Morning. My name is Brent Bracelin. I'm a co-head of technology here at Piper Sandler. Welcome to Nashville. We have the CEO and CFO of Braze here, Bill, Isabelle. Welcome to Nashville!
Yeah, thanks for having us.
Thanks.
Absolutely. So we'll make this kind of interactive. To the extent there are questions in the audience, raise your hand, we'll get you in there. I have a bunch of questions I'd love to kind of dive in. Maybe let's start, though, from the beginning. I love origin stories. I think it's important to frame businesses based on origin stories. What sparked interest in the creation of this idea back in 2011, and how that's involved in the Braze model?
Yeah, sure. So I'll give a quick little whirlwind history of my kind of professional life prior to that, 'cause it all kind of comes together as we started up what was called Appboy in mid-2011. We were renamed to Braze in 2017. But so I graduated from MIT in 2009, right as Android was launching and was fortunate enough to actually get introduced to mobile application development in my senior year there, 'cause Android actually had a big office in Cambridge, and Rich Miner was headquartered there and such, and so there was a great collaboration between the groups.
I then moved out to the West Coast, worked on Android for Google, actually in the summer of 2009 and leading into 2010. So had an early introduction to mobile right on the ground floor. I then actually graduated, went into finance for a little bit. I worked at Bridgewater Associates up in Connecticut, and was there for about 16 months. But while I was there, I felt like the world was changing because of mobile, and I wanted to be a part of that. And so, you know, what I had really experienced, both as a developer on Android as well as a user, was it built this tremendous conviction for me that mobile was gonna foundationally change the world.
In much the same way that I had seen, you know, the internet and the dot-com, kind of the dot-com era, as I was growing up. I felt like mobile had the potential to be even bigger. And so, you know, one of the, when you kind of look at the starting point of Appboy, you know, two major aspects of that conviction: One was that huge businesses would be born and built to be mobile first. And it's exceedingly obvious now, but, you know, in the early days of the App Store, where all you were really seeing making any traction were games, and everything else were kind of flashlight and compass apps, and Arnold Schwarzenegger, and soundboards, and prank calling apps, and things like that, right?
Like, it was mainly like toys and gimmicks, like a lot of, lot of excitement, but not a lot of real businesses being made. And so, you know, when we started, we really wanted to start to build for a future where we thought that mobile apps could be businesses. And in fact, that's how we used to pitch the early product-
Hmm
... was that it would help you turn your app into a business. And then, of course, the second order effect of that was that we thought that the widescale adoption of mobile by consumers would change the way that traditional businesses approached their, you know, the way they delivered their products, the way they interacted with their customers. You see that in the dual track of both looking at the enterprise as well as those digital first, digital natives, that has been a part of Braze's DNA for a really long time. I think it's why when you look out across the startup set, even, you know, from, call it 2014 to 2020, you know, Braze was the only one in that mobile startup ecosystem that was meaningfully going and challenging the legacy marketing clouds in the enterprise.
Because we were looking at customer engagement as a, as something that is just fundamental to businesses of all sizes, of all verticals, and you see that in the diversification of Braze today. You know, we wanted to really focus on a problem that was fundamental to business and tackle that opportunity in a way that was being driven by technological change, so that we would have our wedge, and we saw that in mobile. Mobile was a better way to understand your customers, it was a better way to communicate with them, it was a better way to deliver products and services, or at least augment your products and services, because people were developing this really strong connection, with that technology.
And we just started building for that future early, and obviously, a lot of our bets have paid off along the way.
Why is it so hard for an enterprise to leverage these mobile channels? I mean, outside looking in, we all have cell phones, we all can text, and message, and have WhatsApp, and all sorts of different feature functions. What was the challenge set that was unique to the enterprise? Was it a, was it a data challenge?
Yeah, I mean, there's a few things. You know, one is we see this in all new waves of technology, and I love the example of going back to early banking websites, which was, you know, the earliest. We probably all remember the websites that were an under construction animated GIF, right? And your phone number, and it was like the early bank websites just told you what their opening hours were, right, and gave you their phone number, so you could call them. It was essentially an upgraded Yellow Pages entry. And then someone started to think, like, "Oh, hey, if we actually don't need a human to pick up a phone or to be there in person, what kinds of services can we start to provide through a website, right?
