Amplitude, Inc. (AMPL) Earnings Call Transcript & Summary

Hello, everyone, and thanks for joining Day 2 of the 2021 UBS TMT Virtual conference. My name is Taylor McGinnis, and I'm an analyst on the software equity research team here at UBS. And in this session, we're joined by Spenser Skates, CEO; and Hoang Vuong, CFO of Amplitude. Thank you both for joining us today.

Great to be here. I'm excited -- I've heard Taylor mention that there was a lot of interest in Amplitude, so great to meet everyone, and excited to share more of the story and answer some questions.

Perfect. So with that, maybe we'll dive in. And specifically for those listening in on the line that might be less familiar with Amplitude, maybe you can just start by providing a brief interaction of the company, just given that it's been fairly recent since you guys went public.

Yes. Amplitude is the cockpit for your websites and applications. It helps you track what your users are doing and then feed that back in product experience to create a great product experience. The same thing that Adobe is for marketing teams and Sales is for sales teams, we are for product teams. We started the business back in 2012. We just brought the company to the public markets back in September of this year. And yes, really excited to share more with everyone here about where we're up to.

Perfect. So maybe let's turn to the demand environment. Amplitude's revenue and current RPO growth has been north of 60% these last 2 quarters. So can you maybe talk about some of the catalysts for this robust level of growth? And how durable you think some of these trends are as we look ahead? How the conversations evolved with current and potential customers?

Yes. I think we've seen a lot of interest on the customer side from Amplitude because digital has become existential for every single company out there, particularly with the pandemic. I think if you look at the average Fortune 500 company, most of their business is actually shrinking and digital is the one spot of the business that's growing, whether you look at media companies or retail companies or financial services or B2B or kind of any part, digital has become the main growth driver for all of those for every company across every sector. I think more specifically, if we were to go, I think what's happened is we've seen a lot of interest from Amplitude from customers because the pandemic has really accelerated plans that were supposed to take maybe years into the course of months or weeks. And so we've seen a lot of robust growth and that translates to our customer base. The other thing that's happening is customers who are already on Amplitude continue to experience growth in their user bases. And so that then translates to more data tracked and more value generated out of Amplitude and ultimately, dollars on our side as a business. That all said, we're in the very early days of this transition. And so we call ourselves digital optimization. It's all about optimizing your digitalized revenue channel. And in order to do that, you have to have transformed first. So we're kind of the thing that -- Amplitude is the thing that comes after digital transformation. So it goes digital -- you transform your business to online and digital, and then you optimize it once you're online with Amplitude. And so most companies are still in the early days of that transition. And so there's huge opportunity for us in the future as an infrastructure platform to be that system of record.

Got it. And then as we think about the usage-based pricing model that you guys have that you talked a little bit about in terms of being driven by the number of events, is there anything to keep in mind in terms of the risk associated with that potentially and seasonality in the current environment that we're in. Maybe you could talk about how to think about the trajectory of growth based on that?

Go ahead, Hoang.

So our pricing model is obviously based on both the platform that a customer buy along with the [indiscernible] but that's obviously different than how we recognize revenue. We recognize revenue based on total subscription contract and we recognize it radically versus kind of -- on a kind of per usage standpoint, so we have that. I think that in a world where you kind of moved over from digital campaign to digital optimization and you're getting more users and you want those users to be more engaged. Obviously, you're going to create more and more events. I think the risk as a lot of people will point out is how -- what happens when [ that volume ] is so large, is it cost efficient and all that, and that's always [indiscernible] rate. Our point is that at the end of the day, the event volume and all that ties a lot closer to a company's growth -- the company's growth in terms of their users and their engagement with their users, ultimately users typically drives more revenue. And so to us there's an entire correlation to that than other companies where you're charging based on a certain data volume, but the data volume may not have same correlation to your own growth.

Got it. And maybe just diving a little bit deeper on that. So I'd hear -- so when you think about like the revenue growth trajectory and like the use of patterns that you see in a typical quarter because of like the ratable recognition, could you see differences in the usage or what a customer is doing in a given quarter versus just like a difference between a subscription and usage-based model? And if there's any differences there because of the way that you guys recognize the usage-based pricing?

