After a weak second quarter, TechTarget’s revenue rebounded in Q3, rising 7% to $36.2 million (it was 1% in Q2). Year-to-date revenue hit $102.5 million, up 4.5%. Long-term revenues, which are primarily subscription contracts to Priority Engine, represented 35% of revenue, the same percentage as Q3 2019. International sales are up 30%, with strength in both lead-gen services and Priority Engine.
Priority Engine revenue grew 4% during the quarter, with growth slowed by weakness at “smaller customers hesitant to commit to yearlong subscriptions to new products and services.”
TechTarget continues to invest in Priority Engine, releasing a significant upgrade in September that supported prospect-level intent and an improved Salesforce.com integration. With the release, they initiated a “double-digit price increase” that has been accepted by the market. “We have not had pushback on the pricing so far,” said CEO Mike Cotoia. “So we see that as a positive sign going into 2021.”
Priority Engine’s “early usage is encouraging,” with page views up 80% since January; furthermore, “portal interactions by users that self-identify as salespeople are up over 40% since we released the new sales-friendly version.”
Cotoia called the release the most significant since Priority Engine’s launch. Unlike previous releases that focused on the marketing function, the latest enhancements were centered around UI enhancements and the sales use case. Combining account-level intent with prospect-level intent is “really enabling and empowering” sales teams, helping them “rank and prioritize within their own territories.” Reps now have access to two views: a territory account report and an active prospects report.
Sales reps can now discover intent data and insights for active accounts and prospects within a Visualforce tab in Salesforce. If a contact isn’t in Salesforce, they can quickly add the contact.
“Building a cohesive and easy-to-use workflow for both marketing and sales has always been in our roadmap,” summed up Cotoia. “The September release has been really, really impactful.”
TechTarget will focus on “leveraging our customer’s first-party data along with our data. We have other key engagement opt-ins that we are going to be integrating into this as well.”
TechTarget also saw weakness in the large legacy IT vendors, though it was above Q2 numbers, and they anticipate growth in their Global 10 in Q4. TechTarget has been diversifying its customer base, with the Global 10 accounting for 20% of its customer base, down from 40% a decade ago.
TechTarget anticipates that the shift from event sponsorships to online lead generation will persist after the pandemic.
“We believe that much of this shift will become permanent as we do not believe the face-to-face business will return to its previous spend levels pre-COVID,” said Cotoia. “This is showing up mostly in our International numbers as those markets had significantly more events as part of their budget mix than in North America. Today, most of those deals are short term, mirroring the event buy. The opportunity that we are focused on here is to migrate those budgets from face-to-face to intent-based lead generation and then graduate those customers to annual Priority Engine subscriptions. We believe this is achievable as the vast majority of our customers have a strategic initiative to use data to make their sales and marketing organizations more intelligent, efficient, and effective.”
Customers are focusing on their digital strategy, and TechTarget offers content syndication, content marketing, lead generation, and Priority Engine. All of these digital offerings help tech firms “get in front of their prospects and their existing customers.”
“Even if it starts with lead-generation and content marketing offerings integrated with some of the brand solutions, at the end of the day, our customers are really focused on leveraging the right intent throughout their marketing and sales cycles when they’re in market,” said Cotoia.
These lead-gen campaigns provide a beachhead for upgrading to subscription services. “Priority Engine plays a really good place in that as we start transitioning folks from events to content syndication from content syndication to integrated online solution from integrated online intent-driven solutions to Priority Engine integrated campaigns,” said Cotoia. “I think this plays well for us in the long-term.”
“Let’s unpack what we are seeing and what we’ve learned from the pandemic. First, IT spending is no longer a discretionary item for most companies. They see digital transformation as a necessary investment to remain competitive. This dynamic has benefitted our customers. Second, the migration of IT spending to a subscription model has built in significant resilience and predictability to most of our customer’s business models, which in turn has kept their spending levels on sales and marketing fairly stable as compared to more volatility in past downturns.”TechTarget CEO Michael Cotoia
Cotoia credited the shift to subscription revenue as a significant contributor to its success during the pandemic. “We are very pleased at how our business has performed during the pandemic. It reinforces that the changes we made to transition our business to a data subscription business is paying off in terms of building a stronger company with a more sticky and predictable revenue stream.”
TechTarget announced Q4 guidance between $42 and $43 million, almost 20% growth year-over-year. Some of this growth is the transition from events to online, but some is “pent-up budget” from event marketing that has been held in reserve.
“They have end-of-the-year budget, [and] they want to use it,” said Cotoia. “TechTarget is viewed as a trusted resource.”
Cotoia was asked about ZoomInfo’s acquisition of Clickagy but wasn’t overly concerned about the real-time intent solution, saying that Zoominfo simply acquired its supplier. Cotoia called it a “smart move,” but not one that significantly changes its offering. He also applauded Zoominfo’s contact quality, then pivoted to the differences between their services with opted-in reader intent derived from their media sites.
“What we have is what we call real and observed first-party purchase intent. You have to start with investing in content. We are 100% focused on the enterprise IT market. We have the right engagements coming in. What we know [is] which people are looking at which vendor content or which editorial content or peer-to-peer content, or were doing a search on a very specific technology segment within a very specific region. That’s real. It’s very difficult to leverage things like third-party cookies or bidstream data…[with] a lot of questions about that. It’s only at the account-level.”
Cotoia said that TechTarget’s approach is “very transparent” in its practices, focusing on the “right” engagement and intent signals. “We’re the largest place on the web where enterprise IT vendors publish their content through their marketing efforts.” TechTarget generates this content across 146 enterprise IT community websites and can tell its Priority Engine customers which articles were read, which white papers were downloaded, which webcasts were viewed, which terms were searched, which competitors are being evaluated, and by whom. Owned media sites with opted-in readers deliver “real and observed intent and engagement signals that will help power and transition our customers’ sales and marketing efforts” that are data-driven. What’s more, TechTarget’s intent surfaces opportunities at the beginning of the buyer’s journey.