Deep|ZETA: A Deep Dive into the AI-Driven Marketing Platform Gaining Traction

Comprehensive Analysis of Zeta's Competitive Advantages, Customer Insights, Data Concerns and Future Prospects

Disclaimer: The content provided in this newsletter is for informational purposes only and does not constitute investment advice. We are not registered investment advisors, and nothing in this newsletter should be construed as a recommendation to buy or sell any securities. Always do your own research and consult with a licensed financial professional before making any investment decisions.

Subscribe to us. We might be the Substack with the highest ROI.

In our latest Zeta report, we engaged with eight industry experts to gain valuable insights into the company's products, competitive advantages, customer feedback, data security concerns, and future plans. This report is undoubtedly the most solid and comprehensive Zeta research available in the market, offering content that you won't find in any sell-side analysis.

Research Topics

• Product Distribution and Introduction

• Advantages and Feedback: Data

• Advantages and Feedback: ROI, Traffic, and Take Rate

• Data Security Issues Check

• How Did Customers First Learn about ZETA

• Zeta's 2028 Plan

• Q4 2024 Performance

• Simple Model Assumptions

Products and Introduction

Zeta's revenue can be categorized into Direct Platform Revenue and Integrated Platform Revenue based on traffic sources.

• Direct Platform Revenue: Revenue generated from Zeta's own platform by providing products or services directly to customers, independent of third-party integration and partnerships. This revenue stream has a gross margin of over 70% and is recognized on a net basis.

• Integrated Platform Revenue: Revenue generated through API integration with third-party advertising platforms, leveraging their resources and channels. In this model, Zeta acts more like an advertising agency, with a gross margin of around 30%, and revenue is recognized on a gross basis.

• The proportion of Direct Revenue has been declining but may increase in the future:

  • From CY2020 to CY2023, Direct Platform Revenue accounted for 68%, 76%, 75%, and 72%, respectively. In the first three quarters of CY2024, the proportions were 67%, 67%, and 70%. The decline is due to Zeta's expansion of third-party traffic and the recent onboarding of large advertising agencies like Publicis.

  • Large agencies primarily use Zeta's Analytics platform and Professional Services. Zeta acts as an automated advertising agency, generating usage-based revenue through its Demand Side Platform (DSP) product. Initially, agencies preferred advertising on third-party social networks like META, Snap, and Tiktok. As they deepen their usage of Zeta, they will increasingly allocate budgets to Zeta's proprietary advertising network.

(ZETA 3Q24 Presentation)

ZETA classifies ads primarily into Email, Display Video, CTV, Social, and Other.

Ad Format

• Email (~45% Usage):Corresponds to ZETA's ESP product, leveraging data on 245 million U.S. users (including 110 million with opt-in email addresses as of December 2024’s ZETA Data Summit). For instance, one mid-to-late-stage female beauty brand mainly uses the Email-ESP product.

• Displayed Video (~20% Usage):Corresponds to ZETA's DSP product with placements on the web, mobile apps, and games—similar to Applovin’s traffic.

• CTV (~10–15% Usage):Also part of the DSP product, placed on streaming and broadcast TV platforms, similar to The Trade Desk.

• Social (10–15% Usage):Corresponds again to DSP product placements on platforms like META, Snap, TikTok, and Twitter.

Differential Traffic Growth

• As highlighted during the Q3 2024 earnings call, growth rates for various channels were: Email: +30% YoY, Display Video: +46% YoY, CTV: over +150% YoY, Social: +50% YoY.

• “So I think, starting with the 41% direct revenue mix, if you break it down by channels: email grew almost 30% at 29%, display video grew 46%, CTV grew north of 150% year-over-year, and social still grew over 50%.”

ZETA’s products chiefly include ZMP (DMP), CDP, DSP, and ESP.

ZMP (Data Management Platform): Zeta's earliest product and the landing product for most customers.

• Pricing model: Subscription-based. According to a former Zeta expert, "The contract amount for a single DMP is between $100,000 and $150,000, accounting for 15% of the revenue."

• A DMP is a centralized system used to store and manage large amounts of data from multiple sources, including websites, mobile apps, analytics tools, and marketing platforms.

• DMPs are typically used to store and manage second-party and third-party data, which refers to customer data collected from external sources such as advertising networks and market research firms.

CDP (Customer Data Platform): A crucial complement to DMP and gradually becoming Zeta's competitive advantage.

• Pricing model: Subscription-based. According to a former Zeta expert, "The contract amount for a single CDP is between $150,000 and $300,000, accounting for about 20% of the revenue."

• A CDP software platform collects customer data from various sources (websites, CRM, apps, etc.) and stores it in a central repository, primarily focusing on first-party data. CDP then analyzes the data and provides insights to help marketers better understand their customers.

• CDP also allows access to and integration of third-party data, enabling customers to track customer information across channels.

DSP (Demand-side Platform): Similar to well-known platforms like Applovin, Unity-IronSource, Meta Audience Network, and Mobvista.

• Pricing model: Usage-based. According to a former Zeta expert, "DSP accounts for ~20% of revenue, with a take rate of approximately 20%."

• DSP aggregates various ad exchanges, ad networks, and supply-side platforms. Advertisers only need to set their target audience, creatives, bids, and budgets on the platform, and DSP automatically optimizes ad performance and provides data reports through technology and algorithms.

• An omnichannel system allows users to send emails, CTV, and video ads with just a toggle switch, reaching the same user through different advertising channels.

