Ask a roomful of people to take out their phones, and you're bound to see several with cracked screens. In part, we're to blame.
When it comes to the vast sector of companies focused on buying and keeping customers, sales tech is the most interesting these days for an investor — followed by marketing and, least of all, ad tech.
That’s the word from Byron Deeter, a partner at VC firm Bessemer Venture Partners (BVP).
Previously, he’s been the founding CEO of Trigo Technologies, which offered product information management, and then transitioned into an IBM exec when Big Blue bought Trigo in 2004. I checked in with him recently to get an investor’s perspective on the vastly complicated and overpopulated space of sales, marketing, and ad tech companies.
Hovering over all sales tech companies — which go by such labels as sales accelerators, enablers, forecasters, and opportunity managers — is the 800-pound gorilla known as Salesforce.
They’ve done well, Deeter acknowledged, having grown into the market leader in cloud technology.
“But,” he added, “they’re a 15-year-old platform.”
And that age, plus their inability to “innovate fast enough,” equals market opportunity, he said.
“Salesforce has validated that there’s a mass market, [with] unlimited market size,” he said. “But there are opportunities to extend Salesforce because of the new directions in social and mobile, [and] they’re not able to innovate fast enough.”
As others have, Deeter pointed out that the best-positioned big challenger to Salesforce is business network LinkedIn, which is busily launching sales and marketing cloud solutions to take advantage of its extraordinary, massive, and detailed professional membership.
“It’s the most updated company record,” he said, since bringing your LinkedIn profile up-to-date is the first thing people do when they change jobs.
But there is still room for companies to challenge or expand on Salesforce. He pointed particularly to teleconferencing app provider Speakeasy, a part of Bessemer Venture’s portfolio and a solution that extends Salesforce. Another BVP example: customer retention provider Gainsight, which is integrated with Salesforce.
Marketing tech companies may not have the innovation opportunities that sales tech firms do, but he noted they can “become stickier with success.” A martech solution integrates with a customer company’s other tools, and, if it succeeds, you can build an entrenched user base.
One issue — and growth opportunity — for marketing automation companies has been that the technology is implemented in less than five percent of firms, with a heavy concentration on tech companies.
Deeter noted that this figure doesn’t fully account for email, which most companies are using as their central marketing tool. But, while there may be growth opportunities for marketing tech companies to push past five percent, the level of innovation has tapered off.
“The first wave of martech has matured,” he said, with such mainstays as Eloqua, Marketo, and ExactTarget covering a lot of software categories.
There’s a “little bit of buying fatigue,” he said, as investors look for the next stage in evolution. For both sales and marketing tech companies, he said, using big data in a mobile context offers some possibilities to leapfrog the legacy companies.
As for ad tech companies, customer stickiness and differentiation are both problematic.
They don’t need to integrate with many systems within a customer company, he pointed out. If they deliver what you want, you simply buy more services from them — or from other parts of the digital advertising ecosystem.
There are hundreds of ad tech companies, he noted, and “a lot have built cash flow, [but] not enterprise value.”
“Ad tech is all about acquiring traffic for less than what you sell it for, efficiently,” said Deeter.
“The middleman can profit, and profit beautifully. Google has this down. Criteo does this with display,” he added. “The vast majorities will create cash flow from mobile, but ultimately will sell for low single digits [times their] cash flow.”
While there are “massive incentives for publishers and ad tech to goose the numbers” with traffic fraud and other manipulation, he said, “it will catch up with you over time.”
If all you have to sell is “crappy traffic,” Deeter said, “buyers will stop buying from you.”
“At the end of the day, you care about [customer] acquisition.”
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YouTube is leaning more heavily into ecommerce with a new tool called Shopping ads. The feature will allow consumers to shop products referenced in a video.
Lately, Google has been very keen on ecommerce. In the past several months it started fiddling with buyable ads on YouTube and announced a new buy button to help consumers directly purchase search results.
Already, YouTube has made in-stream ads shoppable with its TrueView technology. Within an ad, TrueView will surface product cards along the side of the screen as a video ad plays. Consumers can then click the product cards to explore the item further or make a purchase.
Shopping ads work very similarly, but instead of ads, the tool makes creator videos shoppable. For example, video product reviews could also host shoppable cards.
The new advertising option is much more “native” in principle and opens up an additional way for content creators to earn money on YouTube. Like with its other ads, Google will take a percentage of the advertising dollars earned by creators.
