Good morning. Thank you for joining us at the Morgan Stanley TMT Conference. My name is Elizabeth Porter. I'm an analyst on the U.S. software team. I'm really excited to have with us today Klaviyo's CEO and CFO, Andrew and Amanda. We are going to take audience Q&A, so at the end, a mic will go around. Before we start, for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. With that, thanks again for joining us.
Thanks for having us.
So we're really excited to have you guys here for the first time as a public company to our conference. So I think it'd be really helpful to start off, for those that might be new to the story, just with an overview of the business. Andrew, what was really the problem you were trying to solve when you started Klaviyo?
Yeah, thanks for having us. So first off, a couple kind of summary stats about our business. We did almost, keep me honest here, Amanda, $698 million in revenue last year. We believe at high growth at scale, 40%-48% year-on-year growth, and with great unit economics, I think 16% free cash flow. So we started Klaviyo because we felt like for consumer businesses, there was no equivalent to what the CRM stack was. If you're a B2B business, there were companies that were addressing that. But for consumer businesses, where you have thousands, millions, tens of millions of consumers, you can't have somebody call each of them and deliver that experience via humans. You have to do it through software.
And so when we started out, we actually started Klaviyo as a database company, this idea of, hey, what would it look like to build this brain, this central data source that had everything about all your consumers? And then what would it mean if you could connect that up to every surface where consumers interacted with that business? So we actually started out building this database. And then after that, we quickly realized that marketing was the kind of first application, first use case. And so we added marketing on top of our data store.
And so what we help everybody from entrepreneurs growing up, SMBs, which is kind of our core customer today, all the way into mid-market and enterprise brands, we help them understand their customers, consolidate all that data, understand who they are, and then put it to work through marketing and messaging that critically acts as a revenue driver for those businesses. So it's not uncommon for our customers that 20%, 30, 50% of their revenue is driven through our software. So a lot of software you think of as like it's kind of productivity makes the health of the business run faster. We really pride ourselves on a metric we measure called Klaviyo Attributed Value that is the amount of revenue that we drive for businesses.
We talked about last week, that last year we drove over $50 billion in revenue and sales for the 143,000 customers we work with. So yeah, that's what we're doing today. A lot of our customers, it's interesting, it started out very horizontal, but we quickly found that retail and e-commerce were a great fit. We work with a lot of SMBs and retail and e-commerce today. But we find that that's rapidly expanding, both within that market, but also we're finding that there's a lot of pull from larger businesses and brands, and even other consumer businesses that are outside of retail or e-commerce, or that's just one part of their business. We're getting pulled by those companies to be the central database for their customer data and then the way that they reach those customers and monetize them.
Great. And I want to double-click on kind of the differentiation. The databases piece is certainly a big aspect. In our customer calls, the Klaviyo Attributed Value was also a really unique metric. So could you just set the landscape a little bit? When you win a deal, kind of who are you competing against? And really, what differentiates you guys?
Yeah, sure. So roughly divided, the status quo when we started 10 years ago was there were really two parts to the market. There were folks that were just starting out, small businesses. And for them, the status quo was whether it was email or text messaging, there's this phrase, batch and blast. You'd build up your list, and you'd send everybody the same message, and you'd hope that it kind of resonated. Everybody knew that was kind of silly. What you needed was to understand those consumers at who was buying what, what were their affinities to different categories. Were they loyal customers or first-time buyers? And so we made it really easy to aggregate all that data into our underlying data store.
And then because it was connected to marketing, instead of using spreadsheets to do segmentation, all of a sudden you could do it directly in the software. And so we found ourselves competing with a lot of the traditional kind of newslettery-type products. And so we've taken a lot of share there. And then in the enterprise, what we found was it was just this fragmentation. One of our core beliefs when we started Klaviyo was the best software tends to be vertically integrated. It takes multiple parts of the software stack, and you build both components, and they work better together because you have that tight integration. And so for us, it was all about that underlying customer data base and then the way that you message and market it.
