All right, perfect. We'll go ahead and get started. Thanks, everyone, for being here. My name is Arjun Bhatia, and I am the research analyst here at William Blair who covers Zeta Global. For a full list of disclosures, please go to williamblair.com. It is a pleasure to have Neej Gore from Zeta Global, who is the Chief Data Officer, and Chris Greiner, who's the CFO. Thank you both for being here. Appreciate it.
Thank you, Arjun.
We're going to have, I think, a mix of folks in the audience. Maybe the best place to start is to just talk about Zeta a little bit. You're kind of in this marketing space, but I would say you probably have one of the broadest platforms in marketing that I know of. Talk a little bit about what you do, what's unique, and what's the ROI that customers get out of using Zeta.
Yeah, I'll start, and Neej, feel free to jump in. What I'll do is I'll put you in our customer's seat and how they look at their business every day, which is if you're a brand and you're a marketer in particular for the largest brands that are spending hundreds of millions to billions in marketing, those are our typical customers. They are trying to acquire new customers. They're trying to grow their existing customers and keep their existing customers. Those are the different use cases that we serve.
For most of our—well, all of our competitors, they do one or the other. They'll either be focused, say, for the marketing clouds, like a Salesforce, Adobe, Oracle, and Epsilon, on the retention of existing customers. They will be able to help that brand based upon what that brand's information is on the four walls that's inside their business.
There are those that are helping those enterprises acquire new customers. Zeta, to your point around this all-in-one platform, is the only platform that can go to a brand or an agency and be able to tell them not just what we know based upon our Data Cloud about their existing customers that can then be merged with all of the data they have in-house to then further retain or further grow their existing customers, but at the same time, in the same console, same pane of glass, be able to tell them who are those prospects that look like their best customers that are known to be in-market at this moment in time. From a use case perspective, that's a very powerful proposition for a marketer.
How many of us own a credit card or recently bought a shirt, but every single day we're marketed to as if we're a first-time customer? We are able to create that single view, single identity of a consumer, whether an existing customer or a prospect of yours. We do that by bringing to bear three different parts of their technology stack.
This consolidation of technology or this replacement of technology in the consolidations of point solutions and features, access to our Data Cloud, access to be able to automate and orchestrate all of their marketing activities, and the ability to digitally engage their consumers, whether it's through programmatic or through email, through mobile, or any different omnichannel activation capability, they can work inside our platform. Oftentimes, it's that lowering of total cost of ownership that gets us in the door.
To your point around ROI, what allows us to not just stay in the door, but get measurably and predictably bigger over time is the transparency of our work. Because we start and work with the majority of our marketing activities that are at the bottom of their funnel, it's measurable. It's attributable to our work.
Not only do we give them our visibility, meaning we're not scoring our own homework, they get to score our attribution, but they can do it side by side with what they're doing outside of Zeta. That oftentimes leads to, well, I get a better ROI with Zeta, I'm going to keep pushing more and more in Zeta's direction. That's evident in the growth of our cohorts. It's evident in the growth of our ARPU over time.
Yep. Ok, that's a good start. Ok, so the part on ROI is interesting, right? Because in this space, I feel like there's a more direct tie-in to ROI because you're getting revenue, you're getting a customer, and you can kind of say, all right, I did this in Zeta, and this is what the outcome was. That kind of leads to this big market. That's why there are so many competitors in the space, right?
You have Salesforce, and you have Oracle, and you have Adobe on the software kind of side. Then there's The Trade Desk and others on the media side. Then there's a whole host of agencies that are also trying to do this. Compared to them, what are you doing that's different? In addressing the different use cases, what is it that Zeta does that those players don't do? What's really unique about them?
Yeah, I think that's—and again, taking the lens of a CMO, and I'm Neej, by the way, I'm Zeta's Chief Data Officer, as Arjun mentioned. If you look through the lens of the CMO, there's two major trends happening in marketing and advertising today. The first is that CMOs believe in convergence. In the last 10 years, they've made investments in Databricks and Snowflake to bring all the data together.
Why do you do that? Because you want to be able to apply AI and machine learning to it. If you believe in convergence, that means that you need one solution to be able to acquire, grow, and retain off of one canonical data set. This is Zeta's philosophy as well. That's number one. The second thing is that we are believers in the idea of identity-based marketing.
that means is there are several companies that believe in identity-based marketing, namely the walled gardens, like Facebook and Google and Amazon, where you can select a group of individuals, you can send them marketing, you can see if they took a desired action, and then you can optimize the result against another group of individuals. No one has brought that approach to the martech landscape before Zeta.
