Zeta Secures $125 Million in Funding as Marketing Tech Rises

Debt and Equity From GSO Partners, Credit Division of Blackstone

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CORRECTION: This story originally reported that Zeta had secured $150 million in funding, in fact the company secured $125 million.

Marketing tech firm Zeta Interactive has secured $125 million in equity and debt to try to meet advertisers' growing demand for approaches that combine the strengths of ad tech with customer relationship marketing.

Ad tech targeting anonymous consumers in sophisticated ways has typically operated separately from CRM efforts aimed at brands' known consumers, but companies like Zeta are investing in both sides of the business.

"We think this funding will accelerate our growth through organic business moves as well as strategic acquisitions," said Zeta COO Steven Gerber. "Clients are trying to acquire more customers that hit ROI targets and do it in a way that's predictable and scalable."

The eight-year-old firm, started by tech veteran David Steinberg and former Apple CEO and PepsiCo President John Sculley, secured the new financing from GSO Partners, the credit division of Blackstone. Mr. Steinberg serves as CEO of Zeta, and Mr. Sculley sits on the board.

The company will use a healthy chunk of its new funding to acquire companies that specialize in social media marketing, web marketing and website optimization, said Mr. Gerber. Another priority will be hiring engineers and data scientists to improve existing campaign management tools and analytical models focused on real-time consumer engagment scoring and customer segmentation. "We believe it's the next generation of marketing -- making decisions in real-time -- so we'll invest in bringing on more data scientists to build out more models," he said.

Zeta said the company is profitable, with revenue that grew to $150 million in 2014 from $90 million in 2013. It added over 125 employees last year to reach a total of 600, with about half its people based in Hyderabad, India. It declined to specify how much of its new $125 million infusion is equity and how much is debt.

Over 80% of its revenue comes from work it does directly with brands, while business from agencies and intermediaries accounts for the other 20%. This year, the company is looking to grow 30%, and with its new funding double its business over the next few years, said Mr. Gerber.

The biggest, and fastest growing part of Zeta's existing business is ZetaXchange -- its private marketplace for e-mail, social and display ad inventory, he said. Once the firm identifies a specific customer segment for a client, based on proprietary data and its customer records, it can use the exchange and its technology to serve ads to those customers across e-mail, social, display and mobile, and then track behavior and measure response. Zeta claims to have access to 350 million customer records in the U.S. and UK.

Its work lends itself to long-term relationships with marketers, according to Mr. Gerber, citing the data flows that inform long-term CRM and loyalty programs. Data integrations also take a long time to unravel.

"This business is less episodic in nature," Mr. Gerber said. "Utilizing data and our technology and analytics tends to make it a stickier relationship than something that is ad tech [only] that tends to be more promotional and episodic in nature."

Mr. Gerber is also hoping to capture more of the offline client budgets that are slowly making their way online. "A lot of our budget is coming from offline, where some of these big marketers have historically done print and direct mail. Last year, 70% of marketing and advertising was still offline even though time spent was not there, so you've got a massive shift continuing from offline to digital."

Zeta opened its doors in 2007, originally under the name XL Marketing. Five years later, the firm secured about $70 million in financing, which it has used to acquire a number of firms that specialized in marketing automation.

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