If those two pieces of software were really tightly integrated, it eliminated the need for a lot of larger businesses to spend time building data pipelines, all these expensive processes that were hard to set up. And you'd talk to marketing teams, and they're like, yeah, it's just hard to get things done. So we allow them to execute a lot more experiments faster. And so for a lot of our enterprise businesses, they're used to sending hundreds of different marketing campaigns a week, and they're used to a lot of experimentation. And we've helped them accelerate that because of this vertical integration.
Great. And Amanda, investors often look at kind of ways companies price their products as an indicator for some of the key metrics that the company might be looking to drive. So how is Klaviyo priced? And once you land with a customer, what are some of those primary vectors to really accelerate spend?
Yeah. I can start in a minute. Happy to add on. So the idea for us was we're going to manage all of your consumer relationships for a business. So our primary pricing axis is the number of we call them profiles, but the number of contacts, number of relationships a business has. And so you can think over time, that business is aggregating more and more of those relationships. So kind of the core metric for us was the number of people kind of in the orbit of that business. We'd help you monetize them, and that's what we'd charge for. And the ROI can be extremely high. I mean, for some of our smaller customers, it might be 10 to 1. For some of our larger customers, it could be 100 to 1, could be 200 to 1.
So it's a really efficient way to reach those customers and make them valuable. So that was primary pricing access number one, was you're growing the number of consumers, and we help we index on that. Over the last couple of years, Amanda joined, we've now expanded from being a single product company to a multi-product company. So our first set of products were all in the marketing space. We believe that there's strong trends. Our customers are asking for it around consolidating various marketing channels. So while we started with email was the most ubiquitous, folks have asked us, can you do SMS marketing? Can you do mobile marketing? Can you pull it all into one place? We love your underlying data store, your targeting engine. Can we apply that to all of these channels and use one set of softwares? So we've introduced products for each of those.
We're starting to solve that. That increases customer spend. Now we're starting to branch out even beyond that. Our CDP product is really all about the analytics. Now we're starting to close the loop between businesses and how they do analysis and then action that analysis. In the past, what was you'd have some data analysts working in one corner. They do a bunch of work, and then they have to export or pipeline their data over to the marketing team. Now all of that sits in the same ecosystem, the same kind of data enclosure. We're starting to expand the number of products across all there.
Great. And I want to go back towards the main product kind of on the email side. And a recent kind of debate in the community has been the impact of Google and Yahoo email changes. It was really encouraging to hear on your last earnings call that you guys aren't expecting any disruption from these email changes. But kind of, can you just dig it a level deeper? Kind of, what are you hearing and seeing from your customers that really gives you the confidence that this is not going to be this change isn't going to drive any sort of headwind to growth going forward?
Yeah, sure. So for folks that are not familiar with what's happening, very positive change, we believe, in the email ecosystem. So a lot of the major email providers, kind of led by Google and Yahoo, and I think the others will follow along, they're doing two things. One, they're saying, hey, our benchmark for what is spam is going up. OK, that's good. It was pretty low to start. And two is when it comes to email security, I mean, we talk a lot about security, it's actually been relatively lax. And so in both cases, they're saying, you know what? We're going to bring those up to par with other web standards. So we're very supportive of both these changes.
In fact, we've been kind of helping customers adopt these not just since Google and Yahoo announced these changes six, 12 months ago, but frankly, over the last couple of years, and especially on the how do you send more relevant messaging and content? So we haven't seen a really material impact. Fun facts we'd like to share was we measure kind of the consumer engagement with the email as a channel. And so while they've asked while things like, hey, you need to include I mean, basic things, you need to include an unsubscribe link in every message you send. I mean, it sounds like formally we're already supposed to be doing that. Now that those rules have gotten in place, we've seen literally like, what is it, 0.007% increase in unsubscribe rate.