Yes. Obviously, because we are ratable, you don't see that same kind of usual volatility that the customer has. But we have customers that obviously have really strong Q4 basically they say about retail, but then you have other customers that have really strong Q1 because they are in a different kind of -- B2B is fast as if it where -- or might be slower. So it kind of tends to balance itself out at the macro level. I think we do obviously have a piece of our revenue that is overages, but as we kind of share more than 95% of our revenue is really on the subscription. So it's just a small component, really.

Got it. And then maybe moving or similar to the last line of questioning, but I believe 2Q had some early renewal and pull forward activity as well as some larger expansions, which I think made for a little bit of a tougher compare in 3Q. So I guess in terms of how you're thinking about the renewal opportunity as we look into the back half of this year because of that and some of like the expansion opportunities, did that -- did you see any impact there? Is there any risk associated with that? And maybe you could just talk about how you think about the growth trajectory on the back of some of the strong growth that you guys have even seen recently?

Yes. I mean, obviously, first on Q4, we're kind of in the quarter, and we're not -- we don't provide kind of forecast within that. I think we've made commentary to the fact that, obviously, Q2 because of our semi-annual comp plan and some of the customer kind of growing that they kind of renewed and expanded in Q2. Some of that probably was on schedule to kind of renew in Q3. So a little bit early, but I think the bigger picture [indiscernible] kind of thinking about the market longer term. And that's kind of where our investments and kind of -- it is really about, right? We're -- obviously, quarter-to-quarter, there will be different kind of movement, whether in 2020 we had COVID and that [ cost some churn ] or now we have the offer where some of those customers really benefited from COVID and they have really big expansion. We're excited about the fact that we're adding more custom pack and we reported accelerated growth in new customers and how those new customer activate and adopt is really important. How our new product with recommend and experiment comes out is also important. And then the macro trend of being a product-led growth and being a system for a product-led organization is something that we think will take multiple years. And so we're really thinking about it from that longer term vision, more so than kind of like, hey, what's going to happen in Q2, Q3, Q4 kind of thing.

Yes. No, that makes sense. Maybe we can dive into that expansion opportunity. So I think one of the key questions that we get from investors commonly is how customers grow with Amplitude. And what determines, event usage or volume growth, which I think you talked about a little bit earlier. But maybe you could elaborate a little bit more on that. So is it number of users or traffic coming into the digital asset or the number of KPIs tracked? How should we think about that piece?

Do you want to take that one Spenser?

Yes. So the -- so first, we have a platform fee that varies based on the size of company we're selling to. And then on top of that the main lever for our analytics product, which is our main product, is data volume. And so that is based off of 2 different things. One, how many end users our customers have on their platform and then how often those end users interact and engage. And so those 2 things will drive the data volumes that end up getting sent to us. One thing we've actually seen there is there's been a -- since the start of the pandemic, the average application on Amplitude has increased the total number of daily active users they've had by about 50%. So we just released the product report a few weeks ago that talks to that. And so that's been -- that translates the data volumes sent to us and to value-driven and our ability to charge. The other big lever that we have is additional modules or pieces of functionality on top of the core analytics. So we've launched 2 products along that vein this year. One is Amplitude Recommend, which is a in product recommendations and user targeting program. It allows you to send notifications to specific groups of users based on what they've done on the product so far. So if someone was about to check out in your cart, but they didn't reach the final step, you can send them a reminder, hey, you have these open items in your cart, you might want to check out. The other product is our experimentation product. So this is the A/B testing product where you could show different variations of -- of your product to different groups of customers and the basis of that see, which variants perform better. So both these products are very new. We just launched them in Q2 of this year. Q3 was the first full quarter. We saw revenue in them being operationalized within the business. Still very, very early as they are very new products. And we're still -- there's still a lot to buildout in both of them. And there's a lot in terms of getting them operationalized by our go-to-market team and plugged into customers. But that's another lever. I think over the long term, the goal is to continue building out that suite of products so that we form everything that this Chief Product Officer buyer is looking to purchase from an infrastructure and product data standpoint from Amplitude. And so there'll be more of that we'll launch next year and the coming years on that, which will improve our ability to charge for the value that we drive.

