundred thousand items from France to Brazil, the translation requirement remains the same. Traditional retail stores close due to lockdowns? E-commerce is booming and suddenly everyone needs to localize their website. International travel comes to a halt? Remote interpreting takes off to facilitate virtual multilingual meetings. In a nutshell — when times are good, contracts need to be translated; when times are bad, lawsuits need to be translated. One way or another, there is always a need for language services. 
  1. Stable margins. Generally speaking, gross margins in the language industry tend to be fairly stable. A well-run, established language service provider (LSP) will have gross margins of around 40-50% before EBITDA for translation and 30-40% before EBITDA for interpreting services. Why? Because an LSP adds value. The work of an LSP reaches far beyond the pure provision of language services. In fact, at Nimdzi, we like to say that LSPs don’t sell translations, they sell project management — because that is exactly where the LSP adds value. Handling the entire process from start to finish. From finding the right linguists to providing culturally specific insights, an LSP is a strategic partner that helps its clients be successful in the global market.  
  1. It’s all about the end-user. We live in an end-user/consumer driven world. If a brand wants to be successful globally, it needs to appeal to the local end-user. As Nimdzi’s Project Underwear study into buying behavior shows, nine out of 10 global users will ignore a product if it’s not in their native language. At the very heart of this, right there in the middle, sits the LSP, which facilitates the sale. 
  1. There is room for growth. Our estimate is that the global language services industry reached USD 55 billion in 2020 and the potential for language services is far from saturated. Especially as the use of mobile phones becomes more widespread and democratizes access to the internet, a whole new category of potential consumers is unlocked. Combined with the implementation of 5G that promises to make content available exponentially faster and at scale, we can expect that more content will be created, which in turn will trigger a higher demand for localization in various industries.
These are only five reasons why investing in the language industry is a smart business decision. The list goes on and includes (but is not limited to) low barriers to entry, not being capital intensive, benefiting from technology, and demand growing faster than downward pricing pressures. To find out more #TalkToNimdzi.

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