Advertisers can bid on Shopping ads as they would on Google Search ads. YouTube will select advertisements for creator videos based on whether the ads are contextually relevant and appropriate to viewers.
Google said it will begin testing these ads on viewers in videos this fall, and advertisers can expect to see Shopping ads pop up in Adwords in the coming months.
This sponsored post is produced in association with Avalara.
An IPO may be one of the most significant events in the life of your business. But graduating to the big leagues means big responsibility. When your company is in its high growth phase, you’re probably not thinking about compliance. You are probably more focused on ramping up the business instead. But as you near a liquidity event, that is when you need to address certain issues that weren’t on the radar before.
Here are six fundamental tax and control considerations CFO’s of any high-growth tech company should contemplate when preparing for an IPO.
1. Sales tax of prior period exposure and ongoing compliance
As you get ready for your IPO, you want to get an idea of your sales tax exposure. Even if you don’t take the time to totally clean it up, you want to at least know how much you owe, so you can be prepared for the auditors and put that money aside.
The first thing to consider is where does your company have nexus? Nexus is a situation where a state can obligate you to pay sales tax for a product sold or service delivered in that state. Generally, nexus is created when you have a physical presence, offices, warehouses, and in some cases, even a sales representative, in that state.
Without a physical presence, you may be able to sidestep sales tax. The problem is, states determine nexus differently. What’s more, digital products sometimes fall under different categories as well, so you want to make sure you’ve got all your basis covered.
2. Planning and structuring for international sales tax
As an online company, one way to expand profits is by selling your physical or digital wares across national borders. But this is where you have to be careful. As you start selling global, you want to keep an eye out for the value added tax, or VAT.
VAT is usually due where goods and services are consumed, even if the seller does not have a local presence. Most countries (with the notable exception of the U.S.) have VAT. However, some countries have more than one type. And even though these VAT regimes have many features in common, different countries vary on how they implement the tax.
As you plan for your IPO, VAT is one thing you don’t want to get wrong. Failing to deal with local VAT obligations can lead to audits, backdated demands, having goods seized, and even fines and interest. Fortunately, products like Avalara AvaTax automate both U.S. tax and VAT calculation, keeping you up-to-date in an ever-changing compliance environment.
Join us for a live webinar on Thursday, September 30 at 10 a.m. Pacific, 1 p.m. Eastern, as three high-power tax consultants from the tax audit firm Armanino share critical info on what you need to know if you’re considering expanding, selling, or launching an IPO.
3. Valuing and understanding limits on net operating losses
Net operating loss (NOL) is a tax credit you earn if your deductions for the year are greater than your revenues. Generally speaking, you can deduct accumulated NOLs from taxable incomes. But here’s where it gets tricky: once you go public, your NOL may be limited.
Section 382 of the Internal Revenue Code imposes an annual limit on the NOL carryover after an IPO or other change of ownership. In order to estimate the availability of NOLs, you will need to conduct a detailed analysis of changes in capital and ownership structure over a three-year period as well as valuation of the company at different dates.
4. Consider upgrading to a sophisticated cloud-based ERP
Rules and rates for corporate sales tax change constantly. Keeping up with those changes is not for the faint of heart. If you are using an outdated back-office enterprise resource planning (ERP) system or shopping cart technology, you risk being non-compliant. Legacy solutions that aren’t cloud-based are particularly vulnerable to this.
If you want to stay compliant, look for an ecommerce shopping cart software that integrates with your company’s inventory, purchasing, catalog, and fulfillment functions. A cloud-based solution, one that updates automatically, can ensure you have the functionality and the comprehensiveness you need when it comes to managing sales tax.
5. Setting up internal controls and prepping for SOX
Getting IPO ready means putting in place the systems and controls you will need to produce financial information quickly and accurately. Right after you file your F-1 Form with the SEC, and at least three months before going public at a minimum, you want to develop a checklist starting with Sarbanes-Oxely (SOX).
Among other things, SOX requires you to certify that your financial reports are accurate and complete and that you have the proper controls in place to quickly predict shortfalls and ferret out fraud. Setting up internal controls and SOX compliance must be in place well before the IPO process, so make sure you get a head start on this.
6. Reconciling revenue recognition issues
For many private companies, the process of going public requires a fundamental shift in reporting and planning. This brings us to our final item: Revenue, one of the most important measures of your company’s financial health. In your S-1 filing, you’ll need to indicate how and when your company counts sales as revenue.
