Consider this an overnight success story almost a decade in the making—Klaviyo, an email service and marketing company founded in 2012— is currently the hottest company on the block thanks to the ongoing drama with Shopify.
As news rolled out over Mailchimp leaving Shopify’s marketplace, many merchants forced to make a decision about email service providers (ESP) are dropping MailChimp for Klaviyo, which already counts brands like Bonobos, ColourPop and Untuckit as clients. As Klaviyo welcomes new clients, the next question on merchants and agencies minds: Will Shopify take the plunge to create its own ESP or just end up acquiring Klaviyo?
“[Klaviyo is] one of the fastest growing if not—the—fastest growing ESP out there,” said Tino Doan, director, commerce strategy at Zehner, a digital agency. “As a business move, it makes a lot of sense [to acquire Klaviyo] but Klaviyo has sort of grown significantly that it makes it an expensive proposition.”
Part of Klaviyo’s allure is the ability to segment customers, automation and understanding the revenue coming from email marketing, said Ryan Markman, COO of Metric Digital, a marketing agency.
Steve Wietrecki, CRO, Klaviyo, said the company’s success is less about its individual features and more about giving brands the ability to own their data, designing “brand enhancing experiences” and analyzing what’s working. It’s not all talk either; Klaviyo’s paid customer base has grown from about 1,000 customers in 2016 to more than 12,000 this year and is on track to double that number in 2019.
In the last two years, about 5,000 customers have switched over from Mailchimp to Klaviyo. Industry sources put Klaviyo’s revenue at the $100 million mark. Wietrecki said the company does not comment on revenue numbers.
“Our belief is we’re delivering a set of capabilities and an ability for folks to grow that are kinda unrivaled,” Wietrecki said. “We welcome competition from any angle.”
Doan said while Klaviyo is significantly more costly than Mailchimp, it gives merchants more capabilities to understand who their customer is and drive revenue up. (Mailchimp’s pricing starts at $10 a month, while Klaviyo begins at $20.) He said email marketing for a mature organization “typically represents 25 to 35 percent of revenue”—so it’s not necessarily a loss for a company to invest in using Klaviyo.
“If you want to do email well, it needs to get to that targeted, really segmented level in order to really drive conversions,” Doan said.
At DBNY, a design agency for ecommerce companies, about 80 percent of its clients are using Klaviyo, said Humayun Rashid, principal and partner. Rashid doesn’t think it’s likely for Shopify to acquire Klaviyo for two key reasons: the significant cost of the acquisition and Shopify’s ethos around building a platform where third-party partners can “build on top of” what’s already established.
“Everyone’s trying to build their platform and by doing that, they are building a moat of partnerships that makes their platform stronger,” Rashid said. “Everyone has access to Amazon Web Services and Send Grid. You need to get to the next level and building partnerships and making sure this ESP works with the entire tech stack of a modern DTC brand.”
If anything, Shopify’s more likely to build its own ESP by using SendGrid, an email delivery company. But, Rashid said the move isn’t in line with what Shopify’s about and where it’s thinking about growth.
“As a platform, they’ve sold this partnership of building this trust of selling email, design services,” Rashid said. “ Their major push for growth is they want more subscribers and active users on the platform not so much getting into a different service line like email.”
In a statement, Shopify didn’t comment on rumors of building an ESP or acquiring Klaviyo.
“We know that marketing, including email marketing, is important for our merchants and we have a rich ecosystem of partners and apps available within the Shopify App Store that provide tools for merchants of all sizes to build brand awareness and a strong customer base. We’re constantly evaluating our offerings to provide the best services for our merchants,” the statement said.