There are a litany of companies in the space. They work off of probabilistic models. They work off of contextual models. The idea that you want to start with people, market to people, measure people, and then optimize to make those campaign performances improve over time, that is a function that has existed in walled gardens. We are exposing that same capability to the broader martech and adtech ecosystem. These are two things that are really tailwinds for us as the market moves forward and evolves.
The data is a big part of your edge, right? It kind of fuels the platform. You have a lot of other workflow capabilities as well that are important. I think on the data side, I believe it is 240—correct me if I am wrong—240 million US individuals that you have data on and over 500 million globally. Maybe give us a sense of how unique that data is, how proprietary it is, where you are getting that from, and then how it feeds.
It looks and feels a lot like what you'd find with a walled garden, like a Facebook or an Amazon or a Google. We own at-scale networks that provide tools to publishers. We own one network called Discuss. I'm just going to give you two sources of the data, but we have more than two.
Discuss is basically allowing commenting on long-tail publishers. Whenever you go to the internet and at the bottom of a web page or a shopping page, you see an upvote, downvote, leave a comment. It drives engagement and monetization for those publishers. There are millions of publishers that use that type of capability. On the other side, we own a company called Live Intent. Live Intent is the largest email exchange for publishers. I use publishers broadly.
Think about The New York Times, The Wall Street Journal, Groupon, Sam's Club. They power email ad units within publisher emails, like the ones you receive from these brands. Those are sources where we're able to collect signal. We're able to collect identity through our relationship with the publishers. They contribute to the 240 million in the graph.
That 240 million, again, represents about 90%-95% of the US adult population. It can fluctuate a little bit month over month, but we're at scale and at maturity in the U.S. On top of those individuals, we would layer in signals. What does someone want to do next? What are they reading about? What are they shopping for? All of those become features of an individual profile. That is used to create optimized campaigns. Those campaigns are generally generated by a combination of our platform and AI coming together.
Maybe just to clarify one point, you're not selling the data, are you? How do you monetize your platform?
Yeah, so, and this is a kind of a loaded question, and I had mentioned this to Chris. The rules around what constitutes a data sale are changing. It's state by state now. If you are enriching a customer's understanding of their customer that's being used for marketing, that could still constitute a data sale, like in California as an example. There's nothing wrong with it. It's just the definition of selling data is changing over time.
Our general and most widespread model is to enrich a customer's understanding of their data and allow them to achieve better outcomes through our marketing platform. They have to use our channels to actually achieve those outcomes. That is the way we operate. We also allow customers to tap into our data asset to find new customers, just like you would find an audience in Facebook, as an example. Zeta manages our own audiences that are very, very high value, that give different intents and interests that you can use to find your next best customers.
Maybe if I paraphrase, for a customer to actually engage someone through Zeta's data asset, they would have to do it essentially through your platform.
That's correct. They use us for marketing, and they use our platform to reach those end consumers.
Got it. Ok, perfect. Maybe switching gears a little bit, one of the, I think, big successes you've had over the last, I'll say, year and a half now has been working with the agencies. Historically, you've gone direct to enterprise. We started working with the agencies. They've loved Zeta, and they've kind of distributed it to their brands that they're working with. How important is this channel? How much of a, I'll say, differentiator has it been to your, or a help has it been to your growth rate? Maybe just talk about the different dynamics between enterprise versus agencies.
It's evolved. It's evolved from starting with our philosophy several years ago. You probably would have pinned us down. We would have kind of squinted and said probably more of a competitor than a partner. It's certainly evolved now to be full partnership. It's taken a multi-pronged growth approach now. We started first working with the largest global agencies. We would refer to them in our earnings calls as the holdcos.
These holdcos deploy billions and billions of dollars in media. They work with hundreds of brands each within their umbrella. It is a one-to-many, very exciting go-to-market strategy for us. It starts with solving their toughest problems, which oftentimes can be marketing inside the walled gardens. It leads to, over time, doing more and more inside Zeta's platform.
It's gone from, call it, mid-single-digit % of our revenue to knocking on the door of 20%. It's been one of our fastest-growing segments of customers. We now work with all five of the largest, working on the next. It is now split into a dedicated sales team focused on those customers. That is a lot of harvesting and partnership work that's still a long way, way in front of us.
