Growth Rate (y/y)
Intercom has raised $240.8M from notable investors such as Kleiner Perkins, Social Capital, Bessemer Venture Partners, and ICONIQ Capital. It was last valued at $1.3B, pegging its present-day valuation/revenue multiple at about 4.3x.
Publicly listed customer service companies have higher multiples, in the range of 6x to 8x. For instance, leading service-first CRM company, Zendesk, has a market cap of $9.1B and a multiple of 6.63x. Freshworks, which delivers help desk support with automation, has a market cap of $3.7B with a multiple of 6.56x.
Intercom is a subscription SaaS company that prices based on the number of seats a customer needs, the number of contacts in the customer's CRM, and the products in the suite that they choose to use.
Additional products include things like product tours ($199/mo), WhatsApp messaging support ($9/mo per seat), and surveys ($49/mo), and give Intercom a way to drive additional incremental revenue from customers.
Key to Intercom's early growth was their ability to drive and convert cheap top-of-funnel traffic from SMBs and startups, which they did in two big ways:
- Content marketing: Intercom's main distribution channel from $1M to $50M ARR was their blog, where Intercom wrote multiple posts per week targeting medium-to-high volume SEO keywords to bring in folks searching for information on support, pricing, user engagement, and other common SaaS topics
- Referral: Early on, Intercom inserted "We run on Intercom" links inside each of their customers' chatbots, driving visitors back to their site to learn more about the tool. Each link also sent those visitors to a landing page personalized for traffic from that website in a technique known as "dynamic keyword insertion".
Today, Intercom offers a variety of adjacent services on top to help teams engage with their customers in other ways and better help them:
- Surveys: Gather feedback and use it to configure the Messenger experience
- Product Tours: Assist clients by having them go through interactive, multi-step tours
- Bots: Build bots that automatically address a variety of issues
- Switch: Reduce hold times for clients and transfer phone conversations to Messenger
All of these separate features help SMBs boost customer acquisition and decrease churn.
The unique advantage of Intercom’s approach is that it’s integrated in three important ways: integrated across the company, making it easier for different departments to collaborate with each other; integrated directly into the product, so that businesses can engage in live interactions with clients; and integrated with the data, meaning all information is stored in one place, which minimizes disorganization.
One piece of evidence that points to Intercom’s integration capability is that 93% of its customers use more than one tool: the average is 2.5 products per paying customer. However, there have been some complaints about the lack of certain features, notably consolidated reports, indicating that the roadmap is still being paved.
Intercom was the early innovator in the conversational marketing world, and is still the market leader—but the space is becoming saturated. Intercom is competing with systems of record like Zendesk and HubSpot on the one hand that offer a full CRM solution around their website chatbot, and other workflow tools like Twilio that are working towards their own end-to-end engagement platforms.
Systems of record
For this reason, they can be better geared towards corporates that require extensive features, but they also tend to offer free or discounted plans that are better fits for SMBs and startups.
The other big advantage of these major systems of record is their flexibility: Zendesk unifies multiple conversational systems, while HubSpot monitors the entire customer journey in one, central place. Although the two companies have distinct features, they’re both known for selling a complete software package.
Intercom's strength here is the fact that it physically embeds into a customer's website and so has on-going visibility into all of their visitors. That means Intercom can bootstrap a CRM without being manually filled out and refreshed as you would have to with Zendesk or HubSpot.
Here, however, one of Intercom's bigger competitors is Twilio, which similarly collects data on a website's visitors via Segment, their CDP. On top of Segment, Twilio has Twilio Engage, which lets marketers define unique outreach workflows for each segment of customers, resulting in a high level of personalization.
Intercom initially targeted the SMB segment but is now seeking to go upmarket. Its enterprise customers include the likes of Amazon, IBM, and Facebook. There remain plenty of big fish to catch in the web and mobile sectors.
As Intercom targets larger customers, its strategy has shifted. Incumbents often release more content and prefer “industry-standard” features. Hence, Intercom is working to ensure that its sales and marketing teams are on the same page. The company’s brand also shifted towards covering a wider audience.
One area that Intercom has neglected so far is real-time analytics, which is a key revenue stream for Zendesk and Freshworks. This feature involves dashboards pre-populated with critical metrics that monitor performance and identify areas of improvement. Companies that leverage data see a 79% reduction in customer wait time.
Intercom’s pricing is difficult to predict given the additional costs and hidden fees. It’s quite steep and can get expensive for early-stage companies, pricing out a lot of potential customers. Intercom appears to be pivoting towards larger enterprises, which might alienate loyal, early adopters.
Intercom’s wide range of tools could be a double-edged sword. Although it’s beneficial for moving upmarket, original users may feel overwhelmed and decide to choose a less complex customer communications platform. The opportunity also exists for specialized startups to supplant Intercom’s various features. Intercom can mitigate this issue by providing educational resources and more in-depth tutorials.
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