Prospectus Summary
PROSPECTUS SUMMARY This summary highlights selected information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all the information you should consider in making your investment decision. Before investing in our Class A common stock, you should carefully read this entire prospectus including the sections titled “Risk Factors”, “Cautionary Note Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.Our Mission
Zeta’s mission is to enable enterprise businesses to accelerate growth by leveraging Zeta’s proprietary data and predictive artificial intelligence (“AI”) to acquire, grow and retain consumer relationships.
Overview
Zeta is a leading omnichannel data-driven cloud platform that provides enterprises with consumer intelligence and marketing automation software. We empower our customers to target, connect and engage consumers through software that delivers personalized marketing across all addressable channels, including email, social media, web, chat, connected TV (“CTV”) and video, among others. We believe our actionable insights derived from consumer intent enable our customers to acquire, grow and retain consumer relationships more efficiently and effectively than the alternative solutions available in the market.
Our top-rated Zeta Marketing Platform (the “ZMP”) is the largest omnichannel marketing platform with identity data at its core. The ZMP analyzes billions of structured and unstructured data points to predict consumer intent by leveraging sophisticated machine learning algorithms and the industry’s largest opted-in data set for omnichannel marketing. The ZMP connects with consumers through native integration of marketing channels and application programming interface (“API”) integration with third parties. The ZMP’s data-driven algorithms and processes learn and optimize each customer’s marketing program producing a ‘flywheel effect’ that enables our customers to test, learn and improve their marketing programs in real time. This continuous learning loop provides greater efficiency and effectiveness for our customers and creates a competitive advantage for Zeta.
The ZMP empowers our customers to personalize consumer experiences at scale across multiple touchpoints. Marketing programs are created and orchestrated by our customers through automated workflows and sophisticated dashboards. Our Consumer Data Platform (“CDP+”) ingests, analyzes and distills disparate data points to generate a single view of a consumer, encompassing identity, profile characteristics, behaviors and purchase intent, which is then made accessible through a single console. Our Opportunity Explorer synthesizes Zeta’s proprietary data and data generated by our customers to uncover consumer insights that are translated into marketing programs designed for highly targeted audiences across digital channels, including email, SMS, websites, applications, social media, CTV and chat.
Over the past decade, we have built a set of technologies and tools that make our customers’ marketing operations easier and more productive through a unified marketing platform that seamlessly bridges consumer identity, personalization, deployment and deterministic measurement across digital marketing channels and devices. We built our business model around a frictionless user experience and have enhanced and extended the platform over time to serve the evolving needs of enterprise brands. We know that the modern consumer is ‘always-on’ and has an ever-expanding digital footprint across websites, apps and connected devices. Our marketing platform not only addresses today’s complex ecosystem, but is also sufficiently flexible and robust to expand into emerging technologies such as Internet of Things (“IoT”) and augmented reality.
We have secured more than 90 patents and patent applications and employ over 500 data scientists, technologists and engineers who work on further advances to our platform. We serve more than 1,000 customers, encompassing some of the largest and most well-known enterprises across industry verticals, including 33% and 31% of the Fortune 100 as of December 31, 2020 and 2019, respectively.
Our business exhibits scale and growth. Revenue reached $368.1 million for the year ended December 31, 2020, a 20.3% increase from 2019. Our net loss was $53.2 million for the year ended December 31, 2020, a 38.4% increase from 2019. Adjusted EBITDA was $39.6 million in 2020, a 62.7% increase from 2019.
Industry Background & Challenges
Data-driven marketing is a critical element of the modern economy. Enterprises that focus on data-driven marketing can achieve significantly higher return on investment (“ROI”) as compared to traditional marketing, especially when delivered at scale and on a personalized basis. In recent years, digital marketing has become increasingly complex due to a variety of factors such as the proliferation of devices, fragmentation of media across platforms and an evolving regulatory framework. In response to these challenges, enterprises have experienced increased costs, reduced transparency and more onerous systems integration as they attempt to target, connect and engage modern consumers. To address these complexities, specialized software and more robust infrastructure are required.
Acceleration of Digital Transformation
In 2020, digital transformation accelerated as consumers moved online and their consumption of digital media grew. This change in consumer behavior has led to an expansion by enterprises in the rate of their investment in digital transformation. According to a KPMG survey, 79% of CEOs say that their companies are accelerating the creation of a seamless digital consumer experience as a result of the COVID-19 pandemic and 63% have increased their digital transformation budget.