Sounds straightforward, but it’s not. The Financial Accounting Standards Board (FASB) recently announced a new revenue recognition standard. Even though the first applicable reporting period is in 2017, the time to begin preparing is now, especially if you choose to adjust the results from prior periods and provide the three-year comparison required under retrospective application of the new guidance.
For many high-tech companies, going public means you’ve made it. But staying successful after the IPO means bringing tax and valuation issues to the forefront. Your major accounting systems need to be ready for prime time. Smart CFOs who want to stay on top of their game increasingly look to SaaS technologies as a cost-effective method for meeting the rigorous accounting requirements of a public company.
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SAN FRANCISCO — Apple chief executive Tim Cook stopped by Box’s customer conference to chat about his company’s efforts into the enterprise: “It’s a huge area for us.” In an interview that appeared reminiscent to Cook’s appearance on The Late Show with Stephen Colbert, the talk covered all areas, including mobility in the workplace and also a few potshots at Android.
In one of many lighthearted moments, Box CEO and cofounder Aaron Levie opened up the talk by displaying an iPad featuring a lit fireplace — it was a fireside chat, after all. But quickly the conversation shifted towards Apple’s role in the enterprise, which is heavily interested in the space since it’s a $25 billion annual market for the company.
Most people probably think of Apple as being a consumer company, but Cook says it’s been thinking about the enterprise from the very beginning: “The things that make devices really great for consumers make them great for the enterprise as well. We think that the skills we bring to this area is huge: we build in security from day one, we’re fortunate enough to have just a few models where we can get everyone the latest iOS — we’re not a fragmented system.”
Cook admitted that Apple wasn’t in the business of trying to be the end all, be all for everyone. There were areas that his company probably wouldn’t dive into, to which Cook remarked: “What we don’t bring is deep knowledge of the different verticals of the enterprise. In order to do great things, we need to talk to other people. Just like we built an ecosystem with great apps, we needed that expertise in the enterprise and we’ve partnered with that.” He was speaking about relationships that Apple has formed with not only Box, but also IBM and Cisco.
Naturally Cook felt that Apple was in a better position to work with the enterprise compared to other operating systems. While not specifically mentioning Android by name, Apple’s CEO said that the enterprise doesn’t want a “fragmented system. You want to deal with someone that works with the major players in the industry.”
Additionally, he shared that one operating system across devices isn’t in Apple’s roadmap: “We don’t believe in having one operating system for the PC and mobile. It subtracts from both and you don’t get the best experience.” However, Cook recognized that people were spending their days moving from device to device, like jumping from an iPhone to an iPad or a Watch so the devices need to be working seamlessly with each other.
Apple seems to be constantly exploring how people blend their lives between the personal and professional side thanks to the power granted through mobile innovation: “People don’t want to carry two phones with them,” says Cook. When people want a smartphone, they don’t choose to have an enterprise smartphone — it’s just one device.
In the end, Apple is all about empowering people to “change the world.”: “We’re motivated by helping people change the world. If you think of all the great things that are happening at companies, we’re happy to play a small part of that.”
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Eight years after Business Insider Inc. was founded inside a shared office space in Manhattan's Flatiron district, German media conglomerate Axel Springer SE Venture capitalists have been pouring funds into the sector in recent years. But few have sold themselves outright or tapped the public markets.
"El Capitan" won't offer dramatic changes, but rather refinements and enhancements to the current Mac system, called Yosemite. In real life, El Capitan is a rock formation in Yosemite National Park.
In an event that was supposed to be all about the latest Nexus smartphones and new Chromecast devices, Google today showed reporters a new tablet in its high-end Pixel line.
The new Pixel C would have been a complete surprise, were it not for a report on the launch of the device yesterday from Android Police.
The device will be available in time for the holidays on the Google Store, starting at $499 for the 32 GB model and $599 for the 64 GB model. The integrated Bluetooth keyboard, which will charge in the background while sitting affixed to the screen, will cost $149, Google director of product management Andrew Bowers said.
The device seems like a bit of a response to Microsoft’s Surface series and the newly released iPad Air, but we’ll have to see when we try it out.
Google first established its Pixel series in 2013, with the launch of the $1,299 touchscreen Chromebook Pixel laptop running Chrome OS. That device got a refresh, a price cut, and a USB Type-C charger in March — but it has been more demonstration project than top seller.