How do we fundamentally change our business model and the products and services that we're offering in order to take advantage of the new technology?" And so I think that the enterprise always takes longer to kind of go through that process of just taking what they were doing before and putting it in a new place, versus, like, fundamentally rethinking what they provide and how they provide it, because it disrupts their business models, right? They've got momentum in a lot of those. And, and a lot of cases, you know, those business models are still gonna make the money for a long time, too. So it's not necessarily always the right call to disrupt themselves the moment that a new piece of technology comes out. And so that's, that's one big aspect of it.
I think in the enterprise as well, you know, you also see some customer engagement-specific components, and, you know, we've, this has been a big part of our journey as well. But, you know, in the early days, we primarily only would sell to the enterprise with a mobile wedge. We would go in because they had a new mobile app, they needed to send push notifications or SMS or whatever, but it was rare that we would go into an enterprise and also send their email right out of the gate.
Mm-hmm.
Because they had a different vendor, they had a different team, they had a different budget. In fact, most enterprise brands, until recently, were organized so that every way that they communicated with or interacted with a customer was a totally separate line of business. You probably remember terms like e-commerce, or like, you know, there was e-commerce, and then there was m-commerce, like mobile commerce.
Mm-hmm.
Right? And, like, the separate web, email, and mobile team was just a standard way that an org chart was set up, right?
Mm-hmm.
And so when you go in and you sell, and we still even run into this, you know, it's a shrinking number of cases. We run into this sometimes, where someone will be running an email RFP... and we come into the sales cycle, and we're like, it's, you know, you should elevate your thinking to be cross-channel. These should all be owned by the same teams, et cetera. And here we have this, you know, email marketer in the enterprise who only knows email, and that's all they've been doing for 15 years, and they're frankly afraid for their job if all of a sudden-
Mm.
like, you know, the definition of the space changes. And they've got this mobile team that's been over here, and they've been really agile, and they've been-
Yeah
... doing a lot of great stuff, and now all of a sudden we're gonna give them access to the email tools? Like, what's that gonna... You know, that might expose me or whatever, right? And so there's a whole bunch of things like that that exist in the enterprise. And we've, you know, we've obviously been working our way through them. I think that the direction of movement here is pretty obvious, and we've been focused on patiently playing the long game and making sure that Braze is built to really be able to be diversified across all these different use cases. You see it in our vertical diversification as well.
You know, Braze doesn't have any major dominant vertical, you know, e-com being the largest, which is natural in marketing, but it's still less than a quarter of our overall business.
Interesting. So, Isabelle, for you, as you think about, you know, reimagining how enterprises can interface with customers now through this new platform, you've had really good success, but you did hit a bit of a speed bump a year ago as you started to see some customer behaviors change. I would love to hear maybe you give us a read on the demand environment. Maybe compare, contrast what you saw a year ago versus kind of what you're seeing now. Has there been any-
Yeah
... change?
Yeah. So, if we go back even to sort of pre-downturn, we've definitely saw an environment where marketers were sort of thinking about, what do I need to buy for in terms of, like, maybe future demand, locking in prices? Our dollar-weighted average contract length has been increasing over time and edging up close to over right about two years, and that's been a journey we've been on. So as marketers look to sort of secure long-term pricing, they've been sort of looking to buy and sort of almost pre-purchase. I think as we went into the downturn, I think a lot of that sort of reversed a little bit. This wasn't a COVID thing. It was just pre... This was - we experienced this sort of well before the COVID time period.
Now I think marketers are much more looking to buy for kind of directly what's in front of them. That leads to actually, other than kind of a little bit of the slowdown that we've been experiencing, that's gonna open us up, I think, to kind of more upsell opportunity in sort of the medium term. I think another dynamic that we saw, and this is very specific to the downturn that happened about a year ago, that started to happen about a year ago, a little over a year ago, is there was a ton of uncertainty in the market. Marketers didn't know what was gonna happen to their budgets. They were getting cut, cut again. They didn't know where the bottom was. A lot of sort of M&A that was happening that was pretty disruptive.