So we've seen very little change in terms of consumer engagement, both across unsubscribes and then where we can measure it in spam complaints. And so for our customers, the reason we think that's true is because, well, Klaviyo was founded on this idea of don't just do one-size-fits-all messaging. The whole point is to be more targeted, more personalized. So our customers have been doing that for years. And so there really wasn't much of a change for them there. Some of the security procedures, like for instance, identifying signing emails, we've made either automatic through our product, or we've streamlined the process of, say, modifying various configurations, DNS records, and the like. So we've seen good uptake on that. We think our customers are going to spot. And as you think about the long term, I think it's very positive for email as a medium.
We love, if you think about social media, the expectation there is, well, of course, my feed is personalized for me. Email actually has surprisingly not really been that way. We're very big proponents that it should be. We want consumers and businesses and brands to connect in the best way possible. And so we think with these changes, they're actually going to usher in an age where the most relevant messages rise to the top. Those are the ones that get prioritized. They get more engagements. And that's great for our customers. And we actually think that'll be a tailwind for businesses that say, you know, I've actually been kind of kicking the can down the road, waiting to do more targeting and personalization. OK, now is actually the time, and Klaviyo is the best place to do it.
Yep. And that's a really interesting point that with all these changes, you could actually see more customers move to the smart platforms. This dumb kind of spray emails just aren't going to be lasting much longer. I wanted to expand into some of the other capabilities. You've mentioned SMS, push mobile. And kind of what gives Klaviyo kind of the right to win in some of these new markets, especially as you've seen kind of the overall landscape? Many vendors start in SMS, kind of go to email. Kind of why are you guys so well positioned to win in these other channels?
Yeah. I mean, the short answer is because we build great products, and our customers love them. I mean, when I talk to our customers and partners, we talk about we earn that right to win in these other markets because we've proven ourselves with the products that we've delivered so far. And so we're very big believers that I mentioned this kind of the CRM for consumer is like an undefined space. It's fragmented, say. And the foundation of that is going to be this really smart customer database. It knows everything about your consumers. And then you want to plug that into every surface, every place that a business interacts with consumers. So we started with marketing. And within marketing, we think about the consolidation of the various messaging channels, so email, marketing, SMS marketing, mobile marketing.
And then we're rounding that out with products like Reviews that help you collect more data for personalization and to better understand what products are working. So there's marketing. But then there's customer service. So you can use our database and plug that into customer service experience to either automate that through AI or enrich it. And then we think about plumbing that onto your website or into your mobile app so that that experience of when somebody goes and is browsing through your store, that's also highly tailored to them. And then obviously, reporting and analytics, which is our CDP. So we think about those four buckets that make up the consumer CRM stack. And they all have to be built on top of one consistent view of the customer that's at scale because you have a lot of consumer data, and it's available in real time.
Yeah, we just think we have an unfair advantage because we built that, and now we're building out the rest of those applications. Our focus for today is really, let's consolidate down those marketing channels. There's a lot of pull from customers to do that. We're focusing there. Over the next couple of years, the plan is we want to be that entire CRM stack for these businesses.
Going on the data piece, Klaviyo has a really unique strategy, also kind of go-to-market partnership with Shopify. That has allowed you to have really financially efficient kind of go-to-market motions. Can you just kind of walk through with investors what this partnership entails in terms of both the product and the joint go-to-market? How should we think about it from a contribution to ARR perspective?
Sure. So when we think about great unit economics, I think companies have great unit economics. What drives the demand? For us, we talk about the three drivers are one, customers, so customers recommending to each other word of mouth. It's like the best marketing channel of all time. Partners, we work with thousands of marketing agencies and SIs that recommend Klaviyo and offer services around us. And we've helped them build out their practices. And then third, as with Shopify, is with platforms. We love working with platforms that are that transactional system of record. They're the place that the order is consummated, where payments happen. That's a great data source to use for marketing. So I got to know the Shopify team, gosh, probably more than a decade ago. And we love partnering up with platforms that are very product-first, very customer-first, very developer-first.