Great. And then can you maybe talk a little bit about the usage of the product and how -- for the end users that are the ones that are in Amplitude, is this something that they're looking at daily, is the event data within Amplitude needing to be repriced or updated in real time? Or is it something that people can update periodically? How should we think about that piece?

Yes, the event data that comes into Amplitude and is reported on is in real time. And so you have folks [ that are ] in product or executives that are looking to get an update on how their end users are engaging with their business every single day, multiple times a day. The metric that we look at internally is what we call weekly learning users, which are the number of users every week who have shared a learning with someone else. We find that for a lot of our user base, is the predominant use case where you're going to check in on metric or a particular set of metrics every week and then do a deep maybe do a deep dive based on what you're seeing in the dashboards within Amplitude. We find that -- that's kind of the -- and not just the usage of it, but then sharing content that you've created or insights that you've found with other users within the platform as the real driver of engagement and ultimately, more revenue on amplitude and more willingness to buy. And so we track the amount of usage that our end customers do predominantly on a weekly basis because that kind of [ sync ] up with how they're running their digital businesses. It's similar to a Salesforce or Adobe marketing Cloud where the team, they'll look at reports every few days or once a week on the product whenever they want to check in on the current state of the business. And then there are some individuals who will look at the same every single day because they want -- because their job is in the data and understanding what's going on.

Got it. And maybe as a second part to that question, how does this impact the level of dollar-based net retention rate that is achievable? So when you think about the catalysts for going to maybe like a higher volumes, how should we think about that? And I think net revenue retention was 121% last quarter. And the messaging, I think is for that to continue to trend up over time. So how do we think about that piece?

Yes. I mean, I think we kind of set out that our long-term goal is kind of to keep that retention rate above 120. I think, obviously, as you get larger in scale, you kind of have that headwind. But we see, obviously, the growing customer base and adding new customers, new products and kind of just digital becoming a bigger portion of those businesses portion that they should have to also boost as a tailwind for net retention rate. So like you just mentioned, we kind of improved from 119% to 121% and we're looking to kind of keep that going, stay about 120% in the future.

Got it. And then staying on this topic, I guess comparing your dollar recent expansion rate to other usage-based companies, it is a little bit lower. So can you maybe talk about some of the differences there and why you might not be able to compare you directly to some of those companies?

Yes. I think probably the first big difference is that our growth and where we came from is really within kind of SMB or commercial cast as we call it. And so we still have almost roughly about 30% of our revenue coming from customers under $100,000. And as you can expect, within those segments, they tend to have a little bit higher churn. I think it's also -- we've only launched our new product really in Q2 of this year. So those new products are something that is still in the future for us. And so the combination of new products, kind of the mixture of customers has been kind of some of the reasons kind of where we are. But I think we feel pretty good about the strength of 2021 and kind of where that's trending, where that looking like. And so we're looking forward to kind of showing that in the future.

Yes. That was going to be my next question. And Spenser, I know you were talking about experiment and recommend to earlier, recognize that these are still newer products. But any early reads to share with those listening in, whether that be on potential impact you could see with average deal sizes or what you're seeing in terms of like interest in expanding into some of these areas? Love to get more color there.

Yes. Yes. We've definitely seen great early traction on them. I think in terms of just to set expectations, in terms of -- it's not like it's -- they've made massive impacts across our average deals or anything like that. They are still again on some small portions of the overall customer base, relatively speaking. Within those, I think there's a bunch of promising indicators that we're very excited about. We've closed lots of deals from both that have given a lot of great initial data points. And there were some deals where that have been significantly impacted in terms of just having a lot -- our ability to charge a lot more overall dollars relative to what we would have done with the analytics alone. So overall, we're not -- while we're not breaking out anything because it's still too early. From my standpoint, as CEO, both very promising areas, ones that will continue to invest both from a go-to-market standpoint in terms of just deploying them across our entire sales team and channel. And then also from an R&D standpoint, in terms of a lot of opportunity to build much more and create more value. Both of those products are about -- they were in development for about a year before we launched them. So again, very, very early on relative to the full opportunity.

