Zendesk Acquires SurveyMonkey in $4.13B Deal | Customer Experience Data

Zendesk's Acquisition of SurveyMonkey: A Deep Dive

Last week, Zendesk’s announcement of its $4.13 billion acquisition of Momentive Global Inc., the parent company of SurveyMonkey, raised some eyebrows regarding the price. However, this investment reflects a growing willingness among businesses to prioritize understanding user and customer sentiment. SurveyMonkey provides Zendesk with precisely that capability.

Enhanced Customer Service Through Data

Zendesk, primarily focused on customer service solutions, now possesses a direct channel for gathering feedback on its services and accumulating crucial data regarding customer interactions. Mikkel Svane, Zendesk’s CEO and founder, emphasized the goal of establishing a comprehensive customer intelligence platform. “Our aim is to provide businesses with a detailed and insightful view of each customer, fostering stronger and more genuine relationships,” Svane stated.

Strategic Alignment and Customer Insights

According to Laurie McCabe, co-founder and analyst at SMB Group, the acquisition is a logical step towards gaining a firmer grasp on customer perspectives. “Momentive equips Zendesk with a readily accessible and user-friendly survey tool, enabling its clients to gain deeper insights into customer attitudes and needs, both presently and in the future,” she explained.

McCabe further noted that the potential for integrated data analysis is significant. “Should Zendesk successfully streamline access to and analysis of combined data from both platforms, it will offer customers a more holistic understanding of individual customer behavior and broader market trends.” Ultimately, this understanding will facilitate improvements to the customer experience.

The Importance of Customer Data

Holger Mueller, an analyst at Constellation Research, highlights the increasing necessity for companies like Zendesk to collect data and develop a more complete customer profile. “The prevailing belief is that survey tools are essential for gauging the thoughts and feelings of customers and employees alike. This is the core reason behind Zendesk’s acquisition of Momentive; if you lack the necessary data, initiating a survey is the logical first step,” he commented.

Comparing to Previous Acquisitions

Brent Leary, founder and principal analyst at CRM Essentials, suggests caution when comparing this deal to SAP’s $8 billion acquisition of Qualtrics in 2018. While some overlap exists, Leary points out that Qualtrics is a considerably more advanced platform, reflected in its current market capitalization of nearly $24 billion, compared to Momentive’s $4.1 billion price tag. “Qualtrics functions more as an analytics platform with extensive capabilities extending beyond simple surveys, justifying its higher valuation,” Leary clarified.

Financial Performance of Both Companies

Both companies recently released their earnings reports. Zendesk reported $347 million in revenue, a 32% year-over-year increase, resulting in a $1.38 billion annual run rate. Momentive, meanwhile, reported $109.4 million in revenue, up 24% year-over-year, placing it on a $437.6 million annual run rate.

Projected Revenue Growth

Zendesk anticipates that the integration of Momentive will accelerate its revenue growth, reaching $3.5 billion a year earlier than initially projected – in 2024. The company further forecasts revenue to climb to $4.5 billion by 2025, as outlined in a presentation regarding the acquisition.

Market Reaction to the Deal

The stock market responded negatively to the announcement. Zendesk’s stock price fell nearly 15% by Friday’s market close, while Momentive experienced an over 8% decline. Zendesk’s stock remains slightly down in early trading today, although Momentive has seen a modest increase.

Momentive's Portfolio of Products

Beyond SurveyMonkey, Momentive’s portfolio includes GetFeedback, a custom mobile survey tool, and a market research division operating under the parent company.

Next Steps and Regulatory Approval

The boards of both companies have already approved the deal. However, shareholder approval from both organizations is still required, and based on the initial market reaction, convincing shareholders may prove challenging. The acquisition is also subject to standard regulatory review. If these hurdles are cleared, the deal is expected to finalize sometime in the first half of next year. Momentive CEO Zander Laurie will continue with the combined company following the completion of the acquisition.