Exclusive: Zeta Global Continues Growth Trajectory With An Eye To IPO – Zeta Global (Private:ZETA) No ratings yet.

Zeta Global (ZETA) is a large, privately-held advertising technology firm that has been keeping a close eye on the IPO market in recent years.

The company, which was founded in 2007 by CEO David Steinberg and former Apple (AAPL) and Pepsi-Cola CEO John Sculley, uses ‘people-based, precision marketing’ technologies to help major brands and advertisers enhance and better target their multi-channel marketing efforts to increase ROI.

Below is a brief interview on the firm’s use of artificial intelligence in advertising:

Source: Fox Business

I previously spoke with CEO Steinberg in early 2017 in the wake of the firm’s announcement of a $140 million in equity and debt financing for the twin purposes of growing the business and acquiring new technologies in the rapidly-changing global advertising technology marketplace.

With all of the advertising industry developments since then, the enactment in Europe of the GDPR privacy law, U.S. advertising controversies with Facebook (FB) and others, I again had the opportunity to speak with Steinberg about the firm’s progress, the regulatory environment, M&A activity, and the IPO market.

(The following has been lightly edited for brevity.)

We last spoke in April 2017. With 2017 and 2018 full-year results in the rear-view mirror, how would you describe Zeta’s financial and operational trajectory during that time and your projection for 2019?

For 2017 and 2018, we grew the business by greater than 20% each year on the top line and we grew the bottom line even faster than the top line.

Our business continues to progress well. We are now 1,400 employees on four continents and we have 750 customers, with no customer accounting for more than 10% revenue.

We are targeting the Fortune 2000 customer base. About a third of our customers are in Fortune 500 and the other two-thirds in the F-2000, with a few middle-market clients.

For 2019, our goal is to continue to grow top-line revenue by 20%. We see two to three more years of 20%+ growth before we step down into the teens. We would love to go from 750 to 800 customers.

How would you describe changes in competitive landscape or how you see the industry evolving, especially with respect to privacy, GDPR, Facebook’s troubles, etc.

More converging than ever before. Before you had a bunch of tech companies providing individual pieces, now you’ve got one company doing multiple aspects – started to see some consolidation in the space.

We’re one of the world’s largest data and marketing clouds; we have a competitive advantage over smaller companies.

Privacy regulations haven’t affected our growth rate or business, but the reality is that any company must look closely at data regulation and privacy. We recently announced our first ever Chief Privacy Officer who is one of the top experts globally around this.

Keep in mind that regulations get passed and tested in the courts and that will determine how GDPR really operates; for the first time in the U.S., the industry is asking for a single Federal law instead of a patchwork of state-by-state laws. Reasonable regulation is a good thing.

Zeta is on the conservative side; we never sell our data, so we are using our data to build intent-based scores and how best to target based on that.

On the M&A front, in April 2017 Zeta had raised $140 million for acquisitions. You’ve since acquired Visto and Temnos. How did those acquisitions fit into your firm goals?

Both were team and technology deals. The Temnos deal was cool – its AI tracks every web page every day and synthesizes it down to topic and intent, then scores the topic based on how many people are interested vs. last week and last year.

Disqus, which we acquired just prior to the equity and debt raise, is our main asset where 4.2 million publishers use the platform for commenting management.

We attempted to buy three deals last year but they were too pricey and we couldn’t come to terms, so we’ve seen a big disconnect. Two of the three companies didn’t trade at all. But, we’re starting to see a little more connection between price and reality in recent months, so it is starting to normalize. I think people were just not getting the prices they wanted and they are beginning to realize that.

What’s your take on the current IPO market, most recently with the Lyft IPO?

We’re expecting to see a few more big tech IPOs over the next few months and it will be interesting to see what that does to private company valuations. Google broke its IPO many years ago and yet it began a stratospheric ascent thereafter, so people forget these things. I wouldn’t just judge things on how they look today; I feel the Lyft IPO was a success.

What are Zeta Global’s plans for an IPO?

We have a large amount of cash on hand, our EBITDA/Debt is lower than years ago and we generate cash flow at this point.

I think a lot of private firms are looking at these 4 or 5 very big companies as ‘canaries in the coal mine.’ If they do really well at IPO, maybe it will be safe to enter the market. If they don’t do well, maybe we’ll continue to wait, but certainly, the next logical step for us at this point would be to do some type of offering.

I research IPOs and technology M&A deals.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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