Zendesk and Live Chat Software | In Practise

Zendesk and Live Chat Software

SVP, GM Platform at Zendesk

Why is this interview interesting?

  • Evaluation of Zendesk platform strategy
  • Zendesk's approach to customer acquisition and to-to-market
  • Switching costs for live chat software
  • How the competitive landscape is evolving from a Zendesk standpoint

Executive Bio

Former SVP, GM Platform

SVP, GM Platform at Zendesk

This executive has spent almost 20 years leading technology teams focused on SaaS-based customer experience platforms. He was recently involved in founding and building the first conversational CRM platform, first via Smooch and then Zendesk post acquisition. He was previously President & CEO of Radialpoint, a tech support platform provider for leading cable and telcos across the globe, until it was acquired by AppDirect in 2015.Read more

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Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

My questions would be particularly with an angle from LiveChat Software, a Polish company. Zendesk, HubSpot and a few others are in the same space and that’s why I wanted to take the time to learn a little bit more about Zendesk. LiveChat’s service is offered by a lot of customer service-oriented companies, being live chat where you get a pop-up and the site asks you how it may be able to direct your request.

I think they’re still a customer of Zendesk who use some of the technology there.

Can you briefly describe your experience with Zendesk?

My background in this whole space of customer engagement, customer communications and customer service started probably in the 2007 era. I had a company that built a bespoke customer service platform – at the time for ourselves – running a premium support service we would sell, a Geek Squad like remote care service through telcos. It was all white label; AT&T, Verizon, BT, Virgin Media. We ran a lot of these services for very large telcos and we built the software for ourselves.

At the time, what was available on the market wasn't good enough so we basically built our own, and it was very much your classic live chat architecture, so I'll call it like synchronous communications. You needed to have that polling connection, the real-time connection between the services. We were innovating on many-to-one service at that time.

Fast forward eight years, sold that business and it spun out a product that became a company called Smooch. In 2013, we started looking at what does live chat mean in a mobile first world because at that point LivePerson was probably the dominant player and the best example in the market. We were looking at what does that mean in a mobile first world and what we basically concluded was it meant in-app messaging. So you need in-app messaging because, at the time, it was very much an app economy. It wasn't about these really responsive mobile websites. Everybody was producing apps and so the first product we built there was basically an SDK to allow in-app messaging. Think basically what Intercom would offer today in the form of an SDK or what Zendesk offers now is my product evolved in their latest releases.

We were sort of in this app world but then along came these messaging platforms that opened for business; Facebook and WhatsApp, Instagram DM, WeChat and Line in Asia. We basically realized not all engagement was happening in apps on mobile but, in fact, these third-party messaging platforms. Instead of focusing on the end point, we ended up focusing on this unifying platform to basically allow a business to connect their existing customer service platform to any messaging channel in the world. That could be in-app messaging, web messaging, Facebook, Twitter, SMS, you name it; as long as it was an asynchronous channel built on a messaging protocol.

Then we took that platform and we licensed it. Our dominant go-to-market strategy was actually to license it to customer service platforms. That's why LiveChat became a customer of ours and, even today, I'm going to assume they might use us for the way they integrate WhatsApp, the way they integrate Apple Business Chat, the way they integrate other channels. I don't know which ones they use us for; sometimes they might build directly or not. Sometimes they use us as this unified API.

Then in 2019, Zendesk bought that business and I expect over time that they'll replace their live chat technology with our messaging architecture, so going from the synchronous polling technology to asynchronous messaging protocols. That gives you some of my background in the space. From a competitive standpoint, LiveChat, Zendesk, Genesys, Nuance, Conversocial, Sparkcentral, 8x8 were all customers. We were under the hood of a lot of different people’s tech stacks.

After Zendesk acquired Smooch, how long did you continue on?

I stayed with Zendesk for roughly 18 months from May 2019 until December 2020. I was there through the end of last year and, aside from being responsible for integration of the business, ultimately I became SVP of Platform which was a cross-functional role. Zendesk was in very early stages of having a platform strategy and the idea was platform outside of their marketplace, thinking should we monetize API and what is our strategy with Platform. That's what I was leading for that period of time.

I stayed close to my co-founder; we were still working in the same office, together all the time, and he became responsible for the entire live chat offering and he basically took responsibility for all of the assets related to live chat or messaging which included their traditional live chat, the Smooch messaging as well as all of the bot technology that was tightly integrated with those channels.

That transition to Platform, that's an important question and I certainly want to come back to that. Before that, given your background, particularly with respect to this live chat and the customer communication part of Zendesk's portfolio, do you think the addressable market for that product is still growing or has it plateaued or is it somehow changing at this point?

I don’t think you can separate the frontend channel from the backend service. To me, live chat is not a market. Customer service is a market. Customer engagement is a market. Sales is a market, like sales software. Chat is a feature. Now, in that context the usage of live chat or messaging, whatever terminology you want to give it, usage of those channels is absolutely growing at the expense of email and voice, but all it is is a shift within features. This was a big problem that Zendesk had when I arrived in that they sold the method of communication as a product, so Zendesk support was email ticketing, Zendesk chat was chat; it made no sense. That's not the way you should break up your product in the current market.

When you go look at Zendesk it's now different. They now have Zendesk Service, Zendesk Sales which is obvious. This is the same thing as Salesforce Service Cloud, Salesforce Sales Cloud, Salesforce Marketing Cloud, HubSpot, same thing. Everybody's the same thing. The total market continues to grow across all of these and, for sure, the demand for the real-time, asynchronous messaging channels is the fastest growing segment within the market, in terms of channel engagement.

There seems to have been a big push from freemium providers on top of all this new competition that has come in. Even though the market seems to be growing, what do you think is the opportunity set for these freemium providers, meaning they just offer it as a part of something else or that's all they offer but it's free of cost? Is that a true threat over the next five, 10 years or is that something that will just fizzle out as time progresses?

Who would be an example there?

tawk.to out in Canada offers part of the same service, even HubSpot to a certain extent offers the primary sales as the premium product but then all the others, including chat and everything else, as a freemium product. Of course HubSpot is a completely different platform but there are many smaller startup operations that have popped up that seem to be offering free of cost.

I don't know that market well about who's really offering anything really material that's for free. I know that you can have these free offers but they just don't offer you any real volume. So it's really for a micro business that has no money to spend, then they try and get you to graduate upwards. My gut says, unless you're someone like a HubSpot or a Zendesk who has got a pretty reasonably featured platform, those models are flawed because people will graduate out of you. It’s very different if you're a holistic platform that has a free base offer but there's lots of room to grow. That makes a ton of sense to me because giving someone something for free when they would only pay you $15 a month, you're probably better off giving it away for free than charging $15 a month and getting more market share. If they can't grow with you then it doesn't make any sense.

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