By way of example, we work with, call it, 100-plus brands at all five of these, adding up to all five of these agencies. Meanwhile, there are thousands of them that we should be working with. It's pretty early in its growth story. We also started to do more and more with independent agencies. These independent agencies could be regional-based. They could be very vertical specialized. They could be maybe more multicultural or creative only.
It could be a whole host of things. There are hundreds of these independents. The biggest difference there is that they work with Zeta, engage with Zeta a lot more like a direct enterprise relationship does. They are taking on multi-year contracts with Zeta. They are creating minimum usage contracts that have to be fulfilled using our direct channels. It does not mean we cannot do social, but they are starting with using Zeta's platform. They are white-labeling it.
They are going to market with a whole new set of capabilities from data enrichment to prospecting to business intelligence. They are branding it as their platform. They are winning new business incrementally because of it. We started with two at the end of 2024. We are now approaching six of these independents. There are hundreds of them. It is a really new, exciting growth area. There is a dedicated sales team to it as well.
It's a big part of our growth play. It's almost a hunting license for Zeta. If we do great work to keep asking for more. There are different ways we can scale within these agencies. We can kind of operate within many of them have sub-agencies, several sub-agencies underneath an umbrella of a holdco. We'll work within each one. There are other models where they centralize digital buying.
We can be part of what powers that intelligence of where media is best deployed across many brands. That's a great model for us to scale even faster. There are different ways in which we can grow within those accounts. It all starts with the outcomes that we're helping them generate and helping them be more efficient, generate higher margins working with Zeta.
Yeah, so it's a win-win because they're winning more business by using Zeta. Obviously, you win because of that.
A better margin as well.
A better margin. What were they doing before Zeta?
A collection of internal tooling, external tooling, and then a collection of different solutions to deploy media. We're consolidating all that into one place for them. It really gives them the ability to compete on tech, compete on data, compete on intelligence. I think the next vector is really being able to compete in generative AI because we invest so much of our effort now and R&D effort on pushing generative AI forward. These agencies want to take advantage of all of those kinds of updates as well.
OK. Where are the--so you mentioned, Chris, that the agencies will start off maybe with one use case, and then they'll expand over time, or one channel, and they'll expand over time. Where are you in kind of getting broad-based adoption with some of, I'll say, your more tenured agency customers and their brands?
I'll expand even beyond agencies. Our average customer is now approaching three channels per. Up to this point in our growth journey, the primary vector of us getting bigger and growing ARPU has been channel expansion. Our fastest-growing cohort were those scaled customers with three or more channels. That continues to work well. That was an evolution of our sales model we made, call it three years ago, where no matter whether you were selling retain or grow or acquire use case, you could sell all channels on the truck, if you will.
The biggest leap forward, and what we announced recently as OneZeta, is this multiple use case expansion. If I add an extra channel, and that extra channel I add to a customer equates to a dollar, there is three to five to seven times more leverage by adding a use case.
It's our OneZeta initiative. Of our 548 scaled customers, which is still wild even to us as we think about it, less than 15% of those 548 scaled customers use more than one use case. Meanwhile, all of our use cases are 100-plus million in scale, growing double digits. Structurally, within these enterprises, they have separate infrastructures and technologies and people that manage existing customers and separate technologies and infrastructure and people that manage the acquisition of new. There is a bit of an organizational hurdle to work through.
More and more CMOs are looking to bring those teams together for obvious reasons. It just doesn't pay to market to you as if you're a new AMEX customer when you're already one. That's wasted media. It's a massive opportunity for us. It's why we created this OneZeta.
We're not letting our teams kind of run across the whole portfolio to sell it. We started with around 10 targeted customers in 2024, had really good success there. We've got a couple dozen this year. That lens will get wider and wider over time. It does not just have to be within enterprise or within an agency where we have that strategy. It is very much and even more appropriate when our direct enterprise relationships, we can sell that multi-use case strategy.
Less than 15% of customers have more than one use case today. The expansion, when they do add another one, is multiples?
Multiples.
OK. And do you, like when you're going to market, do you prioritize between acquire, retain, grow, one over the other? Or do you think there's one use case that can be the big next seller for you?
I think what's really interesting about our go-to-market model is, A, we are not beholden to an RFP cycle. If you think about where we started, a brand's technology stack is they spend a vast amount of money on data sets, third-party data sets that they can then use to benefit what they know inside their four walls. They spend software to orchestrate all that, the marketing clouds.
