00:10:24 · David Steinberg
And in this board meeting, I mean, of the most contentious of my life, let me be honest, probably second most contentious board meeting I've ever run, but the most contentious board meeting by far that we'd ever had at Zeta. And at that point, we were already eight, nine years old, and by far the most contentious even today at Zeta. There was one at a prior company that was pretty ugly, we'll go with this one. And this young guy who was an analyst, I'm sorry, he became a partner in the fund, but he was on it. He just was adamantly opposed to these deals. He pissed me off so much during the course of the board meeting that, Gee, I just said, You know what? We're buying both. And this guy's head exploded. It was just great. Listen, for better or worse, I controlled the company. I still vote greater than 50% of the shares today. My family, through everything, we're still by far the largest shareholders in the company today. And back then I was the controlling shareholder. Still, as I said, vote the controlling shares. I just said, Well, we're going to do this. And to be honest, everybody sort of lined up except for them. That group was not for it. Fortunately, the young person... I shouldn't say young person, in his mid to late 20s at the time, is no longer involved with us. He's off doing something else as he should be. The gentleman who was the partner on the deal is actually still with us and says to this day, He was wrong. This was the best decision ever. Was funny, G, a few months ago, a Harvard case study actually published on Zeta written by Columbia with Harvard on that board meeting, which for an entrepreneur, right? I didn't go to Harvard. I didn't... So having that happen was pretty cool. But that was the moment that launched us into who Zeta is today.
00:12:23 · Guillaume Moubeche, David Steinberg
[00:12:23] S1: Yeah. And talking about Zeta today, I think you you made quite a nice announcement recently with Athena OS. So can you maybe like walk us through from that 2017 moment to now, like what has changed and what's kind of the vision of the future for Athena? [00:12:42] S0: Yeah. So a lot happened between 'seventeen and Athena OS, but what I would say is we went live in late twenty twenty with the Zeta Data Cloud and the Zeta Marketing Platform, and they were fully integrated. Data and AI were foundational, and shockingly nobody cared because AI was not part of the vernacular yet. So we spent a lot of time getting out there, pitching everybody, explaining why AI at the core would allow you to have the highest return on marketing spend humanly possible. Because ultimately that's the metrics in marketing our clients care about. What's the return on spend? What's the return on technology spend? Jump forward, today, according to independent surveys by Forrester, for every dollar a client spends in marketing through our platform, we return between $607,100 percent. [00:13:35] S1: Wow. You need to increase price.
00:13:38 · David Steinberg, Guillaume Moubeche
[00:13:38] S0: Now you sound like a bunch of my shareholders. But the reality is that that's a statistical fact, 600 to 700% return on marketing spend. We also have done independent studies for every dollar you spend on our technology, there's a 297% return on technology spend. So now I exist in a world where if a company is delivering a 250% return on marketing spend, they're considered best of breed, and I'm at 600 to 700%, and I'm able to return just under 300% return on technology. But that was certainly not evident in 2020 when the platform went live. We were talking about, talking about, talking about it. And then what changed? We're going to look back, in my opinion, whoever wins, whether Anthropic wins, whether OpenAI wins, whether Google wins, whether somebody sitting in their basement right now wins, we're going to look back and the day after Thanksgiving in 2021 is going to be the day that everything changed for AI. It was the day ChatGPT went live. And that was the seminal moment. It's when AI went from science fiction to boardroom conversation. Every board went to every CEO and said, What's our AI strategy? And then every CEO went to every CTO, CIO, CMO, and said, What's our AI strategy? And for a year and a half, we'd been out pitching the heck out of an AI strategy. So all of a sudden, gee, the phone is ringing. From 2021 to 2025, I think we're in our fourth consecutive year of greater than 30% compounded top line growth, greater than 50% compounded EBITDA growth, and greater than 75% compounded free cash flow growth. [00:15:24] S1: Congrats.
