Raimo Lenschow: Perfect. Thank you.
Operator: We’ll go next to Scott Berg at Needham.
Scott Berg: Hi, everyone. A really nice quarter here. Congrats and thanks for taking my questions. AB, I wanted to ask a question on your AI functionality. You’ve been able to release several components of it over the last few quarters. As you look at your customer base in terms of what they’re using that functionality most frequently, where do they start? What do you see them, maybe over the course of time, use maybe more often than others? Maybe just help us understand that AI journey from what you’ve seen, at least initially today?
Andrew Bialecki: Yes, absolutely. To tie back, it’s been a major focus of ours for the last five, six, seven years. So let me describe our AI strategy in three parts. The first part is all about productivity. When you look at Klaviyo AI, a big portion of the features there, Segments AI, Email AI, our SMS Assistant, Flows AI, Forms AI, they’re all about how to help you use more Klaviyo, create more, run more experiments. We have a heuristic internally that we believe we can help marketers, businesses get twice as much done. That’s going to lead to lots more of experiments, and that’s going to lead to a lift in KAV and usage. So on that front, we’re seeing lots of adoption. We’re very happy with how that’s progressing. So that’s part one, productivity.
Part two is optimization then of those marketing strategies. So we talked about an example of Forms AI in the opening remarks. That — by running more variations, let’s say, a form on a website, that leads to a better sign-up rate, that leads to more subscribers, which ultimately leads to more revenue. So that’s part two. And then part three that I’m really excited about is how do we not just help people improve the marketing they’re doing but actually come up with net new marketing strategies. If you’re a business that has hundreds of thousands or millions of consumers, there are lots of opportunities for personalization or segments of your customer base, matching them up with just the right product at the right time. And our artificial intelligence can help find those campaigns, and those are additive to the KAV and the revenue that folks are driving through Klaviyo today.
So across those 3 things, productivity, optimization and then expanding your marketing strategy, we’ve shipped the most products on the first part, on productivity. That’s where we’re seeing the most usage. But I expect over the coming quarters, you’re going to see more in buckets two and three, on optimization and expanding your marketing strategy. And then I think for our customers, they sort of — all of those are valuable. But as you think about being able to think of net new marketing strategies, I mean, those are extremely valuable. And so while we’re not trying to monetize, say, the productivity tooling directly, we’re building that into our product as part of what makes us a best-in-class product. I think as we start to optimize the marketing that folks are doing or can help them come up with net new campaigns, there’s going to be opportunities there as we drive adoption for additional either products or different pricing and packaging.
So to round it all out, we built Klaviyo as this revenue engine for businesses. When we started out, it really took more of a sophisticated marketer. We’ve actually started to build a lot of that intelligence directly into our products. And I think we’re still — we’re very early in getting our customers to shift over to that model of really relying on us. I think that’s coming. And I think that’s the big opportunity for the whole category in the space.
Operator: Next, we’ll go to Terry Tillman at Truist Securities.
Terry Tillman: Yes, Good afternoon, AB, Amanada, and Jack. Thanks for taking my question as well. AB it actually relates to — so you clearly have the go-to-market investments and being pulled upmarket. But I’m curious about from an innovation perspective, what do you see as more of an unlocking opportunity, whether it’s the CDP or portfolio or with some of the AI capabilities that I think Scott asked about? Just curious a little bit more for them and what they need and maybe you even see RFPs. What is the more meaningful unlock potential with some of these newer products? Thank you.
Andrew Bialecki: Yes. Thanks, Terry. I’ll take this. To clarify, I will take this more for as we move upmarket, what we’re seeing from folks. So I mean the first is, it all starts with a central source of truth, our CDP, this customer database. Just to touch on the CDP and the progress we’re seeing there, I’m really excited about the adoption and the pipeline, the demand that we’re seeing there. We mentioned Helen of Troy adopting our CDP almost right away. I think you could think about that CDP as two opportunities. One is data governance and federation. So one thing we’re seeing from larger businesses, they want all their consumer data in one place, and they want it to easily integrate not just into marketing but to advertising, to customer service, on to their website.