They spend a vast amount on acquisition. Zeta can enter through any one of those doors. Our preferred way of entering is starting with data. We call it data in, media out. Most of the time, these are $50,000 pilots to $150,000 proof of concepts that reliably get bigger over time. We have a slide. It is in our earnings supplemental. I think it is like slide 9 as of the last quarter.
What it shows you is the cohorting of our customers. If the vast majority of our deals start in this $50,000-$150,000 level, within the first 12 months, based upon last year, the average spend within the first 12 months of those customers is $900,000. That's up from $600,000 in 2023. It gets bigger and bigger in that one to three-year cohort to where that three-plus-year cohort is over $2.5 million per. There's very significant scaling. In our experience, past $1 million is where we start to get that hyperscale. Yeah, it's a very predictable, reliable growth. It all, again, ties back to the ROI that we're generating.
Yeah. Maybe one, just if we zoom out, we've talked about a few of the growth drivers. I would love you to kind of just maybe unpack some of the other ones that you're also kind of pushing. Because when I look at your growth rate, you've been growing mid to high 20s, organic growth, ex-political for the last two years. Even this year, you're forecasting, I think, 23%. You have agencies. We talked about OneZeta. What else are you pushing that's driving this level of growth? We do not really see this that much in software.
Yeah, so we've made considerable investments in generative AI over the last several years. I think our version of generative AI is not to version our software or sell it as an upsell. We think that generative AI allows marketers to have easier, faster, better solutions.
That drives consumption. If you can make it easier for them to deploy a campaign, see the result, and then redeploy, you're going to actually drive more consumption to the platform, especially if it's performing well. Our growth can come from two places: the subscription side, the consumption side. On the consumption side, we're seeing big upticks in that respect. I think this is still TBD as to how generative AI will shape out from a pricing model long term. In the early innings, the easier, faster, better model is working to drive consumption.
Where does Agentic fit into that? Because you've talked about Agentic before as well. Is that part of the?
Yeah, Agentic is part of this. We think of Agentic in three worlds. There is productivity, there is personalization, and prescience. Productivity is, can you just get a marketer to be able to do more with the same resources? Personalization is, can you actually deliver against a one-to-one experience at scale?
If you have seen Zuckerberg's recent comments, that is what he is talking about. Prescience is, can you basically allow a marketer to become a data analyst on the side and make it easy for them? These are the three vectors that we have been pushing forward for about a year and a half now. A lot of the tools are in production and being used tremendously by our clients today.
Maybe it's a little bit too early to concretely answer this. But I'm curious how Zeta's agents will interact with other agents from other companies. Do you orchestrate that? Is that integrated today? How does it work?
Yeah. So there are two protocols today. One's called MCP. It stands for Model Context Protocol. Another one's called A2A, Agent-to-Agent Protocol. These will become the interfaces through which our agents will collaborate with external systems, external databases, other agentic frameworks. We're doing a lot of testing in this already. It's still early, though, because the guardrails around these systems are not fully equipped yet.
OK. Maybe switching gears a little bit. Chris, I want to come to you because I think the kind of selling environment, the uncertainty out in market is on top of mind for everybody. I'm curious, as CFO, how you think about forecasting and giving an outlook in this environment when there is uncertainty. What are you seeing from your customers in terms of behavior change, if anything, recently?
We haven't seen anything different. In fact, when we ended the fourth quarter of 2024, seven out of our top 10 verticals—we serve 15, but the 10 are called 90% plus—grew over 20%. That was the same seven in the first quarter that grew over 20%. Now, we wanted to approach guidance and how we communicated with shareholders in a very thoughtful way.
First, when we raised our second quarter guidance on the top and on the bottom line, we wanted it to be clear that that was a reflection of our expectation that the momentum we had in the first quarter would continue to be in place in the second. I talked about how the month of April was every bit as strong, if not stronger, than the month of March. Continues to be our view of the world.
The second half, we did not have a data-driven marker to take down the second half. We felt like, for the first time, the psyche marker of the investor was more important to take what we beat by in the first and just lower the second half as an extra layer buffer, period, full stop. If you know our company, you know that we typically like to give ourselves 2-5 points of growth buffer in any given quarter.
This is the extra layering on of that 2-5 points of growth buffer. The verticals that we see as our fastest growing, if you extend out to the rest of the year, we have given ourselves room to where those four verticals have the ability to grow half as fast. We still get to what our guidance was. Not to say that that can't happen, but that's a lot of dominoes and totally different industries falling simultaneously to have to be the case.