00:15:26 · David Steinberg
[00:15:26] S0: No, it's great. But my point is that's what changed, right? And then all of a sudden our clients are saying, So we're now so good at marketing. We had retail clients. We would be perfect example of why Athena OS now exists, is we had clients that were saying, You've got to market skirts to females eighteen to thirty five in the Northeast Of The United States. You've got to market pants in the Midwest and dresses on the West Coast. So now the marketing engine is marketing the heck out of that, but the inventory's in the wrong place. Their skirts were in the Midwest, their dresses were in the Northeast, and pants were in the Southwest. So now all of a sudden, clients are saying, Geez, we're marketing, we don't have it. So we built our first real use case of the Zeta Business Engine, or ZBI, is Zeta Business Intelligence. Probably we have a lot of acronyms, it's early in the morning on the West Coast, so you'll forgive me. But the first one was inventory management, because it just made sense. And then clients were like, Wait, we're going to open 500 new hotels in The United States in the next five years. Where do you think we should put them? So we looked at every one of their loyal customers and every credit card transaction they were doing with their five biggest competitors in geographies where they had no location. We said, This is the concentric circle that you should be in, because 60% of your room nights will be consumed the day you open the hotel by existing clients. We can just move from your competitors. So people keep asking me, Why the move out of marketing? Why the move to becoming an intelligent AI infrastructure platform? It's not just a story. It's not just a narrative. It's a business case. Our clients pulled us in that direction. So then we build the Zeta Business Intelligence Engine, and it's massively opened up our town to new opportunities. So you look at it as one use case, right? So inventory. Another use case, hotel placement. Another use case, where do you put your next coffee shop or so on and so forth? And it just made sense to launch an operating system. The other statistic that I'm most proud of, Jake, and I'll date it because who knows how long people will watch this. But in the second quarter of twenty twenty six, we announced that 89.6% of all new code generated at Zeta was automated.
00:18:03 · David Steinberg, Guillaume Moubeche
Think about how innovative you can be when 90% of new code can be automated. [00:18:08] S1: Yeah, it's insane. [00:18:09] S0: It's insane. Right? So back to 2017, I needed 400 engineers in San Francisco to build that platform. Today, we'd need 40, and we can do it in a year instead of three or four. So when we looked at the endeavor of taking Athena, which was originally our super intelligent agent, that by the way is crushing it, and turning her into an operating system, the ability to automate that code base just made that an easier jump because the platform's already got AI and data's foundation. It's already there. You're building on top of it. But even if you look at Athena, and let's just talk about Athena as the voice enabled super intelligent agent for a second. You know this. You're a serial entrepreneur too. We all set out to build fighter jets, but our clients know how to fly a prop plane. [00:19:04] S1: I like this analogy.
00:19:06 · David Steinberg
[00:19:06] S0: But it's true. I have a test. I ask every investor wherever I go, what percentage of your Bloomberg terminal do you use? In The United States, the answer is five to 10%. In Europe, the answer is less than 1%. It's probably higher, then probably lower. Who knows? But the point is the average enterprises use about five to 10% of the enterprise software capabilities that they pay 100% for. It's no different at data. We provide them a... Sorry not to use a Dassault product, but we'll say an F-fifteen fighter jet. And they know how to fly a prop plane. But with the prop plane, they're getting to a 600 to 700% return on marketing spend and a two ninety seven percent return on technology spend. That's pretty good. My goal is to get our clients to an order of magnitude return on marketing spend, and then I'll raise price. I want to get to 1000% return on investment, and Athena is your co pilot to fly the fighter jet. So instead of having to navigate all these crazy platform tools, you go into Athena and say, Athena, I'd like to generate 2,000,000 incremental customers this quarter at an average cost of 15% lower than it cost me last quarter. And instead of being able to access 5% to 10% of capabilities, Athena can access 100%. She can look at every individual in the data cloud. She can look at every single activation point. Every channel, every use case can be looked at in real time. And she changes the UI in front of you to show you the answer. It's so freaking cool, G, because to me, and I'm obviously a nerd that this is what I find really cool, but I was building computers from RadioShack components just to show how old I am when I was a kid. To this day, if I'm in the country, meaning not a city, you'll drive by a hardware store that'll have a Radio Shack attached to it. They'll still have it. The brand's still out there. I'll scream to my wife, Stop. Stop. But the reality is that we said last quarter we had 197 super scale clients the end of Q2, two thousand and six. 40% of them had already adopted Athena. 83% of their usage is voice. And I'm telling you, we're seeing their revenue per enterprise growing at an even faster pace than the 44% we grew that quarter as a top line.