The real winners will be the companies that can use AI effectively and monetize their solutions in the coming years.

Zeta Global (ZETA) helps companies monetize AI through its ZOE marketing-automation platform, which uncovers new sales opportunities and optimizes customer engagement.

By signing customers on small contracts and then expanding their usage over time, Zeta has grown “scaled” clients to spend over $2 million annually.

Serving more than 40 percent of Fortune 100 firms across multiple industries, it’s profitable on a Uniform basis, yet the market is still underestimating its growth.

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Artificial intelligence has been at the forefront of the market for the last year as new advancements in technology continue to show industry-altering potential.

Companies in the U.S. have invested more than $300 billion in the last five years into AI.

And it’s projected that the largest tech companies like Meta, Microsoft, and Alphabet will invest $1 trillion or likely plenty more themselves in the next five years.

While the next few years will lead to the birth of a plethora of new technologies, the real winners will be the companies that are able to use AI effectively and monetize their solutions.

This is the basis for Zeta Global’s (ZETA) entire business model.

Zeta makes it easier for businesses to discover new revenue opportunities. Not only does Zeta help companies monetize AI, but it’s also a user of AI itself.

The company’s marketing cloud, powered by the Zeta Opportunity Engine (“ZOE”) AI tool, helps companies identify potential customers and optimize their marketing strategies.

ZOE plugs right into whatever sales software its client uses. It examines a firm’s customer base and interactions to uncover areas where customers could be spending more with the company.

It can analyze all the data a company’s collected to find ways to sell or market products more efficiently.

It can even understand patterns in customer behaviors, preferences, and potential buying windows that aren’t clear to the human eye alone.

Not only does ZOE identify potential leads, it also recommends the best ways to engage with these leads.

Ultimately, its job is to make selling easier. This is a space within the larger AI market that’s bound for growth in the coming years.

Zeta says its platform is in the “marketing technology” market, which was already worth $20 billion as of last year. This year, it’s expected to keep growing by 14%.

As more companies invest in AI tools, Zeta’s business will continue to boom.

While the company grows its customer base, it’s also figuring out how to make more money from existing customers.

It doesn’t particularly care how much new customers pay. It works on what’s called a “land and expand” strategy.

Zeta signs small contracts to get customers in the door. Then, it shows those customers how valuable it is so they’ll spend more money to get more features and add more users to the platform.

That’s how the company grows new clients into “scaled” and “super scaled” customers. Scaled customers spend at least $100,000 per year, and super-scaled customers spend at least $1 million.

Scaled customers who’ve been with the company less than a year spend about $600,000 on average.

Once they’ve been around for one to three years, they spend about $1.3 million per year. And after three years, they spend upwards of $2.1 million.

Zeta services every major sector, not just technology, including consumer and retail, telecommunications, and travel. The company already serves more than 40% of Fortune 100 companies.

Despite its fantastic business model and the powerful tailwinds, the market hasn’t grasped Zeta’s profitability potential.

The market continues to believe that ZETA is an unprofitable business, with negative as-reported return on assets ”ROA” in the past five years.

Meanwhile, Uniform ROA has been positive and improving during this time.

Currently, the company trades at a 16.2x Uniform P/E, which is around historical averages and is not pricing in the company’s full potential.

At this level, the market expects Zeta’s Uniform ROA to decline to 22% from 35% last year.

This is well below Wall Street analysts’ expectations for returns to reach heights of more than 40% in just the next two years.

Zeta is a great example of how smart AI users have some of the biggest potential in the entire AI ecosystem.

It has already proven the viability of its own AI tools, and as more companies flood the market with new products and innovations, Zeta will be well-positioned to support their marketing efforts.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research