They focus on exposing APIs. We can build really tight product integrations. So that was actually the core of our relationship. We, for years, just worked on this kind of symbiotic relationship of Shopify would facilitate this awesome experience on the website, great checkout experience, would handle payments, orders. And then we would facilitate the messaging side. What happens after somebody buys? Or what if they sign up? And maybe how do you convince them to make that first purchase? We had lots of customers and businesses being successful. So over time, that became a closer and closer relationship. And a couple of years ago, we sort of consummated that with a commercial arrangement. And now not only are we doing more on the product side, but we've started to do more on the go-to-market side together.
So that includes co-marketing, doing trade shows and events together, and even co-selling together as we mutually move up, address more enterprise customers. So we love that as a model. So for Shopify, well, we've got a lot of overlap with them. They're a leader in the e-commerce and retail space. That's also a model that we think we can take into other sectors of retail and e-commerce, whether that's geographically around the world. But also then we can expand and use that model to enter other consumer verticals. So there are other platforms that are similar to Shopify but just address other types of consumer businesses. And so we've started to develop some partnerships in those spaces as well. So for instance, last year, we announced a bunch of integrations with wellness providers that power gyms and spas.
Very excited about what we're doing with Shopify. I think there's a lot more to do with them. There's also a lot of other platforms that we think we can use to help accelerate growth.
Awesome. One of the other ways that you guys are looking to accelerate growth is really to move upmarket, addressing some of those larger customers. One of the metrics that stood out in your Q4 results was just this strength within your customer spending greater than $50K that grew about 80% year-over-year to over $2,000. Does the go-to-market motion need to evolve at all as you've expanded kind of beyond this core SMB to some of the larger customers? Is there any sort of incremental kind of sales and marketing or product investments you need to make to better address the segment?
Yeah. So one of the reasons that we're seeing that growth, which we're very excited about, is we have this thesis that if you offer this database, these targeting personalization tools, a great marketing software, what worked for SMBs, for the more sophisticated SMBs, was also going to scale into the mid-market and enterprise. And that's been very true. So we've seen lots of organic demand there, pull from folks saying, you know, I grew up with Klaviyo. I want to use it even as my business 10x's. And a lot of traditional retailers, folks like Mattel, Stanley 1913, that have come to Klaviyo and said, hey, we want to standardize on your stack as well. So we've made we think we've got good product-market fit there. And both my co-founder and I actually come from an enterprise background.
So we've started to build out our team, both from the sales, post-sales side, marketing side, that can address these markets. We recognize that some of the way we go to market with SMBs, while the product-market fit is great, like the way you go to market to attract larger enterprises is a little different. Now, that said, one thing that Amanda and I are both mindful of is we're a business founded on great unit economics. And as we move up market collectively as a team, we're doing that thoughtfully. And what's great is, I mentioned these kind of like these three P's of how we grow: peers, word of mouth, partners, platforms. We think we can take that exact same model and apply that up market as well, in addition to our more enterprise up market sales team.
We're pleased with the unit economics we're seeing there and the organic growth, the NRR, we're seeing from that segment. We're going to be thoughtful as we invest.
On the CDP product, I usually think of CDPs as a little bit more of a sophisticated solution. Is that being adopted kind of across the spectrum? Is it concentrated in any sort of customer segment, smaller or larger? When you do your CDP sale, are you replacing something? Or is a lot of it a greenfield opportunity you're going after?
Yeah, that's a good question. So we actually thought it would be more of a mid-market enterprise product. We've actually been pleasantly surprised at how many of our even larger SMBs have adopted our CDP as well. So as we've been learning about this space, it was very muddled when we started. We kind of think about it as two core use cases. The first is reporting and analytics, like we talked about. Folks want one place to visualize, build dashboards about customer behavior. So you can think of the products they were using before that, basic dashboarding. But now that's all integrated. And it's built off the same data set that they're using for marketing.