IDC predicts that by 2024, spending on digital transformation technology will represent 57% of all IT spend as compared to 38% in 2019. The accelerated shift in investment towards digital is also evident in the composition of marketing budgets. In 2019, global digital marketing spending overtook spending on analog and traditional marketing for the first time. eMarketer predicts that by 2024 digital marketing will represent nearly two-thirds of all marketing spending.
As the bar to succeed in the digital ecosystem is raised, enterprises are discovering that they must evolve their assets and capabilities to improve how they acquire, grow and retain consumer relationships. Many enterprises struggle to identify the right consumers for their brand, deliver relevant experiences to such consumers and build the capability to do it over an ever-expanding number of digital channels. Legacy point solutions and data and analytics tools from the analog era were not designed to address this accelerating digital shift. Modern tools and technologies are required to personalize consumer experiences at scale and measure ROI with greater precision.
Demand for Personalized Experiences by Modern Consumers
Consumers are seeking more personalized experiences when interacting with a brand. According to PWC, 54% of all U.S. consumers say that brands need to improve their consumer experience to win or maintain their business. Walker predicts that, in 2021, consumer experience will overtake price and product as the key brand differentiator. Although enterprises are aware that more relevant consumer experiences tend to result in improved business outcomes, delivering better experiences is too complex for many enterprises to execute. They lack data assets, core capabilities and modern technologies to capitalize on this emerging development.
Evolving & Fragmented Consumer Identity
As use of personal devices and digital media expands, audience fragmentation is accelerating. A growing roster of digital publishers and an explosion of digital content presents a challenge for marketers seeking to reach a large audience spread over multiple channels. In addition, the number of devices used by individual consumers has increased and is expected to continue to grow. This multiplies the complexity of targeting, connecting and engaging the modern consumer. Although enterprises attempt to target, connect and engage consumers across multiple devices, there is inadequate cross-functional coordination, a lack of data integration across channels and poor interoperability among systems. Enterprises are seeking new approaches to identify individual consumers rather than devices or digital identifiers. This presents opportunities for companies that have the data-driven assets and capabilities to present a unified view of the consumer, deliver more relevant experiences, enable real-time learning and, ultimately, generate higher ROI based on deeper understanding of the needs, attitudes and behaviors of individuals.
Legacy Point Solutions Are Unable to Serve All of the Evolving Needs of Enterprises
Advances in computing and communications technology have enabled businesses to automate and improve their core business processes. Many businesses have purchased, built and deployed a wide range of enterprise software applications in such areas as enterprise resource planning (“ERP”) and customer relationship management (“CRM”). While technology improvements have brought increased processing power and functionality to enterprise software applications, businesses have been challenged to realize the full benefits of these applications for a variety of reasons, including difficulties with deployment and high cost of ownership. Enterprises attempting to deliver more personalized consumer experiences at scale have had to purchase, implement, maintain, upgrade, integrate and use multiple vendors and technologies to execute plans. This piecemeal approach has increased cost of ownership due to lack of inter-operability and decreased effectiveness of their marketing programs as a result of functional and integration gaps. The complexity, cost and sub-optimal results from this legacy approach have created a need for a comprehensive technology platform that serves as a dynamic end-to-end solution for enterprises.
Significant Marketing Dollar Waste Exists
Even though marketing technology has become more sophisticated, many enterprises still lack the ability to accurately calculate the return on their marketing investments. According to eMarketer calculations, companies waste an average of 26% of their marketing budgets on ineffective digital strategies and channels. Many existing data-driven strategies and tactics have proven to be ineffective. Although data vendors are able to collect consumer information across a wide range of digital properties and connected devices, enterprises struggle to realize the value of this type of data because they are unable to coordinate insights and execute across disparate channels. In addition, significant challenges with enterprise data management persist, including data security, big data ingestion, choke points, extraction of meaningful insights and a shortage of professionals who can manage sophisticated unified data systems. This typically leads to an inefficient use of data and a gap between expectations and actual results. Robust, reliable and flexible data management combined with timely, accurate analysis are among the most valuable resources marketers can use to personalize consumer experiences at scale and improve marketing ROI.