Clients have noted that the complexity of ZETA’s platform results in a steep learning curve and challenging campaign setups.

For example, SHEIN remarked:

• “ZETA’s system is very complex with many products. Many practitioners find it hard to understand, especially as its new ad placements are driven by performance advertising and advanced user profiles. This makes us, especially in the financial sector where expertise in combining brand and performance advertising is limited, very cautious.”

A leading apparel brand mentioned:

• “We’re keeping an eye on ZETA. We appreciate that ZETA’s AI and data capabilities are strong and integrate various modules, but the platform demands high budgets and appears to commit to long-term partnerships. We are still consolidating our data before considering full adoption.”

Advantages and Feedback: Data

U.S. User Data

ZETA has collected data on 245 million U.S. users—around 70% of the U.S. population.

On average, each user has between 3,000–5,000 identifiers, meaning over 15 billion identifiers in total. These identifiers include names, birth dates, email addresses, device models, spending power, and other complex labels.

(ZETA 3Q24 Presentation)

Data Collection Methods

At the December 2024 ZETA Data Summit, the company stated that its DSP, SSP, and MTA systems contribute 30–35% of data, acquisitions of Disqus, LiveIntent, and ArcaMax provide 35–45%, and the balance comes from third-party sources.

ZETA also supplements its data through acquisitions:

(2024.12, ZETA Data Summit)

ZETA also supplements its data through acquisitions:

In addition, ZETA exchanges data with its partners. For example:

• A beauty brand targeting mid-to-late-stage women noted, “ZETA offered significant discounts on the ESP product if we agreed to share publisher data, reducing our costs drastically.”

• A leading home appliance brand stated, “ZETA provides us with offline data from retailers like Home Depot and Best Buy, which significantly aids our ad targeting and site location strategies.”

Why First-Party Data Becomes Zeta's Data Advantage

ZETA’s competitive edge stems from its robust data capabilities in a post–third-party cookie world. The more first-party data a company can harness for cross-channel tracking and attribution, the greater its advantage.

Cookies Overview:

• First-Party Cookies: Set by the website you visit, used for authentication, IP address tracking, transaction data, etc.

• Third-Party Cookies: Placed by third parties (advertisers, plugins, analytics tools) across multiple sites to track user behavior and build profiles.

• Third-party Cookies are widely used for precise ad placement and performance evaluation. Third-party cookies can track user behavior across multiple websites, such as pages visited, keywords searched, and products purchased. Advertisers build user profiles based on this data to display ads that match users' interests and behavior on different websites.

• Approximately 80% of advertisers rely on third-party cookies. However, cookies are increasingly restricted by privacy protection policies. Browsers like Firefox and Safari have already disabled third-party cookies, and consumer choices on Chrome will gradually reduce reliance on cookies. As more users opt out, these advertisers will need to find other ways to reach their customers and prospects online.

• The operation of DMP platforms primarily relies on third-party cookie data. When a user visits a website, there is an ID, which is a cookie. DMP uses cookies as user IDs to record historical browsing behavior. Due to increasingly strict privacy policies, Zeta DMP's penetration rate among customers is only 35%.

Zeta addresses privacy challenges through the following methods:

• Collecting first-party data: Zeta Global may collaborate with customers to directly collect first-party data from customers' websites, applications, and other channels. This data does not rely on cookies and can accurately identify user identities and behaviors, such as user registration emails, phone numbers, and purchase records.

  • For example, companies using CDP can review the past year and gain in-depth insights into their customers' purchase frequency, location, demographics, and real-time dynamic data. On the other hand, companies using DMP may only be able to access data from the past 30 days.

  • Currently, the penetration rate of CDP products is 50%~60%, while DSP products have 80%~90% (expert opinion). For customers who have installed CDP products, Zeta can obtain most of the user data to train its models. For users with only DSP products, data collection is relatively limited. On the DSP product, IDFV and fingerprint technology can also help locate customers.

  • Based on our customer interviews, most users are willing to share data with Zeta. For example, in the confidentiality agreement between the Shein platform and Zeta, it is stipulated that "Zeta is not allowed to leak data to other companies and can only use it for ad placement on the Zeta platform." Customers are also more willing to feed back data to CDP platforms compared to DSP-only platforms.

• Integrating second-party data: Zeta obtains second-party data by sharing data and collaborating with partners like Meta, Google, and Twitter. Additionally, through the acquisition of companies such as ArcaMax, Disqus, and LiveIntent, Zeta has acquired identity information for approximately 240 million U.S. adults, including email addresses, phone numbers, IP addresses, and more.

  • Email addresses are hashed for processing. When a user logs in or registers using the same email address on different platforms, the same user can be identified by matching these identifiers, enabling the integration and analysis of user data.

• Third-party data: Third-party data is data purchased from external sources. Zeta buys data from channels like Liveramp. DMP manages a large amount of anonymous data. This data can be purchased from data sellers or anonymized from DMP's own data sources. In either case, the anonymous data is sold to advertisers as a target audience.

• Zeta collects data generated from frequent multi-touch interactions between users and enterprises through CDP, segments customers, and develops different marketing strategies for different groups to achieve highly personalized and better conversion results. In other words, Zeta understands customers better than traditional platforms like Meta and Google. For Meta and Google, the biggest advantage lies in scale, which leads to better results in brand advertising. However, in performance advertising, Zeta may be superior.

Expert Feedback on Data from Interviews

SHEIN: