DAVID STEINBERG: I appreciate it.
Though we’re actually not a programmatic company. I’d say we’re a marketing technology company. Though it’s funny you say that, because our business encapsulates so many different things, it’s been confusing to Wall Street. And I think your comment is emblematic of that.
We do happen to own a programmatic platform, but it’s not a big percentage of our revenue. We’re really a marketing cloud. We compete directly with the other marketing clouds. In this quarter, we added 30 new logos [business jargon for a brand client], and in 100% of the cases we’re either displacing or competed with one or more of the other very large marketing clouds.
We’re a software platform. The vast majority of our revenue is in the form of software fees. But we also own a data cloud, and we own an orchestration business where we do activation. So we’ve got the software, the data and the activation in one place. It can be confusing to new investors.
What was behind that confusion?
I think we did a poor job of iteration. We tried to get too granular. And the story just didn’t didn’t resonate. The way that we’re repositioning the story is: “This software plus data plus activation in one platform, and that’s the simple way of doing it.”
I think it’s our job to simplify the story as it relates to Wall Street. And the way to do that is, you really focus on the sum of the parts: the software, the data and the activation.
What’s the breakout of your revenue between the activation, software and data business?
Seventy-seven percent of our revenue is on our software platform. Twenty-three percent is activating with third-party platforms like Facebook, or some other activation methodology on behalf of our clients. Software was 68% of our revenue a year ago, and it’s now 77%.
We’re better at finding customers using our data and our software, so we’re doing more and more on our own platform, and a smaller percent on third-party platforms like Facebook, Google and others.
The reason Wall Street cares about that so much is because gross margins on our software platform are in the 70s. And our gross margins with third-party activation methodology, or what we call all platforms, are substantially lower.
Our goal is ultimately to get our own platform revenue to over 80%, which would be a good metric for us. That’s why the way to think about us is as a marketing technology company, in that over 85% of our revenue today is subscription or reoccurring revenue, even though we own some advertising technology assets.
Where does your first-party identity data come from?
In our Data Cloud, we have about 20 different software tools for publishers and a publishing platform. So the vast majority of our data comes from the ownership of Disqus, which is the world’s largest commenting platform. Over 5 million publishers have embedded Disqus into their tech stack, to allow consumers to comment, share, and interact with articles. And hundreds of millions of individuals log into Disqus accounts every month.
We also own a publishing platform, where people opt in to receive newsletters.
The US base number for consumers in our Data Cloud went from 220 million opted-in identities a year ago to 225 million in Q2. Two years ago, it was 190 million. We do expect that number to continue to grow.
Is that newsletter business software for publishers or people who send newsletters, or you producing content?
The content is created primarily by artificial intelligence at this point. They have multiple articles that sum the news of the day in certain topics, with links back to other publishers. We have an editorial group that worked through it. But we publish over 1,700 newsletters on a daily basis today to many millions of people.
We don’t monetize that. We give it away for free to the consumer. But the consumer opts in, and we then use their data on the back end. We never share the consumer’s identity with any of our customers. All they know is that Zeta ID number X now has a high level of intent to buy their product or switch services. That’s one of the reasons our Data Cloud works from a CCPA and GDPR perspective.