Zeta Global: Addresses Need For Data-Driven Marketing (NYSE:ZETA)

Summary

I recommend going long Zeta Global (NYSE:ZETA). Zeta’s identity-driven marketing platform uses proprietary data and AI prediction to aid in acquiring, expanding, and retaining customers. Its omnichannel features allow businesses to improve the effectiveness of their marketing campaigns by engaging with customers across multiple channels. With its large proprietary identity graph, Zeta is well-positioned to take advantage of market opportunities and help businesses better target their audiences and manage customer relationships.

Company overview

Zeta is a cloud-based, data-driven platform that provides companies with customer intelligence and marketing automation tools. ZETA enables clients to connect with their audiences and interact with them through various addressable medium.

Marketing must be data-driven these days

Marketing that is informed by data is crucial in the modern economy. An organization’s ROI can be greatly improved by data-driven marketing, particularly when the campaign is tailored to the specific needs of each customer and implemented on a massive scale. However, the proliferation of mobile devices, the dispersal of media across platforms, and the ever-evolving nature of regulatory rules have all made digital marketing more difficult than ever before. Because of these obstacles, targeting, connecting, and engaging today’s consumers comes at a higher price, with less transparency, and with more complicated system integration. This complexity can only be tackled with the help of dedicated software and a stronger infrastructure.

A further complication is that COVID has sped up the rate at which consumers embrace individualized digital goods. The digital ecosystem is becoming increasingly competitive, forcing businesses to adapt their resources and capabilities in order to attract, engage, and keep customers. Finding the right customers, giving them what they want, and expanding their capacity to do so across a growing variety of digital channels are all challenges that many companies must face. The pace of the digital transformation is too great for the tried and true solutions and data analytics methods of the pre-digital era. Better ROI measurement and widespread personalization of the consumer experience call for sophisticated means.

Legacy solutions are not good enough

Computing and communication advancements have allowed businesses to automate and enhance their most fundamental operations. A variety of enterprise software applications, including enterprise resource planning and customer relationship management, have been deployed by a great number of businesses. Despite the fact that technological progress has enhanced the computing capability and features of enterprise software, organizations have continued to struggle to fully reap the advantages of these software due to factors such as implementation difficulties and high cost. Businesses that want to provide individualized service to a large number of customers have had to implement or upgrade systems from a wide range of suppliers and use a wide range of technologies to do so. This method has increased the overall cost of managing the software and lowered the efficacy of their marketing initiatives due to gaps in functionality and integration. The legacy approach’s inflexibility, high price tag, and lackluster outcomes have necessitated the development of a platform that can provide an adaptive end-to-end answer for businesses.

ZETA is a fantastic tool for bridging the gaps in this case. ZETA is an identity-driven marketing platform. In order to speed up the process of acquiring, expanding, and keeping customers, ZETA uses proprietary information and AI prediction to aid clients. By keeping the client at the center of all it does, the Zeta platform achieves all digital marketing goals and reaches customers through every channel. Thanks to its intelligent platform’s design, which is based on a service-oriented architecture, new solutions can be developed rapidly, industry expectations can be met with relative ease, and new use cases and marketing requirements can be met with relative ease.

In my opinion, ZETA is in a prime position to take advantage of these market opportunities. In particular, ZETA’s large proprietary identity graph helps businesses better target their audiences and manage their connections with consumers.

ZETA provides omnichannel engagement

Zeta’s omnichannel features allow businesses to improve the effectiveness of their marketing campaigns by providing consumer insights linked to individuals’ purchase intent that can be applied across digital marketing channels. Its algorithmic software ensures that recommendations and decisions are made objectively and in the best interests of customers. The Zeta platform enables businesses to track individual customers across multiple digital mediums, which can be used separately, simultaneously, or in combination depending on marketing tactics. Additionally, the platform is able to quickly adapt to new technologies and integrate with other platforms and endpoints.

ZETA reduces TCO

Consistent investment in R&D has resulted in ZETA’s innovative spirit, which I consider to be one of the company’s greatest strengths. The ZMP has been steadily enhancing its performance while simultaneously decreasing its cost structure. ZETA can then offer its platform at a price that encourages customers to abandon expensive but inefficient older technologies and advertising strategies. In my opinion, these improvements will help ZETA gain market share and keep customers happy by reducing their costs and increasing their return on investment.

Plenty of up/cross-selling opportunities and other growth opportunities

ZETA, with its enormous network of contacts and loyal client base, should be able to capitalize on the ongoing trend of companies reallocating more of their marketing dollars from traditional media to digital channels. By introducing new features and functionalities, I believe ZETA can achieve significant growth through cross-selling existing solutions and earning a larger share of clients’ marketing spend. ZETA currently has over a thousand customers across a wide range of industry verticals.

Besides that, I think ZETA has a fantastic chance to promote broader platform adoption as conventional software vendors struggle to keep up with fast changing client demands. ZETA needs to hire additional salespeople and streamline its go-to-market approach in order to effectively target new demographics of consumers, in my opinion. I think one thing ZETA can do is build on its existing network of marketing firms and businesses to increase its B2B marketing offerings.

Global expansion

The development of ZETA’s foreign market presence is, in my opinion, only starting out. ZETA will likely grow its international alliance of consulting, distribution, and technology providers to facilitate reaching a wider audience and increasing coverage. With the help of this network, ZETA will be able to expand its sales efforts and gain more clout in the implementation of its projects at home and abroad, something that is especially useful in areas where local knowledge is crucial. This expansion of ZETA’s capabilities also bodes well for the company’s ability to deepen its bonds with existing customers and expand its presence in the worldwide market..

Valuation

According to my model, investors can expect a 39% return.

My model assumption is ZETA on management’s FY22 revenue guidance and my belief that the company will reaccelerate its growth after the weak FY23 due to a bad global economy. As ZETA reaccelerate its growth, I believe we should also see a mean reversion in valuation multiple back to 3x from the current 2.8x. With these assumptions, I expect ZETA to trade at $12 in FY23.

Risk

Competition in the 1st-party data arena

In my opinion, ZETA 1st-party data set faces considerable competition from advertisers with 3rd-party cookie data. Significant changes in the phasing out of 3rd-party cookies could delay transitions to ZETA platform. If the use of 3rd-party cookies is not phased out, this could potentially devalue ZETA differentiated data set.

Conclusion

In order to maximize profits in today’s data-driven economy, organizations must adopt a data-driven marketing strategy. Zeta’s clients benefit from its identity-driven marketing platform, which makes use of proprietary data and AI prediction to aid in customer acquisition, expansion, and retention. Its omnichannel capabilities extend a company’s reach to customers via multiple channels. I believe Zeta is ideally positioned to seize market possibilities and aid businesses in more precisely targeting their customers and managing their customer relationships thanks to its extensive proprietary identification graph.