The magic there really is tightening this loop from somebody doing analysis, discovering a segment of customers that, gosh, isn't behaving quite the way we want it to, or maybe there's an opportunity, and immediately being able to flip that over to the marketing team to take action. So marketers love that because now they have the tools to both do the analysis and action in one place. They can self-serve. And data teams love this because now they don't have to wait around to say, like, hey, I found something interesting. It doesn't take days or weeks or months to get action. So the core of our CDP product today, the first part of it, a lot of the features are around these advanced analytical capabilities. And we're seeing really good adoption of that.
Beyond that, the other part of what we think about as CDP is this underlying customer database. And so we're also building out the APIs and the SQL interfaces so we can give those directly to our larger customers and allow them to program against the internals of Klaviyo on their own. And folks are really excited about that. And just to give you a small example, I was talking with a large cosmetics company that uses Klaviyo for marketing, for email and SMS. And they were excited by this because they said, hey, look, we're actually kind of already finding a way to pull the data out of Klaviyo to use that to do things like website personalization. And even if you guys don't have a product there, if we can just give us access to the data, our development team can build against that.
And not only does it make that Klaviyo stickier, we think in the future there's an opportunity to monetize that as thinking about our core database as infrastructure. So I think what you're going to see from this CDP market is it's really these two core use cases of analytics for data analysts or even practitioners, like our marketers. And then separately, it's going to be this infrastructure product that allows people to extend Klaviyo out into these other parts of their business, both customer-facing, consumer-facing, and internal, where they need access to this reliable source of truth about consumers. So we're very excited about the progress there, but a lot more to come.
Yep, great. And then I want to make sure to hit on the SMS side. About 16% of customers have adopted your SMS product today. So you are starting to see that trend nicely. Where do you think this mix could go over time? And can you just help us round out the puts and takes for investors on kind of the revenue and margin side as this piece of the business scales?
Yeah, sure. So let me talk to the margin side. So I mean, all of our customers I talk to say, I hate point solutions. I don't want to use something for email, something for SMS, something for mobile. I want to consolidate those down. So we are helping deliver on that promise. And the 16% is great adoption. We think that can go much higher. When we survey our customers internally, we're finding that a large percentage of them, the majority of them, they're starting to experiment with SMS. Some of them have SMS programs already at scale. Some of them are still experimenting with that channel. But they want to do it in one place. And they're eager to use our not just for ease of use to understand they only have to learn one product.
But also, they want to use our artificial intelligence and machine learning to load balance across those channels, to figure out, for instance, what kinds of content is better delivered via text message because it's more intimate, it's in somebody's messages app versus what should go into their email inbox. And does that vary by type of content? Does that vary by type of consumer? Those are the kinds of things we can do because we've got the complete data set. So anyways, we're excited about the 16%. But we think the ceiling is much, much, much higher on that. Does that make any sense to the margins?
Yeah. In terms of SMS, we like that it helps our customers. It helps them with how they communicate with their customers. It does come with a different margin profile than email. The way that we manage that is by looking at the total customer relationship and how is this contributing incremental gross profit dollars to that relationship. Then the other thing that we do as we manage across the total business is we have some fantastic work that has been happening in our engineering team, where they are continually engineering and re-engineering the way that we process and store data so that we can get more and more efficient on our cost of goods sold and our compute costs. So that's how we balance out that impact that comes from SMS.
Then I want to ask a little bit more on financials. From an NRR kind of perspective, it did tick down sequentially in Q4 as you guys are lapping some of the impacts from pricing. But how do you think about the longer-term trajectory of NRR and kind of when that can tick back up as you're expanding the portfolio, more people are adopting SMS, still early days of CDP?
Yeah, great question. So as we think about NRR, we think about a few drivers in our business. One is maintaining having a great product that customers love that's incredibly sticky so that they stick with us with strong gross retention. And then as we expand with our customers, we expand in three ways. We expand as their businesses grow, just as Andrew was talking about. As they add more digital relationships into their business and their business grows, they expand their subscriptions with us. The second way that we expand with them is adding new products, adding SMS, now adding CDP, and adding reviews. And then the third way that we expand with them is landing with one brand and expanding across multiple brands and multiple geographies within the portfolio. Historically, the majority of our expansion has come from that first motion, growing with our customers as they grow.
