Billion Dollar Unicorns: Will Medallia Help Consolidate?

According to a MarketsandMarkets report, the global customer experience management market is projected to grow from $5.98 billion in 2017 to $16.91 billion by 2022. That translates to an annualized growth rate of more than 23% over the five-year period. Palo Alto-based Medallia is a Billion Dollar Unicorn player in the space that many believe is ready to go public.

Medallia’s Offerings

Medallia was founded in 2001 by the husband and wife team of Borge Hald and Amy Pressman who wanted to build a service that could gather benchmarking data for services organizations such as hotels and compare the customer satisfaction levels at these organizations with those provided by other services within the same brand and by competitors. The two created a SaaS-based offering that gathers feedback from multiple sources, leverages real-time analytics to build visual dashboards, and finally helps organizations make decisions to improve their customer experience.

Medallia’s service allows organizations to go beyond social media monitoring solutions to real physical media such as paper surveys. Medallia believes in creating a dialogue with its customers’ customers. Its Digital offering empowers companies to get a holistic view of the customer across all touchpoints. Organizations can capture feedback from customers on the web and mobile and integrate it with data from retail stores, contact centers, and other touch points to understand customer behavior in real-time.

Recently, it expanded its offerings for the insurance sector as well. Its Best Practice Package for Insurance Claims is a suite of software that uses real-time feedback from customers to help improve customer loyalty and retention rates for insurance companies. The solution helps improve the claims experience for end consumers by offering the insurance companies a real-time view of the customer’s claims journey. It helps identify customer experience trends so that organization can take steps to increase the efficiency of the claims process.

Medallia’s Revenues

Medallia offers its services on a license-based model. It is privately held and does not disclose detailed financials. In 2011, it was expecting revenues of more than $30 million. In 2016, its revenues had grown to $125 million. Its profitability figures are not known.

Medallia was bootstrapped initially before it raised funds from Sequoia Capital. It has raised $255 million in funding so far from Sequoia. Its latest valuation is not known, but the last $150 million round held in 2015 valued it at $1.25 billion.

Questions for Medallia’s Board

Medallia has delivered a successful product since most of its competitors are primarily market research firms which offer more expensive, and at times, slower products when it comes to the process of gathering customer responses and converting them to actionable items. But there are other smaller players in the segment that it could add to its portfolio. I would like to know if Medallia is planning on consolidating within the segment? There are plenty of names for it to choose from. Like Salt Lake City-based CloudCherry that is known for its massive database for consumer metrics. It is significantly smaller with an estimated $2.7 million in revenues with $7 million of funding. Or, Redwood City-based Satmetrix which has revenues of closer to $50 million and a funding of $58 million.