Point solutions vs. platforms

29 September 2014

As announced today, Qubit have recently raised a $26M Series B round led by Accel, with participation from Balderton and Salesforce.

Balderton led the Series A for Qubit in November 2012, and I have been lucky enough to know the founders since our days at Google in London.

The company’s impressive growth since then has been driven by great execution, and by strong demand from eCommerce businesses for an integrated optimization platform. I believe this is a broader trend in eCommerce technology, which I will try to expand on here.

The first successful players in eCommerce technology, in the early 2000s, were large Enterprise platforms, covering a broad range of functionality: Adobe Omniture, IBM Websphere etc.

The trade-off for clients was high cost, long implementation times, slow innovation and non-intuitive interfaces.

The successful marketing tech startups of the last five years disrupted this market by focusing on doing one thing really well. Examples include:

• Criteo in retargeting ($2B market cap)
• Optimizely in A-B testing ($88M raised)
• Richrelevance in web personalization ($82M raised)
• Enisghten in tag management ($55M raised)
• Sailthru in email personalization ($48M raised)

These companies have a number of attractions to marketers and eCommerce heads:

• Easy to get going: in some cases they can be tested for free, directly from the website, implemented with one line of javascript.
• Straightforward: you can ‘outsource’ one element of your marketing mix to the provider.
• Clear results: Demonstrate their revenue uplift with A-B tests.
• Low cost compared to the big enterprise platforms

These make a compelling story, which has led to impressive growth for the companies above.

However as retailers start using multiple of these tools they are starting to see their drawbacks:

• Attribution. Often multiple tools claim the credit for the same increase in sales. How do you work out which really drove it?
• Data complexity. Each marketing tool builds its own database with its own structure. Integrating these databases is hard or impossible.
• Tech complexity. If something goes wrong with your site, and you are using multiple outsourced marketing technologies, how do you diagnose the problem?
• Evaporating results. Tests that looked positive and were pushed to the site start to underperform, no ‘control group’ to identify this

As a result we see increasing demand from retail businesses for integrated customer experience platforms.

These companies are faced with four choices:

1. Build their own platform in-house. Amazon are the obvious example of this. Hard and expensive to do, however: both to build in the first place and to keep up to date with latest innovations.
2. Use a platform that has built a complete suite through M&A (e.g. Adobe, Salesforce). However the integration of the acquired companies’ products can often take years or remain incomplete indefinitely.
3. Work with their existing ‘point solution’ providers as they expand their offering. These point solution companies face a dilemma, however, in wishing to maintain the simplicity and accessibility of their proposition, while on the other side broadening functionality and adding enterprise features.
4. Work with a platform that has been built bottom-up to offer an integrated enterprise solution.

In our view, 4 is the best option for most mid-sized and large retailers, and Qubit is the most complete and flexible product in this space. Their platform includes personalization, A/B testing, audience segmentation, digital analytics and tag management. All of these are built off the same unified visitor data hub, which captures every aspect of every visitor’s behaviour.

Qubit’s product has been validated by their strong growth in the UK, where they are used by more than a hundred retailers, from Staples to Topshop. Following the opening of their New York office late last year they are making an impression in the crowded US market, winning clients such as Indochino and bebe.

We are excited to be part of the Qubit story, and look forward to their continuing success. Thank you to Graham, Emre, Ian, Dan, Seamus, Sefton, Jibran, Jamie and all of the team there for making this happen.