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2017 IPO Prospects: Profitable Zeta Global Waiting For The Stars to Align

Posted on Friday, May 26th 2017

A MarketsandMarkets report estimates the global marketing analytics software market to grow from $1.2 billion in 2014 to $2.1 billion by the year 2019. That translates to an annualized growth rate of nearly 12%. Serial entrepreneur David Steinberg’s latest initiative Zeta Interactive is one rapidly growing member in this space. The company appears to be getting ready to go public.

Zeta Global’s Financials

New York-based Zeta Interactive was founded in 2007 by David Steinberg, John Sculley, and Bill Landman based on the realization that the marketing world was shifting from being focused on being creative and establishing relationships to one that was more focused on analytics and data understanding. The founders wanted to set up a company that could cater to this emerging marketing ecosystem and help organizations run efficient customer acquisition and CRM programs by leveraging Big Data over the Internet. Zeta Global was initially called XL Marketing, before it renamed itself as Zeta Interactive. Last year, it renamed, once again, as Zeta Global.

Zeta offers three key products – ZetaCRM: a comprehensive, multichannel marketing solution that integrates and analyzes data to improve return on marketing investment; ZetaZx: an acquisition engine that leverages proprietary people-based data to help brands engage or acquire new customers; and ZetaActions: a results-driven customer acquisition engine that leverages patented technology to drive scalable, repeatable demand generation for premium brands. ZetaCRM accounts for nearly 80% of its revenues and the remaining portion comes from the other offerings. ZetaActions is a performance-based offering and the company gets paid on being able to generate clicks for its clients.

Zeta does not disclose detailed financials, but the company has maintained that it is very profitable. In fact, it has been profitable for 3 years, and is estimated to have earned $200 million in revenues in 2015. Zeta was estimated to have grown 50% in revenues in 2016 and is looking to grow another 30% this year. That will translate to revenues of $390 million for the current year.

Zeta’s profitability has helped it secure funding easily, when needed. It was founded using a $10 million pool raised by its founders. Since then, it has raised $380 million through debt and private equity financing. Investors in the company include names like Franklin Square Group, FS Investments, GPI Capital Partners, GSO Capital Partners, GCP Capital Partners, and Madison Capital Funding. Its last private equity round was held last month when it raised $140 million in a mix of equity and debt funding at a valuation of $1.3 billion. An earlier equity round was held in July 2015 had valued them at over $1 billion. Zeta had raised $45 million in debt financing in 2016 as well.

Zeta plans to use the latest acquired funds for additional acquisitions. Since inception, the company has leaned towards acquisition for growth. Last year, it had acquired eBay’s CRM division for an estimated $80-$90 million after acquiring Acxiom for its marketing automation initiatives for $50 million. It hopes to continue the trend in the future with the newly acquired funds.

Zeta Global’s Machine Learning Focus

Most companies today are pushing forth on the Artificial Intelligence initiative. Zeta’s biggest rival Salesforce has been focusing on its own AI offering called the Einstein. Zeta too is investing in machine learning. The company has over 100 data scientists and 500 engineers as part of its 1,200 employee strength. It has nine patents in machine learning and has been developing new products to help its customers. For instance, it utilizes machine learning in its marketing cloud to help clients monetize customer engagement by leveraging Big Data. It has been focusing on utilizing the growth in processing power and ability to improve the speed of reporting to milliseconds instead of hours.

Zeta’s software solutions can make specific recommendations and provide analytics offering by identifying the prospects who are most likely to buy, identifying the delivery of information to these prospects programmatically within a few milliseconds, and identifying the customers who are most likely to leave so as to try and retain them.

Analysts expect the company to go public soon. But Zeta is still cautious of the IPO market. It believes that the “IPO markets are good, not great,” and given its financial prowess, the company is willing to wait for the market to improve before it lists.

Photo Credit: Perzonseo Webbyra/Flickr.com

This segment is a part in the series : 2017 IPO Prospects

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