Got it. And Spenser, you talked earlier about ambitions to expand the product portfolio that you guys have today. So can you maybe talk about areas that you find of interest and maybe areas that Amplitude doesn't address today, that there's a lot of like synergies or are adjacent offerings. Any color there?

Yes. The big one that we'll be looking to get a lot more out next year is on the data front. So helping folks manage their data both into and out of Amplitude. That's a #1 blocker to success I mean Amplitude today is being able to easily get data in. And then make sure that you're putting that everywhere you need to in your business. And so that's a huge area of focus that we're going to do a lot more from a product standpoint when it comes to next year. Beyond that, there's tons of other areas that we're always kind of looking at and evaluating. I mean, within the core analytics, there's a lot more that we'd like to get more sophisticated on. We're looking at marketing used cases, so things like advertising attribution there. And then for us, it's really where are the customers pulling us at the end of the day in terms of, hey, the reason we want into experimentation is because that was something that we've heard from our customer base for a very, very long time, and that's why we're looking at the data side for next year. And then beyond that, it's hard to say at this point. But I think there's just a lot of opportunity in terms of how many different people within a company can use product data.

And I think one interesting thing that we found in our research is that it sounds like a lot of times, people are using Amplitude in combination with CDP platforms. You hear a lot of like talks also using it alongside Snowflake. I know you guys just announced a partnership there, but can you maybe talk a little bit about more of that piece? Because I think even CDP itself is an emerging area, too. So I'd be curious, with your guys' integrations there and the potential for even more partnerships on this area as we look ahead?

Yes. Yes. CDP have been a great partner to us since the early days of Amplitude. And for us, it all comes back to being customer-driven on it. So the reason that we've -- there's tons of a lot of customers use CDP to send us data. And a lot of customers also use things like Snowflake and so it's always our focus. It's always a desire on our end to deepen our integrations, whether it's with Snowflakes, with other CDPs out there and all in service of just making it easier to get data into Amplitude. We're agnostic as to where the data comes from. We don't have a strong point of view. A lot of companies will build their own internal systems or they'll use a CDP or they'll use a data warehouse like Snowflake. And so for us, it's just about enabling as many of those connections as possible. And that's something that, as I mentioned with the data focus, we're going to place a big emphasis on and have a lot more coming when it comes to next year.

Got it. And maybe turning to the new logo side of the equation, from the expansions that we were talking about earlier. So if you think -- if dollar-based net expansion rates continue to be somewhere in the 120s range. That means that a meaningful portion of your growth is -- will continue to come from new customers. So in order to sustain like that high level. So I guess when we think about the new customer adds of 137 last quarter, that was really strong. But I guess as we look ahead, how should we think about the pace of new logo like additions, it sounds like you guys are very early in this market, and there's plenty of opportunity. But any color there that you can give for people listening in?

Go ahead, Hoang. You take it.

I think if you look at our total paying customer list and it's kind of under 1,500, that's still is very small fraction of companies that really should be moving and using Amplitude to kind of drive their product. And so we -- like we talk all time internally, we're in the early days, maybe kind of moving out of early adopter to early majority, but still that still a very early portion of kind of where you are in the market. And so we kind of expect that we're doing everything right from go-to-market and product that we're going to continue to see good additions of new customers and adding to that to drive our growth and now to future expansion.

Perfect. Spenser, is there anything that you want to add to that?

Yes. No, I think -- I completely agree with Hoang. I think there's a huge opportunity there. We're very, very early on. I think we've done a great job for companies who know the landscape -- for buyers who are very opinionated what they're looking for, I think we've done a great job. And that's why I think give us a early adopter persona that's really looking at technology details, what features do you have, how do you stack up against the competition. I think our next big challenge as a company, and this is going to be over the next 5-plus years, is how do we move from that selling motion, being great at that selling motion to getting into the early majority, where they're looking at a whole different set of criteria when it comes to evaluating our products. So they're less concerned about the technical details. They want to know that you can educate them. They want to know that you have the resources to shepherd them through both the buying process and becoming more mature as a company. They want to know that you have a full product suite. And so we're just starting -- part of the reason we went to the public -- we wanted to go to the public markets sooner rather than later so that we would be set up to sell to that early majority buyer. And so we're going to -- 2022 is going to be a big focus. That's going to be -- the big focus for us is changing the company to go after this buyer. And as part of that, that unlocks massive, big and new markets for us that we just haven't tapped into before.