I think over time, as we're growing more up into the mid-market, that we'll see more coming from expanding across products and expanding across brands within the portfolio. And I think a great example maybe to bring our land and expand motion to life is Marine Layer. So Marine Layer started with us several years ago when they were a pretty small business. They now are a fantastic brand, not only online. They have stores across the country, great loyal customer following. And they have grown with Klaviyo as they have grown their business. And then recently, have integrated Klaviyo not only into point of sale in the store but also added the SMS product. So a great example of how we have helped to fuel their growth and how that has fueled their expansion with Klaviyo.
Great. And then when we think about the revenue growth drivers overall, so you have the adding new customers, clearly growing with existing customers, also the move up market. So help us stack rank. What are some of the most important drivers? How would you rank those guys? And then is there any one specific leg that you would want us to be more focused on within that mix?
Yeah, it's a great question. So four primary growth drivers in our business: adding new logos, expanding with those logos, growing internationally, and growing in the mid-market. All four of them are going to continue to be really important drivers in our business. But as you think about how things are going to unfold over the next few years, you'll probably see more of an emphasis start to come from expansion with customers and landing at larger and larger price points as we continue to land those customers in the mid-market.
And then I'm going to open it up for audience Q&A in just a bit. But before I do, haven't hit on AI yet, everyone's favorite subject. You guys recently announced Klaviyo AI. So what's some of the new capabilities that were introduced with that product? And then how do you expect to monetize those? Is it going to be kind of through separate SKUs? Or is it more just attraction to the platform as you have these features?
Yeah. Yeah, something we're very excited about is interesting. We've been working on when I first started, AI was data mining. There was machine learning. And now we're back to artificial intelligence again. So we've had a group internally that's been working on what we dub machine learning and artificial intelligence for the last five years. And we were given one mission, which was we believe the future of software is not software just as productivity. Today, if you use Klaviyo to drive revenue for your business, you buy Klaviyo. But you have to point and click and define the campaigns you want to run. And we have wonderful interfaces to do that. But still, it requires some human thinking through it.
Beyond even generative AI, we think about a future we've been working on where, well, what happens if you just plug your business into Klaviyo and we do everything for you? It's what we've dubbed kind of autonomous. What will be autonomous CRM. But we're focusing first on autonomous marketing. And so what we will launch with Klaviyo AI is a toolkit, a set of features that start to automate away more of the tasks and the decisions that a marketer needs to make day to day. So just to give you a couple of examples, when you're designing a marketing campaign, one of the things you have to do is you have to define the content. Well, with generative AI, we can actually do a lot of that for you.
We can take your brand style guide, what we know about you, the way you like to present to the world. We can pattern match that across a database of hundreds of thousands of customers, millions, tens of millions of marketing campaigns, and allow you to guide us with some natural language, with a prompt, and then design content for you. So now, instead of needing a designer on staff or having to point and click your way to content, we can do that for you and optimize it. So we're taking features like that. And then actually, even at send time, we can do things like we have a feature around Smart Sending, so send time AI. And that's around a lot of marketers, they will obsess over, well, gosh, what's the right time to send this? Is it 9:00 A.M.? Is it 10:00 A.M.?
Well, actually, it turns out we can just test and experiment and figure that out for you based on who your consumers are. So to give you an idea of the impact this is going to have on marketing, we have a customer, Willow Tree, that used some of our AI features to figure out new groups of customers to target with campaigns. It figured out pools of customers and the content that was relevant to them. And as a result of taking those suggestions that came out of our engine, they were able to increase the revenue they drove through Klaviyo, this KAV metric that we talked about, by over 50% in the back half of last year.