There were teams that were getting eliminated. And so as we were going through our buying cycles, we had difficulty, more difficulty, I would say, in sort of predicting how the pipeline was gonna evolve and just what our visibility was just sort of cloudy. I would say that the evolution that we've seen now into sort of nine months later, a year later, is things are not necessarily better, but they haven't gotten worse, and people have learned to settle into this new normal. Budgets may be smaller, but they're known. I think what that enables marketers and the buyers to do is to make those prioritized decision, knowing how much money they have in the tank to spend and how they wanna allocate it. So that, I think, has led to a bit of the stabilization that we are experiencing.
I wanna be careful that nobody interprets that as sort of things are turning around. That, that's not what we're saying. But I think settling into this new normal has been helpful for us as we make our way through this year.
We have a new normal. Budgets are kind of settled, but you did talk about, like, maybe having some upsell opportunities. What, walk me through, what would be an upsell motion?
Yeah.
Yeah, I was just going to say, I thought it was funny that, you know, from the CFO lens, you characterize it as, like, marketers don't want to buy ahead. It's like, I actually think the marketers want to buy ahead.
The CFO-
It's that their CFOs do not-
CFOs that don't want them to buy ahead, yeah.
Are we sensing a little tension between the departments?
No, no, I think, I think we're, I think we're good. But the, you know, and, and when we talked about that a little bit on the earnings call, you know, one of the things that I just characterized was that, you know, WhatsApp is a great example of an incremental channel that provides incremental, you know, incremental ROI opportunities for a lot of brands. And, and in our early use cases, it's like, oh, hey, there's this big... You probably have this big group of lapsed users or in, relatively inactive users, that if you reach out to them on these more premium channels with high open rates and things like that, that you'll actually be able to go and, and find some really high ROI activation.
That, in many cases, you would only be able to do through paid advertising, performance marketing, et cetera, which has just a much worse cost function than when you can do it through an earned and an owned channel, like, email or, or SMS or through a, a mobile app or what have you. But, for, you know, for every 10 marketers out there that want to experiment with WhatsApp this year, probably only two of them have permission to do that from their CFO, right?
Mm.
So, you know, when we look at the last 10 months or so of product innovation, I think that in general, you know, what we're seeing is there's a lot of excitement in the market to adopt a lot of these new things, but they're working with, you know, flat budgets at best.
So when we think about upsell, Isabelle, it really is a channel. Is that the right way to think about upsell?
Yeah.
Or is there something else?
There's so many dimensions across which we can upsell an organization. And so that's one of the reasons why we don't worry so much about where we land or how large our land is-
Yeah
... we're so comfortable in the expand storyline. So one is, you know, as we, as our customers start to adopt more and more channels, and we're actually seeing our customers over time, the number of channels that they are using and simultaneously is continuing to increase. So there's just net new channel adoption.
Yeah.
As net new channels get unlocked and purchased, and we develop net new channels, that actually enables new use cases.
... new use cases can unlock brand new sets of monthly active users. It comes with new channel volumes, and then we continue to then further penetrate organizations as we access net new markets or net new brands within an organization. So there's so many different vectors across which we can, you know, continue to penetrate organizations and, and have that successful expand storyline.
So as I think about the discussion here around channels and engagement, it feels a little different, and I bring that up only in the context of martech. We've seen so many martech vendors out there, thousands. You've seen the martech landscape slide, thousands of different martech, sales tech, ad tech vendors. This feels different. How is customer engagement different? And I bring that up because it feels like now everyone's customer engagement, but they're not.
Yeah.
Walk me through how is customer engagement, the way you're thinking about it, different than just a traditional email SMS marketing?
Yeah. So I think a few things. One is where the strategy is formulated. So when you're stuck in a world where you've got a whole bunch of single channel, you know, vendors and you've got channel-oriented teams, as we were discussing before-
Right
... with the mobile web, email, et cetera, you have an organizational problem of when you have a hammer, everything looks like a nail, right? And when you should actually be thinking about customer engagement strategy, it should be: what are my business's priorities, and what does the customer experience look like? And how do I, you know, how do I provide the right nudges and incentives and the right kind of shaping of that customer journey in order to maximize whatever my goals as a brand are? And when you're operating up there in the orchestration kind of world, the channels are an implementation detail, and which channel you use for which goal should be dependent on a whole bunch of different things. Like, what’s that person opted into? What are they responding to the most?
