Quite frankly, we have bought some of those guys in the past and we might in the future, but as I always say, I believe that “transformative deals transform both companies for the worse.” So we will continue on with our discussed M&A strategy that we talked about at length at our Investor Day, where we’ll continue to do smaller tuck-in deals where we think we can pick up great people, great technology, great data, and can syndicate those products or can – I should say, integrate those products into the ZMP and then allow all of our clients to use them.
Chris Quintero: Excellent, thank you so much.
Operator: Next question DJ Hynes with Canaccord Genuity. Please go ahead.
DJ Hynes: Hi, good evening, guys. Congrats on the nice quarter. Chris, one for you on the direct revenue mix as it pertains to the agency customers. As those customer relationships mature, would you expect that mix of direct and indirect revenue to start to look like your direct enterprise relationships over time? Or will it always be kind of structurally a little bit higher indirect revenue?
Chris Greiner: No, I mean, look, I think you got to learn from experience. And in our case, we have a number of examples. The most material of which, as I mentioned in the prepared remarks, the first large global agency we began working with in 2020 spent $3 million with us and only 7% of that was direct revenue. If you fast forward to ending 2022, it was an over $20 million a year customer and 76% of that spend was using our direct channels and as you’d expect, the margin profile of that business evolved half of our direct revenue mix and it’s been holding steady [ph]. The gross margin profile there is between the low 70s and mid 70s and this quarter was closer to the mid 70s. So yes, we do expect that as Azure’s relationships get more tenured, not only do they get bigger, but the mix starts to balance out and look a lot like our first example with that large global holdco in 2020.
DJ Hynes: Yes, okay. Got it. Makes sense. And then David, maybe a high level question for you, so I’m sure you’re early kind of in the planning cycle for 2024, but as you think about the sequencing of investment dollars, like what are your highest priority initiatives at this point as you look out to next year?
David Steinberg: Well, as Chris said, it’s a little early to get into 2024, but I mean, I think, you will see us continue to invest heavily in generative AI where our goal is to automate everything. We’ll continue to invest heavily into salespeople and high quality engineers, right, that can help us to do those things which quite frankly were also things we talked about on our Investor Day. I do think mobile is going to be a bigger and bigger part of what we do. And I think we’re going to start more heavily investing in the partner channel where we are working with larger professional services firms that have direct relationships with enterprises where we can partner with them to bring our products through them into the enterprise and roll out a suite of analytics products as partners roll out different deliverables that the professional services firms can build on top of the ZMP.
We’ve already begun meaningful conversations in that ecosystem and we’ll be investing in that as we continue to grow the business.
DJ Hynes: Yes, very, very good. I appreciate the color. Thank you guys.
David Steinberg: Thanks DJ.
Operator: Next question Ryan MacDonald with Needham & Company. Please go ahead.
Ryan MacDonald: Hi, congrats on a great quarter and thanks for taking my questions. Maybe piggybacking off of the agency question from before from DJ I’m curious, as you continue to add brands and deepen those relationships, do you expect that when you start with a new brand that it will continue to be at that heavy mix of indirect or will the agencies as you grow with them, have better experience saying as we add on an incremental brand that that each incremental brand will start with a greater mix of direct versus indirect? Hopefully that was clear.
David Steinberg: No, it was clear and it’s a great question. And the answer is absolutely the latter. As the agency gets more comfortable with the platform, they start with new brands already on platform. And we are seeing a lot of that where when they jump from social, which is integrated to CTV or online video or integrated messaging, all of that is on platform. So what happens is usually it’s a nose under the tent and it’s not usually with one brand, it’s usually with two or three where you’re starting un-integrated. And as we get to know them and they start using the platform, they see the power of being on our platform. So one of the most interesting things about this is why did that other agency go from 7% on platform to 76% on platform?
It wasn’t just because they liked us, it’s because the power of being on platform is very evident and very clear when you begin to use it. The return on investment, the attribution capabilities, the ability to access data assets are substantially higher. Therefore, once they start using it, they want to use it for all their clients, which is why you see that accelerate as a percentage of revenue as they grow to new brands.
Ryan MacDonald: Super helpful. Thanks for the color there. And then David in terms of the priorities for next year you talked about having meaningful conversations and really investing in the partner channel. As we’ve been at industry conferences, it’s clearly an area where the sis are, are putting a lot of focus in terms of making an investment. How competitive are the conversations, if you will, amongst the best of breed vendors like Zeta and others to try to be the established partner or CDP for some of these large SIs right now? Do you think it’s, I guess, a winner takes all in terms of the partnership side or do you get the sense that it’s going to be sort of multi sourced opportunities? Thanks,
David Steinberg: Unfortunately I think it’s going to be multi sourced opportunities. I don’t think you are going to see the large service providers consolidating behind one, which by the way is really good for us because they are already working with two or three of our competitors. So it allows us to get in there and get our nose under the tent. What I do believe is I believe that our products are best of breed. I believe we have the best CDP, I believe we have the best data cloud, I believe we have the best messaging system and I believe we have the best activation system in the world. So all things being equal, I believe that those service providers are going to recommend our products over our competitors because our products are superior.
The other thing that, I think, is really important here is we’ve never really had a deliverable that the service provider could build on top of what we do before. And one of the things we learned is if they don’t have a deliverable that can be built on top of your platform, when our platform doesn’t really require the type of integration that most of our competitors do, right? Because if you choose Salesforce, Oracle, Adobe, you are going to have to spend millions of dollars on integrating those platforms with Accenture, Merkle, or others. With ours you don’t need to do that. So that we were coming from behind, we’ve now built some direct deliverables that these service providers can build, build to their clients as added value on top of the ZMP, which are also subscription services to the service provider, which I don’t know anybody else who is doing that.
