Zendesk + Momentive - a $4.1 billion gambit to build much more meaningful customer relationships

By Stuart Lauchlan

October 29, 2021

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Zendesk has announced plans to buy Momentive Global Inc, owner of the SurveyMonkey platform for nearly $4 billion, its biggest acquisition to date, but one that got a cool response from Wall Street where the stock price dropped sharply on the news.

So what’s the rationale for this latest gambit? CEO Mikkel Svane talked up a joint vision for the two firms:

Both Zendesk and Momentive were founded to improve the customer experience and believe that software should be powerful while easy to use. Our cultures are very similar and our go-to-market strategies are complementary. Together we have a significant opportunity to expand our markets and our collective growth over the long-term and most importantly deliver more value to our customers. 

The reality for businesses today, especially given the events of the last few years, is that building meaningful relationships with customers is hard and everything is moving online and experiences happen in moments. There are no easy ways to paint a rich picture of the customer and we believe we can change that.

Zendesk pioneered the best way to respond to what your customers say and do and Momentive and the SurveyMonkey platform is the best way to capture how they think and feel. Combined, we create a richer picture of the customer and that deep understanding and the ability to better act and engage to build meaningful relationships. Together we provide true customer intelligence.

That message was reinforced by Zander Lurie, CEO of Momentive, emphasising the firm’s customer footprint and credentials:

At Momentive, our fundamental strength is that we provide incredible insights into how customers think and what they want. [In] our core business, SurveyMonkey, over the last few years we’ve invested in product innovation and go-to-market resources to expand our product portfolio and move up market. And today Momentive leads in five core areas - customer experience, employee experience, enterprise service, market insights, and brand insights.

We provide [services] to 345,000 organizations worldwide, including IBM, Johnson and Johnson, LG, Toyota and Verizon, just to name a few, with intuitive, people-centric solutions that enable them to create valuable relationships with their customers. Through our expansive set of customers, we’ve generated 5.5 billion survey responses to date and nine million daily AI predictions that help our customers make decisions quickly and confidently to achieve tangible results.

The two firms platforms are complementary, he added:

As I think about [Zendesk’s] 115,000 [strong] customer base, we have a product that every single one of those customers will use because if your company needs Zendesk, you need to collect feedback about how your customer feels. You want to understand how [they are] engaging with your platform. And that’s what we do better than any company in the world - over 3 million active users on our platform every day, sharing 25, 30 million responses about how they feel about your product, your curriculum, your non-profit, your pricing, your campaigns, etc.

Enteprise acceleration

What the Zendesk tie-up means for Momentive is a way to ramp up its enterprise ambitions, he argued:

We’ve been pursuing a strategy to expand our enterprise customer base. And now with Zendesk, we believe, we have an opportunity to accelerate this growth as we leverage our combined global footprint, our partners and relationships with the world’s leading companies and brands.

He added:

What we have done with that large footprint, where we have millions and millions of active users and 850,000 paying customers, is move up market to build enterprise products…Today a third of our businesses are enterprise contracts and we have world-class product market fit. We have the most discerning, demanding customers in financial services,  CPG, automotive, direct-to-consumer, [all]  buying our products.

With Zendesk, we are plugging into this much more mature go-to-market that really just accelerates our enterprise strategy. And so, as I think about their global footprint in Latin America and Asia Pacific and parts of Europe where we don’t compete, we’ve built these products that are going to plug in, that we can now sell up-market to their 115,000 enterprise customers…We have over a thousand quarterly sales calls where Zendesk comes up. We’ve had hundreds of requests for integrations with our CX product for Zendesk. So we’re really excited to redouble our R&D efforts to build those integrations and just feel like there is a ton more value to offer our shared customers.

Why buy?

As to why Zendesk feels the need to own Momentive (with a hefty price tag) rather than partner with it, Svane explained that it’s about building on established prowess rather than trying to replicate it:

Momentive and its iconic SurveyMonkey platform is ubiquitous in the market today. It is the world’s largest feedback platform. You may be able to build some similar technology. You can never get the experience. You can never get the DNA.

First and foremost, of course, a fantastic brand. There is a level of experience that we will never be able to match in such a product. We’ve always been partners in many different ways and we have, of course, big overlapping customers.

But I think that really putting these things together and really executing on this vision of providing additional different depth and richness on your customer pictures by overlapping what they say and do with how they think and feel, it’s incredibly powerful. We believe that it will create a whole new dimension on understanding and a whole new rich picture of your customers and that is the vision we’re very, very intrigued to execute on together.

My take

All that sounds compelling and thoroughly sensible. So what about that share price tumble? Alongside the takeover news yesterday, Zendesk turned in a loss of $54.4 million, but beat Wall Street expectations with revenue of $347 million.

One problem related to the share price dip is likely to be that the market is nervous following the collapse of Zoom’s takeover of Five9 and this new, completely unconnected, deal is picking up some residual skittishness as a result.

There will be an opportunity to convince Wall Street skeptics over in mid-November at the annual investor meeting. For now, Lurie’s argument is this:

We ran a thorough process and the [Momentive] Board enthusiastically supports this transaction in many reasons…We see a compelling combination. I don’t think it takes a lot of squinting to understand the power of our combined product offering. And so I don’t care what happens in the short-term [share price] movements. This team - and me in particular - is super, super committed to executing this transaction, closing this transaction, and then serving the hundreds of thousands of customers...I believe [it] is super compelling. It enhances the value for our shareholders…I’ve got a lot of confidence we’re going to be able to, not only close this transaction, but make it a success for shareholders on both sides.

For his part, Svane concluded:

It’s very straightforward - these are two companies that can work really well together and provide a lot of value to customers. And in many ways we’ve already proven that we can do that with how we operate over the last couple of years. So I feel very confident about this.

As noted, this has a lot of potential to deliver for both firms. One to keep an eye on.