Like, what is the marginal cost of each of these channels? Like, what personalization opportunities do I have, and is the content richness of the channel appropriate for that, right? Like, even potentially, maybe this changes by time of day because the person is at work versus at home versus at soccer practice with their kids, right? And so to be able to have software that can automatically adapt to all of those conditions and rise above the channel conversation and actually be focused on the business goal and the customer journey, that is an important distinction, and it's why, like, I personally, like, stopped saying, like, omni-channel customer engagement because, like, if you're not, if you don't have all these channels available, if you haven't abstracted away from that, you're just not doing customer engagement.
Customer engagement should be actually operating at that business and customer goal level. I think the second major characterization of it, and this is related, is how data-driven and how therefore experimental this can be. So when you move from a world where, you know, even in email marketing, you're basically just looking at clicks and opens, right? It's not a comprehensive data story. When you're integrated across all the different customer touch points and able to communicate in all these different channels, you have a really rich first-party data context to be able to act upon, and that gives you the opportunity to layer on advanced machine learning and AI in order to have even better automated decision-making.
It also gives you the opportunity to run your teams in a more experimental way, to be able to compound these learnings over time, test different things, and evolve strategies. And so I think that that practice of customer engagement is interdisciplinary. The practice of customer engagement is more agile, and it actually compounds these learnings over time. And one great example, and I share this one quite a bit because I think that it's relatively mundane, but it is instructive because of that, is consider a streaming provider and the point in the customer journey of, you know, your annual, your annual renewal comes up and your credit card's expired in the meantime. That used to be a transactional message triggered by the product team, and it was effectively an accounts receivable problem, right?
Yeah.
But if you actually approach that with customer engagement tools, you can turn that into a growth experiment where you're actually then able to take, you know, what are the different customer personas? Is this someone that's using a prepaid debit card and surfing free, free trials, or have they been a loyal customer for four years and are on Amazon Platinum? Those two people should obviously be going through a different customer journey as they approach that, you know, renewal point. Similarly, is this someone who is like a second screen user? Like, if I give them the warning on their Apple TV or on their, you know, Samsung Smart TV, am I gonna force them to type in a credit card on their TV remote, where they're probably just gonna switch to another service?
Or can I send them a push notification and they can quickly just, like, thumbprint it and, you know, use Apple Pay, right, to, to get through that renewal point? There's... And I could go through the examples here, but the point being that when you apply customer engagement software, even to these operational and transactional use cases, you can all of a sudden turn it into something that has great room-
Mm-hmm
... for optimization. In this case, you can avoid a meaningful amount of churn, which is just ridiculous churn to be dealing with, right? Someone that was already a premium subscriber that you lose just because of this, like, little friction point in the journey. You can be preemptive about it. You can adapt it based on the person, based on the channel. You can have, like, different win-back strategies. You can start to engage, paid media only in the circumstances where you need to because you've actually turned them. And that's just a great example of the difference between sending a message and, you know, doing customer engagement.
I think that when we, when you look at the entirety of the customer journey, there are still a whole bunch of unexercised opportunities where something is still treated as, you know, vanilla product delivery or as an operational message being delivered to someone, that can turn into these high-leverage customer engagement experiments that actually you can compound additional gains for your business over time. That's actually why, you know, as I two quarters ago, you know, I was getting a bunch of questions around, you know, is AI gonna replace the marketer, et cetera? I just look at, you know, the customer journey across even the most advanced brands that are doing this today, and you say, where are all the still unexercised opportunities in the customer journey to continue to make these optimizations?