Yes. That leads to my next question because I think one thing that is apparent is that there's a lot of opportunity in the product analytics space, but still in its early innings and largely being developed by younger software companies like Amplitude. So -- and many of which are still private. So I guess, one risk could be in relation to new logo adoption and just as the market builds brand awareness. So to some of the things you were just talking about, what are you guys doing on the go-to-market side to facilitate new customer activity, partnerships with Snowflake seem like a good step, but curious if there's any other plans on the partner side there, too.

Absolutely. I mean, I think the partnership goes beyond just tech partners, there's also obviously system integrator partnerships. When you think about some of these industries, the reason why they haven't moved is they may not be ready internally with even understanding kind of what measure should they look at, the quality of their data, how to instrument their site. And obviously, we're a software technology company. We don't have aim to kind of be a service company nor do we have the relationship with all of those companies. And so looking to partner with whether it would be the large SI like Accentures and Pricewaterhouse or even more specialized [indiscernible] and WPG and stuff like that. I mean we're definitely been building that out over the last kind of year, and there's so many of those really valuable partners and they have really great relationship with a lot of these accounts. Know those account really will, know their infrastructure and data structure really well and can really help kind of accelerate the time line. And so the combination of both tech partner and solution partners are critical as we kind of go after that next phase -- the next wave. And so absolutely, we're looking forward to kind of bearing fruit on that to you next year.

Yes, awesome. And then maybe we can dive in a little bit to the competitive landscape. So we thought it really interesting that Amplitude largely competes against other young software companies like Mixpanel, Heap, and then Pendo. And there aren't a lot of large software companies that are direct competitors to you guys. So can you talk about Amplitudes differentiation and maybe some of the risks that the success you and others are having, drives interest from larger players like Adobe and Google and others to potentially entering this space?

Yes. I think I see -- I actually kind of see it the other way around. I think in any software space, you always have a bunch of competitors at the low end in SMB and commercial, and you named some of the folks that we see there. I think the biggest one in enterprise by far is Adobe. We see them quite a bit in terms of them providing marketing analytics and then doing similar types of things and offering similar value to our -- to the same end buyer. And so I think that's kind of the interesting question for me, which is there's this change in mindset from having a marketing centric view of digital to a product-centric view of digital. And that's the real thing that we're selling. And so often, it's, okay, well, are we going to keep using legacy marketing tools like Google Analytics or like Adobe Marketing Cloud in order to understand the digital journey or are we going to look at that same thing through a product lens. And that's the core of the differentiation. Amidst that a lot of -- it's got this totally different approach to what digital is and how to build the product within it. I'd say within -- within -- in terms of differentiation, it really comes back to that different view of the world. So we've created a whole bunch of custom technology that specifically targeted that end user journey. Product journeys are very, very different from marketing journeys. So I talked a little bit about this as part of us going public. But the -- if you think of the average product, the average product as a huge amount of surface area. There's thousands of different things you can do even on relatively simple products. And the question that you're asking is, okay, well, how are you tracking and managing all that complexity, especially when each user doesn't navigate that in the same way. And so what we've done is we created a -- what we call the Behavioral Graph, which is a piece of technology that allows you to pick out trends and insights from those thousands of different things your users can do and from those unique cards that they can have. And that all goes back to answering the question of why is someone having a successful experience in my product and how do I get them to have -- to improve that and have them find more success. A great example, I love talking about is one of our customers is Peloton, and Peloton has been with us for a number of years, and they have one of the stickiest workout products around. It's one of the highest retention, most engaging fitness products out there on the market. And one of the ways that they did that is they've actually created a just phenomenal social experience. And they found out through using Amplitude that if you had a social experience during a workout, you were much more likely to come back and engage again and they ended up adding a bunch of stuff like high fives and leaderboards and other social elements that helped their end users have that experience, and that's why they're now one of the stickiest workout products around today. That's not something you get out of Google Analytics or an Adobe or a bunch of the tools that is in the market. And if you think of the value that, that sort of insight has to do business like Peloton, that's almost special to be the best, and most differentiated and to understand what it is your users are getting value out of your product. And so we help all of the companies that are on Amplitude by similar sort of insights, and that's where we really stand out versus a bunch of what's out there.