Protecting Consumer Privacy and Regulatory Challenges
Increasing awareness about how Internet user data is gathered, processed and used by marketers to create targeted marketing messages has resulted in a growing number of privacy laws and regulations globally, including the California Consumer Privacy Act in California (“CCPA”), the Video Privacy Protection Act (“VPPA”) in the U.S. and the General Data Protection Regulation (“GDPR”) in the European Union (“EU”).
We believe these developments will continue. In addition, there are a growing number of consumer-focused non-profit organizations and commercial entities advocating for privacy rights. These institutions are enabling digital consumers to assert their rights over the use of their online data in marketing transactions. Enterprises are demanding more transparent and easier to use solutions that enable them to remain in compliance with existing and emerging regulations.
Our Market Opportunity
We participate in the large, growing and rapidly evolving digital marketing industry. The sector is benefitting from an accelerated pace of consumer adoption and heightened innovation across the technology ecosystem. Increased Internet penetration, expanded use of mobile devices and modernization of legacy systems have driven digital transformation initiatives within enterprises and created new channels to target, connect and engage consumers. To utilize these digital channels more effectively and satisfy shifts in consumer preference, enterprises are increasingly employing marketing automation tools to manage their customer acquisition and retention programs. As marketers seek to maximize their digital transformation initiatives and minimize the friction of internal operations, they have increased their demand for easy-to-use, comprehensive third-party marketing technology platforms that deliver relevant communications to the right audiences, via the right channel and at the right time.
According to eMarketer, global marketing spend was approximately $647 billion in 2019 and is expected to grow to $841 billion by 2024, representing a compound annual growth rate of 5%. Within this broader global marketing spend, digital marketing spend was $325 billion in 2019 and is expected to grow to $526 billion by 2024, representing a compound annual growth rate of 10%. According to IDC, marketing software spend worldwide was approximately $19.2 billion in 2019 and was expected to grow to $35.5 billion by 2024, representing a compound annual growth rate of 13%. We believe these trends are driving the demand for marketing software solutions like ours.
The increased focus on digital marketing has also increased demand for marketing automation solutions. These solutions facilitate consumer acquisition, engagement and loyalty by leveraging data and analytics to optimize personalization of marketing programs. According to Mordor Intelligence, the marketing automation software market was estimated at approximately $6.9 billion in 2020 and is expected to grow to approximately $19.7 billion by 2026, representing a compound annual growth rate of 19%.
We believe we are well-positioned to capitalize on these market opportunities as a software and platform provider. In particular, we have one of the largest proprietary identity graphs that enhances enterprises’ targeting capabilities, patented AI that delivers personalized experiences to improve engagement and purpose-built technology that enables our customers to acquire, grow and retain consumer relationships more effectively than alternative solutions.
We sized our market using a bottom-up approach. We believe the size of our total addressable market to be approximately $36 billion. We calculated this figure by first estimating the total number of U.S. Large Enterprises, derived from U.S. Census Bureau data and which we define as firms with over 1,500 employees. We then further segmented the U.S. Large Enterprises by industry verticals in which Zeta maintains most relevance, yielding 9,558 companies. We multiplied this number of relevant U.S. Large Enterprises by our scaled customer ($1M+) average revenue per user (“ARPU”) of $3,805,734, derived from internal Company data for the year ended December 31, 2020, to arrive at the TAM.
Our Key Strengths
Omnichannel Engagement
Our omnichannel capabilities enable us to provide value to our customers by uncovering consumer insights tied to individuals’ purchase intent that can be used across digital marketing channels, thereby optimizing and measuring the effectiveness of our customers’ marketing programs. Through the ZMP, our customers can identify and target consumers across a wide range of digital channels. These channels can work independently, in parallel or in concert depending on the marketing strategies and tactics of our customers. Many of these channels, such as email and programmatic, are native to the ZMP, while others, such as social media, are accessed through API integrations with third party companies such as Facebook and Snap. The ZMP can respond quickly to technological advances and seamlessly connect with emerging digital platforms and new devices.
Actionable Insights
The ZMP monitors, aggregates and analyzes the behaviors of individuals globally across multiple points of interactions to predict interest and intent. Our customers can use the Opportunity Explorer module in the ZMP to identify, synthesize and act on consumer insights in real-time. For example, each month in the U.S. alone, our technology monitors and scores over 50 billion webpages and online discussion forum interactions, 3 billion visits to real-world locations, 1 billion purchase signals and up to 2,500 demographic and behavioral attributes to identify high value opportunities for our customers to optimize their digital marketing programs.
