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Cloud Stocks: SurveyMonkey Eyes Acquisitions for Growth

Posted on Tuesday, May 28th 2019

According to an IBISWorld research report, the online survey software market in the US is estimated to grow 5% this year to $1.1 billion. The growth appears to have slowed down from the 12% annual growth rate reported over the years 2014 through to 2019. But that does not appear to deter SurveyMonkey (Nasdaq: SVMK), which continues to invest in AI, acquisitions, and geographic expansion to drive growth.

SurveyMonkey’s Financials

SurveyMonkey’s first quarter revenues grew 17% over the year to $68.6 million. It ended the quarter with a net loss of $17.7 million or $0.14 per share. On an adjusted basis, the losses came in at $0.02 per share. The market was looking for revenues of $68.23 million with a loss of $0.15 per share.

For the current quarter, SurveyMonkey expects to report revenues of $72-$73 million with an adjusted operating margin of -4% to -2%. It expects to end the current year with revenues of $298-$304 million. The market was looking for revenues of $72.77 million for the quarter and $301.6 million for the year.

SurveyMonkey’s Growth Focus

During the last quarter, SurveyMonkey remained focused on investing for growth. It recently added AI capabilities to the survey text analysis of its product platform. Coupled with machine learning and natural language processing technology, the text analysis features will now help its customers identify visually impactful insights with minimal effort. Known as the Sentiment Analysis, the new feature classifies text responses to identify aggregate view of respondent sentiment. Some of the levers used to determine sentiment include existing features such as the Word Cloud, which helps customers draw insights from text responses by visualizing the most common words and phrases.

As part of its effort to expand geographically, SurveyMonkey launched a European data center for its new enterprise customers. The public cloud infrastructure will let SurveyMonkey host data locally for customers located or doing business in the region.

SurveyMonkey is also expanding its footprint in the region through its recent acquisition of Amsterdam-based Usabilla. Usabilla was founded in 2009 on the belief that continuous user feedback is essential to build a successful website, product, or service. Its flagship products Usabilla for Websites, Usabilla for Apps, and Usabilla for Email allow its customers to introduce customized feedback buttons that they want feedback on. The $80 million acquisition will complement SurveyMonkey’s existing enterprise solutions that focus on delivering a comprehensive Customer Powered Data portfolio. Prior to the acquisition, Usabilla had raised $1 million in an angel round led by Boralis BV. Its annual revenues are estimated to be $4 million.

There appears to be some consolidation in the survey industry. Last year, SAP had acquired Qualtrics for an estimated $8 billion. The Usabilla acquisition is a lot smaller, but will help SurveyMonkey expand its product offering to the enterprise segment while giving it a stronger presence in the EU market. Usabilla’s list of 450 customers include the likes of Lufthansa, Philips, and Vodafone.

SurveyMonkey currently operates a Representational State Transfer (REST)-based API strategy for its platform. It allows developers to build apps that can customize, automate analysis, and engage customers through instant responses to customer feedback. Developers can create a draft app and have it registered with SurveyMonkey for public or private deployment. Public apps are available to anyone with a SurveyMonkey account and are published in its App Directory. Developers can also build apps focused on the requirements of their organization and release them as Private apps. Currently, there are more than 100 public apps on the SurveyMonkey platform that allow users to perform a wide range of activities including analytics, customer support, and marketing, to name a few.

Over the past few years, SurveyMonkey has made seven acquisitions to drive growth. It should continue to invest in its developer community to use its platform as a good source of potential acquisition targets that can help it expand deeper into the enterprise segment.

Meanwhile, its stock is currently trading at $17.10 with a market capitalization of $2.2 billion. The stock had climbed to $20 soon after listing in September last year and had fallen to $10.05 in November last year.

This segment is a part in the series : Cloud Stocks

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