Yext’s IPO Could Raise All Boats in Local — And Herald Consolidation
While Yext’s long-anticipated IPO announcement yesterday didn’t come as a huge surprise for those following local, the news that it was imminent still packed a punch. So we asked several luminaries to weigh in on what the offering might portend for the broader industry.
Andrew Shotland, proprietor, LocalSEOGuide
The entire local industry should be eager to see Yext’s IPO succeed. A knock-out public offering, or even just an okay one, will instantly validate the space for investors and help other local start-ups attract more investment. Yext will have to continue to innovate and grow both via R&D and/or acquisition, which could also be great for the industry as a whole.
Should Yext’s IPO face some headwinds, it won’t necessarily be horrible for the company, although public investors might not be too pleased. Yext will still have its money and time to improve its story. But all those other startups that could have drafted off of Yext’s success will suddenly find the markets, public and private, much less receptive.
Either way, it feels like 2017 could be the year of “The Great Local Consolidation.”
For most of us standing on the sidelines, the IPO will be a win no matter what happens because there will still be this enormous fragmented opportunity that is local for as far as the eye can see and beyond. (Disclosure: Yext is a LocalSEOGuide client. Read Andrew’s longer post about the IPO here.)
Perry Evans, CEO, Closely
The local marketing industry should be cheering Yext on — validation by public and institutional investors of the market opportunity we all chase flows down to improved access to capital.
Whenever an IPO succeeds in your market space, venture capital will de-risk the bets that can be made in that market. So market participants across reputation management, location data services, and vertical data services all stand to gain. I think we all see significant opportunity to grow on top of, around, or head-to-head against Yext’s product/market space and business model.
Sharon Rowlands, CEO, ReachLocal
Local marketing has reached an inflection point where it is an absolute necessity for a strong digital marketing strategy. Yext going public is a good indicator of the level of adoption of basic foundational products like listings management and this marks the shift in tides in the local marketing ecosystem.
Large players that help businesses integrate local into their digital marketing mix will acquire or invest in these technologies with a goal of innovation, not just competing for table stakes. I think it’s safe to say the IPO takes the lid off the pot and the battle for market share will now be fought on a completely different playing field.
Randy Parker, Brevi CEO and Constant Contact founder
A successful Yext IPO will be a chance for local marketing to gain a point of centralization. An IPO gives a company like Yext the cash and market presence to step up to this challenge. Yext knows pure data management is just an entry point, one that is challenging to make profitable on its own. They have recently rolled out “applications” (Pages, Reviews) that start to move them up the value stack from data management.
There are great, unsolved pains in our industry around customer confusion and high customer acquisition costs. Yext’s resellers cannot solve either of those on their own. The marketplace needs comprehensive, integrated product portfolios that provide demonstrable ROI. Yet there are few companies who can play this role. Major web players (e.g., Facebook, Google) have so far only dabbled in offering solutions wider than their own ad products. Vertical brands and big hosting/domain providers are a possibility, but are working their way there.
Will Yext step up as a platform business? Can Yext expose customers to a suite of integrated marketing solutions, even those of third parties? We are moving to a planetary model: a few big distributors surrounded by smaller “distributees” who rely on the distributors for customer access. Let’s hope the public market is favorable to Yext and also that they are ready to grow into this distributor role.
Charity Huff, Managing Partner, Maroon Ventures
Details of the pending Yext IPO are a foreshadowing for our industry. Their hyper-growth hasn’t sustained and they are too dependent on third-parties for their revenue. The same description could be applied to others in our industry. Local, at scale, requires many of our companies to become intertwined in order to service the tangle that is SMBs. Because so few directly own the channel to the SMBs, we have to share our profit with one another, or with the big-guys. Either way, it makes our yellow brick road more winding than anything Dorothy could have imagined in Oz.
Cue the flying monkeys: the industry is ready to be rounded up for consolidation. Instead of operating at razor thin, shared margins, consolidated local marketing companies could service the industry at volume with an offering that meets the marketing needs of SMBs end-to-end rather than relying on channel partners to cobble together an offering that many times falls short of what small business owners need. To me, that is what the Yext IPO foreshadows: a local marketing industry with healthy vitals and the potential for sustained growth.
Neal Polachek, Board Advisor
It’s great to have a look inside one of the leaders in the local space. I remember fondly the day Howard stepped onto the stage at a Kelsey event to showcase PowerListings. It was cool then and listing presence clearly has become a “need to have” element of a broader solution set.
That the largest player in the space has penetrated only a fraction of the available market — even if you cut Yext’s estimate of 100 million in half — speaks to the available runway for Yext and its competitors. Should the Yext IPO be a success, it will accelerate a consolidation process that I believe is inevitable — and already underway — which will be transformative for the local and SMB space.
Monica Ho, CMO, xAd
Yext’s IPO is a key indicator of the increased importance of location services when it comes to supporting the changing customer journey. While these technologies have existed for quite some time, many brands are only just recognizing the need to personalize the local shopping experience by reaching customers at every stage of their path to purchase-from a nearby search to an in-store checkout.
Whether through location intelligence or local search, brands must be cognizant of the fact that 90% of purchases still happen in brick-and-mortar locations. This accounts for $4.4 trillion in offline commerce as compared to the $400 billion brought in by online purchases. Yext’s IPO sheds light on the importance of leveraging these local search and in-store commerce trends to provide an improved customer experience, leading to greater ROI.
Peter Krasilovsky, Chief Analyst, Local Onliner
In 2014, Yext worked to complement PowerListings with location-driven “Pages” as an upsell. “Reviews” were added in 2016. On paper, both features help to complete the package. Yet, penetration figures haven’t been provided for either, and it isn’t clear whether either can make a big dent in these highly competitive spaces. It would be a major coup if they can.
One of the macro-questions for us is whether location management can “win” as a new local anchor that everyone else builds around. Every company has to start somewhere, but it doesn’t necessarily make sense that location will ride herd over such strong features as search, web pages, reviews, promotions and content marketing. The answer is important to players such as Google, Facebook, Yelp, YP, Go Daddy, Constant Contact etc. Most of these, of course, are Yext partners. (Read Peter’s longer post about the IPO here.)