Zeta Global, the cloud-based CRM and data services company, plans to break into the marketing cloud arena with a demand-side platform (DSP).
“Every conversation starts with, ‘Zeta who?’” said co-founder and CEO David Steinberg.
But Zeta has become a known quantity in ad tech. Over the past year, the company has emerged as an exit ramps for DSPs.
It acquired the Sizmek-Rocket Fuel DSP out of bankruptcy. Then it struck a deal with PlaceIQ – taking over its DSP business in exchange for PlaceIQ becoming Zeta’s default location data provider. Next on the block was IgnitionOne, which handed Zeta its DSP business when it couldn’t afford to operate the platform.
But Zeta doesn’t shoulder heavy integration costs like other marketing clouds, Steinberg said. Zeta acquires DSPs for their book of business and ditches the tech, consolidating accounts to the Sizmek product. IgnitionOne and PlaceIQ DSP clients are now using the Sizmek DSP – or someone else’s.
“Advertising technology is going through nuclear winter,” Steinberg said. “Which means there are opportunities to buy businesses at great values.”
The marketing cloud biz
Zeta doesn’t have the balance sheets of Salesforce, Oracle or Adobe, but it’s raised $380 million, is profitable and has deep-pocketed backers in its co-founders, Steinberg and John Sculley, former Pepsi CMO and Apple CEO. And there’s an opportunity to connect its marketing cloud and CRM services with ad tech in a way that other clouds cannot, according to Steinberg.
Oracle insists it will never own a DSP, since that would be a conflict to third-party data sales. Salesforce also strategically avoids ad tech, focusing its pitch as an analytics and integration hub.
Companies that sell data or sell themselves as a “Switzerland” of marketing avoid media activation, because it’s an obvious conflict, Steinberg said. But Zeta doesn’t sell data. It has an audience graph to attribute and target campaigns, but that can’t be exported from the platform, more like Google’s or Facebook’s approach (except Zeta also doesn’t own media – the big walled garden conflict).
Zeta’s data comes primarily from Disqus, the largest online comment board service (if you’ve left a comment on a news story, it was probably over the Disqus platform), and from a newsletter operation. Steinberg said Zeta sends 1,700 newsletters per day in categories like mortgage info, real estate and health and exercise, which gives it a stream of email data to anchor its identity graph.
But while brands trust Google and Facebook audiences even if they can’t audit the data, Zeta must convince skeptical agencies to embrace its identity graph. Zeta is pitching a similar identity framework, but doesn’t have the consumer-facing business.
Why DSPs?
If DSPs are folding left, right and center, and almost none are being founded or funded right now … why does this make sense for Zeta?
As The Trade Desk and walled garden DSPs have shown, the category can be lucrative at scale, Steinberg said.
Zeta still needs to buy or build scale, but it claims it has resources to do so, and Sizmek won’t be the last DSP to skid to an exit.
“Advertising technology companies are struggling because many more were created than the market really needs,” Sculley said. “Our skill is to feed the scale on our side while absorbing those struggling businesses.”
Zeta’a DSP ambitions hinge on first-party data. The Trade Desk has a bustling third-party data marketplace, but that eats up more and more of the overall media plan.
Data previously accounted for 20-25% of Sizmek media buys, Steinberg said. But Zeta can offer its data to DSP customers for free.
“The goal is to go head-to-head with The Trade Desk and say, ‘You’re spending 10-20% of your budget on data and with us that goes to zero,’” he said.
Zeta’s investment thesis is sound, said Matt Prohaska.
But the company still has a to catch up with DSP category leaders. The DSPs Zeta acquired last year over-index to display and mobile, so Zeta needs to invest in channels like out-of-home and, especially, connected TV, Prohaska said.
Advertiser outreach
So will Zeta’s DSP actually be able to scale to the point where its bet pays off?
Zeta hasn’t become a must-have DSP. Part of the problem is that Zeta isn’t a natural fit for Sizmek, its DSP flagship.
“We didn’t buy Sizmek for the customer base overlap, which there was little to none,” Steinberg said. He said the deal was for the tech and the talent.
Zeta’s roots are in brand relationships, mainly Fortune 2,000 types that could tap into Zeta’s identity graph to evaluate metrics like churn rate or potential lifetime value. Sizmek and the other DSPs it’s acquired had deep inroads with agency holding companies.
“Since they’ve come together with Zeta, there’s much less activity for us on the Sizmek front,” said one holding company data executive.
Zeta doesn’t lead with Sizmek as an entry point for new business, said another holding company exec. “They’re still pitching their data, and the DSP is just something they have in the toolkit.”
About two-thirds of Zeta’s business is subscription contracts for data services, Steinberg said. The other third is “episodic” revenue (i.e. advertising).
Prohaska said Zeta is heavily tested in market, along with DSPs like Xandr, dataxu and The Trade Desk. And he said that there’s strong demand for scaled and sustainable alternatives that could right-size overall spending with Google, Facebook and Amazon.
“They’re off-radar now because their story is still forming,” he said. “But they have a lot of people trying to root for them.”