So while I don't think we don't know if everybody there's 50% lift out there for everybody, we do think there's substantial lift over what a human intuitively would decide to do with marketing. And so that's what that group, our machine learning and artificial intelligence group, has been working on. So right now, we're in the phase where we are proving to our users, to our customers, that, hey, if you turn on the autonomous features, the AI features within Klaviyo, that, oh, yeah, the revenue that you're driving from Klaviyo will go up. One of the beautiful parts about our business is we have this great metric where we're very close to the transaction.
So I think about, for artificial intelligence, products that are very close to the end value, it's going to be easier for them to attribute, to demonstrate that value, and therefore easier to show that value and then monetize it. So that's what we're focused on doing right now, is very rapidly releasing more features, more suggestions into our suggestion engine for Klaviyo AI, improving to customers that if you turn this on, it's like a speed boost to your business. Now, as we do that, we think there's an opportunity to monetize that. It's not something that we've built into our short-term plans. But I do think over the long term that whether it's an add-on to Klaviyo so you can think of you can buy base Klaviyo and use it yourself. And then if you want Klaviyo to drive itself autonomously, great.
You can buy that as an add-on. Either it'll be something that we offer as a separate product, or we may just build it into our base product. I think this is going to have both advantages around customer retention. I think this is going to become the standard for consumer marketing in the very near future. We were going to lead that. So both on stickiness. Then also, I do think it's just a lot more valuable. Customers are very much willing to pay for that.
Great. Do we have any audience questions? I did want to hit on the macro kind of demand environment for a minute because you do have such a wide base of over 140,000 kind of customers. So what are you seeing in terms of the health in your customer base? And is there any differences between that core SMB that you guys are serving and then also some of the larger markets?
Yeah, so a couple of things to hit on. The first is, over the last couple of years, well, we've seen some fluctuations. Different businesses perform differently in terms of their revenue. Klaviyo ultimately monetizes indexes to the number of, as Amanda said, the number of digital relationships that a business has. And so while the revenue over time, consumer demand for various product categories, fluctuates, actually, the number of relationships, we found that to be pretty much monotonically increasing. So we believe that's a very durable trend. If you look at the number of relationships between businesses, organizations, retailers, and consumers, so many of those are still analog. They're in the physical world. And there's still a long way to go to digitizing all of those. So in that sense, we've seen that's a very durable growth vector for us.
There's not a business I talk to on the small side that will say, yeah, yeah, it's very important that I build out my own customer database relationships. And then for traditional retailers, they all have initiatives around how do we grow that consumer database, the number of people that we have direct relationships with, to 10 million, 20 million, 50 million. And so they're looking to us to power that. So that's one. And then two, I'd say, is a lot of businesses, when customer acquisition is harder, they look to us they look to Klaviyo as an accelerant to customer acquisition. But then also, they look to offset that with more demands, more revenue driven through existing customer relationships. The reality is that it's much easier to get somebody that's already a happy customer to come back than it is to acquire a new customer.
We like to think at Klaviyo, we help with both. We maintain those relationships with customers that you already know. If somebody visits your website, we give them an alternative. Rather than having to buy right then and there or go away forever, we actually give them an on-ramp. It's like, well, why don't you learn about this business? Maybe it's an offer. Maybe it's some educational content. You can convert them down the line. In both cases, I think we think of Klaviyo as kind of an all-weather company for folks who want to drive revenue. When it's all up and to the right, great. We help accelerate that. When it gets harder, we actually help you go back to the customers that are the most loyal and help you convert the folks that are maybe new to the business.
A customer summarized it well for me the other day. She said, "Amanda, my CAC is increasing. You guys are the key partner I count on to increase my LTV.
Great. I think there's a lot of really interesting things to look forward to, you guys. You're so ingrained in kind of the customer relationship, seeing you add kind of just the new customer side but also moving up market, the expanding of the portfolio are all really interesting things we'll be watching for this year. Thank you so much for joining us today.