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Zendesk and Freshdesk Count on Building their Partner Ecosystems

Posted on Thursday, Nov 12th 2020

According to an Allied Market Research report, the global complaint management software market was estimated to grow at 11% CAGR to reach $8.3 billion by 2026. Leading player Zendesk (NYSE: ZEN) recently announced its third quarter results that continue to outpace market’s forecast as the company invests in building its partner ecosystem to drive growth.

Zendesk’s Financials

Zendesk’s third quarter revenues grew 24% to $261.9 million, ahead of the market’s estimate of $253.77 million. GAAP net loss was $40.7million. Adjusted EPS of $0.18 was ahead of the Street’s estimates of $0.11.

Zendesk saw impressive movements in some of its key metrics. Deferred revenue-based billings grew 27% over the year to $273.5 million, ahead of the market’s estimate of $252.8 million. Its current Revenue Performance Obligation (cRPO)-based bookings grew 40% to $313.9 million. This strong revenue performance was attributed to a large number of customers now willing to commit to longer deals, and, as suggested by the management, a broad-based improvement to normal buying cycles amongst customers.

Zendesk provided a current quarter outlook and forecast revenues at $274-$279 million, compared with the market’s forecast of $273.57 million. For the full year, it expects revenues of $1.02-$1.025 billion compared with the market’s forecast of $1.01 billion.

Zendesk’s Growing Partner Ecosystem

Recently, Zendesk announced a partnership with WhatsApp to provide enhanced customer conversations on WhatsApp directly within Zendesk. As part of the agreement, the two will collaborate to give customers early access to new features such as workflows, thus enabling businesses to quickly get up and running on WhatsApp. Businesses will have the ability to add out-of-the-box Zendesk messaging capabilities on both their website and mobile app, allowing customers to have engaging and automated conversations on all of Facebook’s products. The messages will flow to a unified workspace so that the support team will be able to manage and respond to customers from a single place while having access to history and context of the conversation.

Besides WhatsApp, Zendesk also announced the addition of Instagram messaging for its customer support offering. Similar to WhatsApp, the Instagram integration will allow its customers to provide end-customer service on Instagram, straight from Zendesk. The API will provide support for businesses to seamlessly manage customer service inquiries that come through Instagram messaging, allowing companies to respond to customer stories and start DMs.

Zendesk does not report detailed partner financials, but reports suggest that its partner-led activity now accounts for mid-teen % of total revenues, compared with the single digit percentage contribution a year ago. Analysts expect to see significant room for growth within this channel.

Zendesk’s stock is currently trading at $123.56 with a market capitalization of $14.4 billion. It touched a 52-week high of $126.96 earlier this month. The stock had fallen to a 52-week low of $50.23 in March this year.

Freshworks’s Growth

Meanwhile, rival Freshworks also continues to add to its partner and product portfolio. Last month, Freshworks released Freshworks CRM, a CRM tool that integrates sales and marketing teams with out-of-the-box capabilities for a 360-degree view of the customer to deliver better customer experiences. Freshworks CRM is built on the highly customizable platform Freshworks Neo. It integrates data on an embedded customer data platform for personalized customer engagement, improved lead conversion, and sales growth.

Freshworks CRM will allow marketing and sales users to have access to AI-powered insights on a single dashboard. The customer data will be converted into “Freddy AI”, powered insights that will further help drive sales and improve customer experiences.

Within its partner network, Freshworks recently entered into an agreement with Hexaware Technologies Limited, a leading global IT consulting and digital solutions provider. As part of the agreement, Hexaware will make use of Freshworks’ customer and employee engagement software to build digital solutions for its customers. The partnership will help businesses improve customer and employee experiences by offering quicker resolution to internal and external requests.

Freshworks’s Financials

Freshworks remains privately funded for now, having raised $399 million from investors including Sequoia Capital India, Accel, Google, Tiger Global Management, and CapitalG. Its last round of funding was held in November 2019 when it raised $150 million in a round led by Google at a valuation of $3.5 billion. Freshworks recently hired a former Atlassian executive and tech veteran José Morales as its Chief Revenue Officer. The addition suggests that the company may be heading towards an IPO. Freshworks hasn’t commented on its IPO plans. Freshworks does not disclose its financial details.

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