The reality is that they're all over the place. Like, this is still an area that is very under-penetrated, and it's also an area where being able to learn over time and continue to experiment and try new strategies, and, like, as your product evolves and as your customer base evolves into new regions and new geos, into new customer personas, and as, like, new features bring into play different aspects of the customer journey, it's an ever-expanding surface area for a business that actually involves a lot of ROI. So to the extent that we can make those people-
Yeah
More productive, they're gonna be able to run more experiences, experiments, they're gonna compound more gains. And this is, this is not like a, you know, we are the automation that is, that is already, you know, providing that tremendous leverage, but it's not like replacing the human. The customer engagement marketer actually is becoming more sophisticated. The teams are becoming more interdisciplinary, and as a result, you know, brands are getting a lot more ROI out of this.
Sure, with broader reach. Isabelle, from a CFO perspective, we have this, call it new category, customer engagement, different than marketing. I think historically, we viewed marketing as discretionary. So if it's not discretionary, we're in a new bucket, a priority around engaging with customers and driving better churn outcomes and higher revenue. How do you fund it? Like, do you pull back funding in another area? Walk me through that CFO budgetary-
Yeah
... philosophy around this new category.
Yeah, so it's interesting. I've actually talked to our sales team to kind of give them insight into kind of the mind of the CFO.
Yeah.
And so as people come to me and ask for budget dollars, I think, and this is probably true, you know, at a number of our organizations that are then seeking to buy Braze, is, "Explain to me the trade-offs." And so in some cases, you know, we've talked about vendor consolidation, for example. And so with vendor consolidation, there's potentially the collapsing of a number of other contracts that would trade off for Braze that may not actually—that may not save you net new dollars. It may be actually equivalent, 'cause we are a premium price product.
Yep.
But first of all, there's operational simplicity in that. And you may have multiple different teams that were using or supporting, on the back end, all of this-
Mm-hmm
... sort of cacophony of different tools that had to kind of work together. So you've frustrated engineers, you've got confused marketers, you've got more people than you probably need, and that is a simplifying assumption that a CFO can kind of wrap their head around. They're like: "Oh, got it. So in your budget next year, you're only gonna be asking for one line item. Maybe it's the same size, but then from a head count perspective, maybe there's rationalization in a couple of different places," right? So that, I think, is a super simplifying assumption. There's top-line assumptions, which is... And we do a very good job of trying to play out the ROI story as we're selling.
Mm-hmm.
And so if the buyer can then have an ROI conversation with the CFO, there's-- And we're really quick in terms of time to value. And so that storyline, I think, is very helpful to say, "Look, this investment is gonna pay back in X amount of time," and then you can kind of prove it out. And if they're really nervous about it, they'll sign, you know, maybe a one-year contract instead of a two-year contract, but we do prove it out. And so then they come back and renew and upsell, et cetera. So I think that those, those conversations across those two dimensions, I think, is where the money comes from.
There's another interesting aspect, where obviously, one of the easiest places to kind of pull marketing dollars is from performance marketing budgets, because they're huge. And when you look at the kind of marginal ROI of customer engagement activities versus the marginal ROI of additional performance marketing activities, because the, you know, the customer engagement activities kind of stand on the shoulders of giants, if you will, because they, they stand on top of prior investment in acquiring the customer. And so the fact that-
Mm
... you can go and you can kind of activate these marketing channels using first-party data to inform the strategy, and using the first-party relationship that you already, you know, spent a lot to acquire, and, and that you're nurturing over time, you don't need to go to Facebook or Google or TikTok to rent people's eyeballs every time you wanna talk to them, right? You actually get the benefit of that, and, and you're only paying the marginal cost of that additional message.
Mm.
In the stack of, kind of, what's the ROI of talking to people and trying to provide, you know, marginal sales benefit or what have you, it's the best performing in a stack. But interestingly, sometimes because of all the benefits that we have from a churn perspective and from an acquisition... Because it's like acquisition, then you need to activate them, right? You need to get them to become a loyal customer or get them to become a premium subscriber, what have you, and then you need to not churn them. And so to the extent that customer engagement does its job and actually improves that retention curve, we actually make the marginal acquisition dollar more efficient as well.
And so while we often borrow the, you know, from those performance marketing budgets up front in order to get up and running, just because they're large, it's an easy place to kind of go and plunder if you're a marketer. In a lot of ways, we then help kind of improve the entire acquisition engine's efficiency function for them. And that can lead to enhanced investment in that in a lot of brands. And we see that in a lot of digital-first brands that we work with, where, you know, they actually often will go in, sometimes even shut off their, a lot of their acquisition spend up front, because once they get better perspective into their funnel, they realize that a lot of their acquisition dollars are being spent in an extremely inefficient manner.
