Can Optimove Change The Apathetic CRM Space?

Small and medium-sized businesses eager to attract and retain loyal customers are even more eager to harness the power of machine learning and artificial intelligence. Software based on these technologies can make predictions on customers’ behavior, assess their potential as repeat purchasers and automate communications that will stimulate buying behavior, or even do it for them.

This is the reason that Optimove has developed algorithms and processes to deliver automated, personalized marketing communications to customers from its customer marketing cloud. Optimove’s clients include 1-800-Flowers, Zynga and eBags.

Optimove announced on Sept. 15 that it had raised $20 million from Israel Growth Partners, a private equity investment firm that engages in later-stage investments. The round marks the first funding for the nearly eight-year-old company.

What has stimulated the interest? CEO Pini Yakuel credits Optimove’s success to its focus on two areas only, eCommerce and the gaming industry, and a predictive mathematical model using a “secret sauce” that he developed in his college days. Over the past seven years, Yakuel built the company in Israel, a country known as a hotbed of engineering innovation, and he is now building a New York office.

Although Optimove has success with clients in the U.S. and Europe, Optimove lacks a home court advantage in the U.S. So, how does Optimove intend to establish itself in the U.S. market against competitors, such as Adobe marketing cloud, IBM marketing cloud and Salesforce?

“Our customer modeling technology divides the customers into microsegments and predicts customers’ future behavior patterns, trends. What are they going to do? What is the likely route or path that a customer is going to take? And based on the insights, we automate emotionally intelligent communications with customer interaction, which are highly personalized and well-adapted to the personality of the characteristics of each and every customer,” said Yakuel.

To Yakuel, originality is what is missing in most of his competitors, and he blames the fast pace of VC-backed FinTech startups and the constant turnover of talent among competing firms.

“You don’t see originality a lot in the American space. Mostly, firms just come up with something, the talent is jumping between companies like football teams and they copy off one another. Our data science and automation are not siloed; they are nicely coupled and work together holistically.”

Jon Lee, cofounder and CEO of ProsperWorks and someone who has founded three companies based on his work with algorithms, agrees that there has been little progress in the CRM space. According to him, CRM is a $37 billion business but one that really hasn’t evolved to any great extent.

“Salesforce has taken CRM from on-premise to the cloud, but it is still the same 1970s software that ran on a mainframe years ago. Now, we have the opportunity to get better data into the system and then use that data to then either automatically do something or motivate human beings to do something,” Lee said.

So, the prevalence of Big Data available now from mobile and online shoppers could herald a new era in CRM innovation.

“As more people use mobile payments, companies are becoming more digital, and they understand that they need to master the realm of data. Marketing teams are getting more scientific, and that is music to my ears,“ said Yakuel.

In the future, the leaders in the eCommerce CRM space, whether they are Amazon, Facebook, Google, IBM, Microsoft, Salesforce or Optimove, will be the companies with a “360-degree view” of the customer based on machine learning and predictive tools.

What might the future hold for Optimove?

Yakuel intends to focus on scaling in the U.S., which he predicts will be Optimove’s biggest market within two years; so far, Europe has been the firm’s stomping ground. But Optimove does not see a need to offer solutions for the acquisition side in addition to the customer retention side or to overreach.

“I think that we have a niche, and the niche is no longer that small. I think there is plenty of room for us to establish ourselves in the realm of customer marketing retention without having to go to acquisition,” Yakuel said.

Lee agrees that there is plenty of room for innovation and new companies in the CRM industry. And, according to Lee, Google will not be the one that will crowd out the enterprise software market.

“The focus of Google is to create tools that allow applications to capitalize on concepts like machine learning and artificial intelligence. Google’s focus is on creating an ecosystem of application and infrastructure, such as Google Cloud or a machine-learning platform.”

But Lee also said that the Googles of the world may want to attract a company like Optimove to move onto the Google Cloud platform, where it could take advantage of Optimove’s tools for end-user applications.

What will be the challenges for Optimove? According to Lee, serving the larger customer can change the ballgame. Companies with resources want to leverage machine learning, and they want to do it their way.

“As companies get larger, they either want you to expose your algorithm so that they can tweak it or give them the ability to do the analysis themselves. Larger customers are going to demand more configuration,” Lee said.

So, will Optimove ultimately have to reveal the recipe for its secret sauce? That’s just one of the juicy questions we’ll be tracking as we watch this growing company.