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As the backlog of software IPOs builds up, the digital marketing software-as-a-service platform Klaviyo has filed to go public, with hopes of helping online businesses better attract consumers in a sea of spam, unreliable data and privacy regulations.
You might not be familiar with Klaviyo, which was founded in 2012 and is based in Boston. But you’ve probably seen its work, via the automated email and text promos you get from businesses selling you things online.
“You’re receiving emails through Klaviyo all the time,” D.A. Davidson analyst Gil Luria told MarketWatch. “It just doesn’t say Klaviyo anywhere.”
As of June 30, Klaviyo had over 130,000 customers, many of them small to medium-sized businesses and mid-market companies. Klaviyo also has partnerships with e-commerce platforms like Shopify Inc.
SHOP,
— where considerable overlap worries some analysts — Salesforce’s
CRM,
Commerce Cloud, Block Inc.’s
SQ,
Square, Wix.com
WIX,
and is integrated with Amazon’s Buy with Prime.
Klaviyo’s debut will be the first software IPO in some time, Luria said, and that debut would follow a strong year financially for the company so far, including a recent turn toward profitability.
The company set a price of $30 a share Tuesday night, above its expected range. On Monday, it had revised the terms of its IPO, with plans to offer 19.2 million shares in a range of $27 to $29, up from a prior range of $25 to $27, potentially raising up to $556.8 million at a valuation of $7.3 billion.
The stock is expected to list on the New York Stock Exchange under the ticker symbol “KVYO.” Goldman Sachs, Morgan Stanley and Citigroup are the lead underwriters.
Here are five things to know from its IPO filing:
The debut would arrive amid broader shifts in the digital-marketing industry
Klaviyo’s debut would come as online retailers try to harness the reams of consumer data they already have to make their marketing more precise and more relevant. Luria said that increasingly, platforms like Klaviyo and Braze Inc. have emerged to help businesses gather customer information in real time and react accordingly.
That trend, he said, marks a shift from earlier days, when smaller e-commerce retailers depended on Meta Platforms Inc.’s
META,
Facebook, Alphabet Inc.’s
GOOG,
GOOGL,
Google, Amazon.com Inc.
AMZN,
and third-party data to draw customers. But deeper concerns about privacy and restrictions on selling consumer data have made it harder for social-media platforms to collect data and sell it, he said.
Meanwhile, emails from other automated email marketing platforms, like MailChimp, often contained that platform’s own branding, Luria said. Klaviyo and Braze
BRZE,
he said, leave their branding off that messaging.
Klaviyo wants to clean up the consumer-data mess
Either way, Klaviyo suggests, businesses have a whole mess of data to sort through. That data, it said, is often difficult to decipher.
“At a time when consumers expect more personalized, relevant, and consistent interactions across digital channels, they are instead inundated with an overwhelming number of inconsistent and ineffective marketing messages,” the company said in its IPO prospectus.
“As user tracking rules change, third-party data has become unreliable, complicated and expensive to use,” it continued. “Meanwhile, the proliferation of first-party data has made it difficult for businesses to aggregate, synthesize and use these disparate data sets.”
The company says its technology and easy-to-use interface make it easier for businesses to create unified customer profiles and launch marketing campaigns.
“Combining our data layer and application layer into one vertically integrated platform allows our customers to rapidly segment their consumers, easily create highly-personalized experiences and automatically send messages customized to their unique brands,” the IPO filing says. “This integrated approach also means our customers do not have to pre-configure their data or manage complex integrations.”
It has turned a profit so far this year, with a big sales boost
Klaviyo reported net income of $15.2 million during the first half of this year, after losing money in 2021 and 2022. Over the first half of this year, the company reported revenue of $320.7 million, a 54% jump from the same period last year.
Those sales come from customer subscriptions to use the company’s marketing platform. Those subscription plans are largely month-to-month and have different tiers based on the number of active customer profiles and the number of messages sent out.
It has some big rivals…
Along with MailChimp and Braze, Klaviyo counts Adobe Inc.
ADBE,
and Salesforce.com as rivals. The IPO filing said Klaviyo expects competition to keep rising, and notes that many of its rivals have deeper financial and technical resources.
Luria, in a research note, said that Klaviyo and Braze, which has fewer but deeper-pocketed customers, don’t have a lot of competitive overlap right now. He said Klaviyo averages around $5,000 per customer, with upwards of $200,000 for Braze, which had 1,958 customers as of July 31.
But over time that’s likely to change, he said, as Klaviyo’s technology — and its existing customers — get bigger and as the company reaches for larger customers.
“Braze is trying to pave the way for customers to ‘graduate’ from Klaviyo to its more comprehensive platform,” he said in the note.
…and a lot of overlap with Shopify
Klaviyo partners with and integrates with a variety of data sources, like e-commerce platforms, to harness consumer data, according to the filing. Under Klaviyo’s partnership with Shopify, Klaviyo is the recommended platform for all of Shopify Plus merchants, according to the filing. Shopify Strategic Holdings has also invested around $100 million in Klaviyo, and owned around 9.2 million of its shares as of July 31.
As of the end of last year, Klaviyo got around 77.5% of its annualized recurring revenue — a gauge of the value of paid subscriptions — came from customers who also use Shopify’s platform. Klaviyo’s agreement with Shopify expires in 2029. But it warned that business could suffer if that contract wasn’t renewed or if the relationship deteriorated, and said that broadening its relationships with other platforms could complicate operations.
“That overlap is very substantial,” Luria said. “So they’re very much exposed to the ups and downs of e-commerce and specifically they’re very much exposed to Shopify as a platform.”
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