You've kind of proactively left some of this cushion, even though it's maybe out of an abundance of caution as opposed to something.
Totally out of an abundance of caution, zero data-driven markers as to why we could have done that.
OK. Maybe just like as you're thinking about the model and how you run the business, what is the trade-off that you can make between growth and how you invest for growth versus margin expansion? We are, I think, as we look at the guidance, there's both that are happening. What's the levers that you look at?
In fact, over the last five years, we're in rare air in that there have only been a total of eight companies from 2021 to what is expected of them in 2025 to grow every single year over 20% and expand free cash flow margins every year. You do not have to sacrifice one for the other.
I think it is actually a misnomer amongst the investing community that you have to. I did a podcast yesterday talking to some extent about this. That is because our philosophy of investing as a company is every dollar we have to deploy should go towards creating the best product in the market and creating sellers that can go sell it. We do not invest in the middle. In fact, we invest to get leaner in the middle.
We have been able to drive more engineers, more data scientists, more sellers, more account reps while reducing the middle of our organization. I think we can continue to do that. It does not put us in a situation where we have to make that trade-off. Frankly, if we could hire more engineers faster, we would. If we could hire more sellers, we would. Throwing bodies at growth is just a bad investment.
We make the funnel pretty small for hiring and sales. We have over-indexed on hiring the most experienced sellers, which means we pay them more. The benefit of that is they know how to ramp themselves faster, and their time to their first deal is multiples quicker than what a newer inexperienced sales rep would be. We hire with an expertise.
It could be an agency expertise, a marketing and software expertise, or an industry vertical expertise. These different lenses and gates that you have to get through make that funnel a little bit smaller. We're still in a net add position of quota carriers. We think we need to add 10%-15% more quota carriers a year to hit our goals. That's about half as much as we've had to add in the last four years.
You have, as you're looking at some of the other growth initiatives, whether it's AI or whether it's OneZeta, are those specialist sellers? Are they part of your core go-to-market organization? How does that picture kind of?
Our OneZeta team is led by Ed See. Ed See is our Chief Growth Officer. We hired Ed in January. Ed was the lead partner for McKinsey's marketing practice. So he has got an incredible book of business that he can go immediately call upon. His team is small.
They're more like fighter pilots. If we are going to one of the largest airlines, one of the largest banks, one of the largest health care companies, we will take our best seller in one of our three verticals, acquire, grow, or I should say use cases, acquire, grow, retain. They will lead the deal. But all sellers are incentivized to make this multi-use case sale happen. So we're not necessarily adding a big layer on top. It's just more of the coordination point.
Ok. Maybe I'm trying to bridge this with the conversation we had earlier just about the agency growth that you're seeing. Is there a balance that you have to kind of manage between how much you're focusing on direct? Because agency channel has increased to 20%, as you mentioned, relatively quick. Can you do both effectively?
I'm not saying this to be flippant. We don't run the company like an investor might view the KPIs. We lead our sales process with what is the toughest problem our customer needs solving. In the agency space, that is social, it starts with. Where can we drive the best ROI? That is from using Zeta's direct channels to market, full stop. It's that combination.
What I think is oftentimes misunderstood is that growth with the agencies, which has been our fastest growing new customer set, totally new set of customers that we were selling to today that we weren't three years ago, their toughest problem is social. Social grew the fastest out of the gate. They're now making that nice migration.
Even though those margins on selling social are called in the mid-30s versus when we sell direct in the mid-70s, it is accretive to adjusted EBITDA. You have had this mix shift from a new set of buyers starting with a lower margin product. Outside of a sales commission, we are not innovating inside the walled garden. There is very little G&A attached to it. It is a very high adjusted EBITDA.
As this mix shift has happened, yes, there has been some attraction in gross margin. We have been expanding adjusted EBITDA margins faster and free cash flow margins even faster than that. I appreciate very much the focus of an investor on this. If you zoom out, you are solving your customer's toughest problem. You are becoming stickier in the organization because of that. There is a pathway that leads to higher ROI on a higher margin product over time.
Yeah. Because essentially, you're getting distribution from the agencies, which is one of the benefits of going through that channel. Ok. Perfect. We are out of time. So we'll leave it there. Appreciate the time, Neej, Chris.
Thank you.
Thanks as always.
Thanks to you, Arjun.
For everybody in the audience, we do have a breakout in 10 minutes upstairs in GenAI, if you'd like to ask any questions.