But then, once they start to optimize it over time, they now know, like: Hey, if I'm retaining 20% better, I can actually move my CPA targets up, you know, by half that, and I can still be ROI positive. I'm bringing even more people into the funnel and building that base of stuff. And so you gotta think about how these things provide really great positive feedback loops, because we improve the entirety of the retention curve.
I think about the tech stack and the data, which is important to driving that ROI case, making some of these, exposing some of these limitations of legacy architectures. Walk me through, what is unique? I mean, I think data is important for AI, data is important for your own personalization and segmentation. Like, what is unique about the Braze data architecture? Does that architecture get elevated in an environment where everyone's focused on re-platforming and maybe accelerate a transition off these legacy platforms?
Yep. So, a couple of key things to realize about customer engagement in particular. One is that we're not just a consumer of data, we also produce a tremendous amount of data. Because, you know, when you send billions of messages every single day, the way that consumers respond to those messages is a really important signal for, you know, how they experience your product, what kind of persona they have, what kinds of marketing strategies work with them, et cetera.
Mm-hmm.
And so you should always think about Braze as both a consumer and producer of data. And that a large part of what happens with our orchestration engine is that it lives in the flow of that. And so that leads into the second really big part, is that, you know, a huge portion of the data that Braze is interested in is actually we need to be right next to where it gets generated. And so there's another whole segment of data that lives in the data warehouse that I'll talk about in a second.
But the whole stream of data that's being generated by user activity in the product, as they're using a mobile app, as they're browsing your website, as they're engaging with your loyalty program, as they're, you know, clicking around on Apple TV or using a connected fitness product or what have you, that's all data that's being generated, and we need to be able to execute on top of in real time. And so all of that data actually flows through Braze's software integrations directly into our ecosystem without engaging the rest of the data landscape. And so, you know. And that's where a lot of these in-the-flow engagement use cases end up happening. Now, there's additional data that can come in, which might come from other parts of your systems, like a customer support system that's loading into your data warehouse.
It might be that your data engineering teams are building advanced machine learning models and propensity scoring, that they're then storing in your Snowflake instance. You might have a product catalog or maybe information about franchisees, right? There's a whole bunch of other data sets that we're interested in, as well, that help with personalization and other sorts of things. And those are places where, you know, we are focused on making sure that we have the right interconnections. Now, the interesting thing about that data is that it's not as sensitive. It's not quite as sensitive about how real time that should be as the data that's generated by the user activities in the moment, right? Like, doing propensity scoring on someone, those propensities are usually longer lived than just-
Sure
... a few milliseconds, right? And so what when we kind of look at the data landscape, we work it out in those various ways. But the sum total of all this needs to be available to our system. And so we make a lot of investments as we reach out into the broader data ecosystem to ensure that we have the full picture of everything the user is doing. All the data that we generate through interaction is both available to us for follow-on action, because most messages are actually parts of conversations or multi-step journeys. It doesn't, it's not just fire and forget. But also, that we can make that data available to the science teams that we work with, and so we flow a lot of data back out into the data ecosystem with partners like or what have you.
And then similarly, we wanna have continuous, easy access to those data systems flowing in. And to Isabelle's point, from an operational standpoint, you know, that's one of the places where we've been really focused on building partnerships so that marketing can get access to that data, where Braze and Snowflake will work together, or Braze and Databricks, or Braze and BigQuery, you know, whatever, will work together to make sure they have access to that data without their engineering teams needing to provide the operational maintenance. That lowers total cost of ownership, it speeds up time to value, and even more importantly, it lowers the activation energy for them to bring on new use cases, and that increases the rails of our upsell vector. So we're gonna keep investing comprehensively in that.
Very interesting discussion. Unfortunately, we're out of time. We'd love to spend 45 more minutes talking about this st ory, 'cause it is very complex and new to a lot of folks. So thank you so much for being here-
Yeah, thanks for having me.
And sure.