And we’re providing for that, and so that’s a real differentiator. The second thing that we’re focused on is really rounding out the marketing stack for a lot of these bigger businesses. A lot of them still rely on point solutions for different channels. They want all of that to be orchestrated to be — to work together. And we’ve been able to prove out with some of our larger customers that there’s real lift in doing e-mail and SMS and other channels altogether. Not only to reduce complexity but actually, consumers like it better. It’s a better consumer experience. So adding on those marketing channels, over time, one of the things we found with CDP is that it’s not just about data governance, but there’s actually an analytics play. With part of our CDP feature set allows our customers to run more advanced reports, some of which are out of the box, to help them discover some new marketing ideas.
For example, we have large customers that have used our RFM analysis that’s out of the box to discover customers that used to be really loyal, but has since lapsed, and quickly create marketing campaigns based on that. That’s something that in the past, it was an idea folks had, but it would take months to actually implement. And we’ve made it something you can do in hours or days. So you take all those two things, you then layer on some of the productivity boost, the optimizations with machine learning and artificial intelligence, I think that’s the complete picture. I think for the larger businesses, they really want a complete stack that allows them to store customer data and then drive personalized consumer experiences all in one place.
And so we’re trying to do that both with the products we offer but then making sure that we integrate with the other software they’re using.
Operator: We’ll move next to Siti Panigrahi at Mizuho Group.
Siti Panigrahi: Hi, thanks for taking my question. It’s great to see this largest online fashion store deal that you talked about with Shopify integration. As you look at the opportunity in the Shopify Plus installed base with your partnership, what kind of opportunity — how many do you think you can further penetrate in that base? And when you see this kind of opportunity, is this mostly a displacement? Do they use some sort of service? Or is it more of a greenfield opportunity?
Andrew Bialecki: Yes. So our — we love working with Shopify, and we continue to partner really closely. With Shopify Plus in particular, we mentioned that our Shopify integration and our relationship there is so strong. Our two products work really well together, and that matters a lot for personalization. So I think as for Shopify Plus merchants, those businesses, we’ve got strong market share. But we still think there’s a lot of room to go, not just in terms of adding additional customers but also in expanding how we can use data from Shopify in our customer database and then use it across more marketing channels and more parts of the consumer experience. When I talk to customers and partners, they really like that vision.
And a lot of them are looking for us to give them that road map. And that’s a lot of what our sales team — I talked about the customer growth team we have. It helps our customers adopt more Klaviyo. So we’re very happy with the progress that we’ve made to date in the Shopify Plus ecosystem. And we think there’s a lot of room to grow there as well.
Operator: We’ll move next to Derrick Wood at TD Cowen.
Derrick Wood: Thanks. Amanda, you have a strong customer acquisition engine at the lower end of the market, but you’re also investing more resources up market. So I wanted to get a sense of how to think about the impacts on new customer generation levels in 2024, especially in light of the macro and some of the comments you made. We did see net new customers drop down to 3,000 in Q1. Should we be thinking that’s kind of the new run rate? Or are there other seasonal factors quarter-to-quarter that we should expect as we progress through the year?
Amanda Whalen: Yes, great question. Thanks, Derrick. As we discussed on the call, we did see a bit of softness in the new logo adds. And in terms of the count, that was really focused at the lower end of the market. We think what’s going on there is a combination of a couple of things. We think it’s a combination of macro and the macro environment as well as the intentional investment decisions that you referred to, which is — we are continuing to target entrepreneurs. But we’re doing it really through products and then we’re intentionally shifting more of our go-to-market towards those SMBs and mid-market. But when you look at the net logo count, those smaller customers, they have a disproportionate impact on the logo count and they have a smaller impact on total revenue.
Now an interesting trend that we are seeing in the business within there is that if you look across each of our customer groups, the entrepreneurs, the SMBs in the mid-market, within each of those customer groups, we are closing higher ASP customers. Customers are growing their businesses, they are turning to us to drive more of their revenue, and that results in them signing up for larger plans. So going forward, as you think about the balance of the rest of the year, I would expect we’re going to continue to grow new logos. But it’s going to be more moderated growth on total number of new logos that we’re adding and more of a balance there between growth in logos and growth in ASP.