Recognized Leader in Marketing Automation
The ZMP was designed to enable marketing and IT professionals to integrate our platform with their existing tools and technologies quickly and seamlessly. We believe our customers choose our platform over others because of its powerful and easy to use applications, rapid integration with internal technologies and marketing channels and seamless onboarding of an enterprise’s consumer data. We have been recognized by various third-party research reports as a leading player in the marketing automation sector. For example, in 2020, we were recognized as a “Leader” by The Forrester Wave™: Email Marketing Service Providers, Q2 2020 and received the highest possible scores for our campaign management data, analytics, artificial intelligence and campaign operations capabilities. In addition, we were recognized as a “Visionary” in a market research report by a major research and advisory firm in 2017.
Secure, Scalable and Reliable Platform
The ZMP has been designed to provide our customers with high levels of reliability, data integrity, performance and security. Our public cloud deployment and IT systems within our data center have multi-zone and multi-region fail-over redundancy. We have built a comprehensive security infrastructure, including firewalls, intrusion detection systems and encryption for transmissions over the Internet, which we monitor and test on a regular basis. We built and maintain a multi-tenant application architecture that has been designed to enable our service to scale securely, reliably and cost-effectively to tens of thousands of customers and millions of users. Our multi-tenant application architecture maintains the integrity and separation of customer data while still permitting all customers to use the same application functionality simultaneously. Our architecture also enables us to segment access privileges across our user base.
Management Team
Our management team is highly experienced, possesses deep industry knowledge and is operationally focused. We are led by our original founders, which gives us a combination of stability and a strong entrepreneurial corporate culture. Our co-founder and CEO, David A. Steinberg, has decades of relevant industry experience with a proven track record of entrepreneurship and innovation. Our co-founder, John Sculley, was the former CEO of Apple and President of PepsiCo. The rest of our management team has worked in top enterprises and tech-forward companies, including Microsoft, Oracle, IBM, Netscape, PayPal, Accenture and Nielsen.
Our Competitive Advantages
All in One Platform
The ZMP is an end-to-end platform that gives our customers a 360-degree view of their consumer relationships, provides proprietary and actionable insights that improve business productivity and has the ability to execute across all marketing channels to improve marketing program ROI. Some of the key capabilities of our end-to-end platform include: proprietary identity data, master data management, omnichannel engagement, native integration of marketing channels and customer acquisition capabilities. We believe this sets us apart from competitors’ legacy point solutions that neither provide a full suite of capabilities nor address all primary use cases of acquisition, growth and retention.
Reduces Complexity and Cost of Total Ownership
Our business model is driven by our comprehensive platform, owned infrastructure and continuous innovation resulting from consistent investment in research and development. We believe each new release of the ZMP has delivered significant improvements in performance, reliability, scale and scope to our customers and reduced our cost base. This enables us to price our platform more competitively, allowing our customers to exit legacy technology systems and eliminate ineffective marketing programs. We believe these improvements have helped us reduce our customers’ costs and improve their ROI, enabling us to attract and retain customers and grow our market share.
Patented AI Engine with Custom Built Algorithms
The ZMP was purpose-built from the ground up by our seasoned team of product experts and engineers. It was designed with patented AI at its core to maximize utility and extensibility. As the digital landscape has evolved, we have enhanced and extended our AI capabilities to address the evolving needs and requirements of our customers. We believe that the accuracy and precision of the answers delivered by our AI engine enables our customers to make faster and more effective marketing decisions and allows marketing executives to oversee profitable marketing programs.
Opted-In Data
A number of countries and regions have enacted or are considering enacting legislation that could significantly restrict the marketing industry’s ability to collect, augment, analyze, use and share data. While we do not expect these requirements to become a universal standard for data collection, we have nonetheless prepared for the possibility of such laws being enacted in the future. Accordingly, we have implemented a framework to record and apply consumer consents that meet or exceed legal requirements in the U.S. and the EU. Much of this opted-in data is captured through Disqus, a commenting platform that is implemented on more than 6.2 million publisher websites with a network that spans more than 15 billion webpages.