Got it. And then on, is -- can you maybe talk about who is the buyer of your technology is? And is that the same buyer of Google Analytics and Adobe Analytics? Is there a lot of overlap there? Or is it different people within an organization that are making those purchasing decisions?

Yes. So we think of it as a Chief Product Officer. Within tech companies, that's become the standard of how it is that you're tracking who that person who owns the digital journey, and that's who owns the data and the success behind that. It's really the product leader. Now that title actually doesn't exist in a lot of non tech companies. And so you see a lot of different variations of it. It can be the CMO, it can be the Head of Online or Head of Digital, it can be -- you can have a Head of Mobile or something else. And so I think we see some overlap with Adobe, Adobe and GA tend to roll up to marketing and so some organizations, all of digital sits there, but there's a lot of organizations where it doesn't as well.

Got it. And then I guess how far along, maybe are we in terms of product becoming more of its own category? Because I know, Spenser this is something that you've talked a lot about in Amplitude, potentially paving some of the way here. So where do you think we are in terms of that potentially materializing?

Yes, very, very, very early. I think you've seen technology companies embrace that. But the vast majority of the non-tech world still has to recognize that the Chief Product Officer is the most new important C-level executive. And I think -- so companies are just starting to figure that out. I think you look at places like Facebook or Netflix or Twitter, where it is really the product leaders that are driving the success of those businesses. And I think a lot of that knowledge is just starting to get to the rest of the industry. So yes, I'd say we're in any one of that.

Got it. Do you feel like the pandemic was a catalyst for some of that? And I'd be curious if you're seeing that show up in your conversation that you're having with customers.

Absolutely, yes. There's like -- I'd say what we saw as initiatives that were going to take years on the digital side, go down to months or weeks. And so there's a lot of -- particularly, I think once you got past the initial few months of the pandemic and past the shock and you kind of realized, hey, I need to move my business to digital. We saw a lot of acceleration in terms of initiatives and buying cycles to go towards Amplitude. Now I think the question a lot of folks have in their mind is like, okay, well, is that a temporary thing or is that a permanent thing? What I'd say is that long-term trend, that's going to continue to happen and dynamic just accelerated us. For sure, no one's going to go back. It's not like all of a sudden, next year, someone is going to be like, oh, digital is less of a priority. That's definitely not going to happen. Now the rate and when the big inflection points are, that's what anybody's guess is about.

Got it. And then let's turn to some financial related questions. So I think some were surprised to see the 4Q revenue growth guide of 56% because it's a material deceleration from the 72% year-over-year growth in 3Q. So was there anything that occurred in 3Q that was more onetime in nature or as it relates to seasonality, that would potentially explain some of this deceleration. And Hoang, maybe you can talk about some of the assumptions that are embedded in the guide as well as your guidance philosophy, given that this is only going to be your guys second quarter?

Yes. I think the main driver was actually I think what kind of accelerated kind of Q3 -- and was accelerated Q3 was really kind of -- we have, as you mentioned, a few customers who have some really large expansion and they benefited from COVID in Q2. And when we do that, the way we recognize revenue is they have a remaining contract we take plus a new contract and recognize it ratably. And so what that typically does is it obviously booster your Q3 revenue, but then a mixture of Q4 revenue sequentially quarter-over-quarter and proper comparison. And so I think you are obviously trying to stay prudent about kind of how we're forecasting out when we're looking at as some of those early expansion happening in Q2. So I do think it's mainly driven by tougher comp and also kind of where we are as we -- in the stage of our company and trying to make sure that we're giving guidance that we feel good about.

Got it. And now moving to some -- moving to operating margins. So the guide, as we look for next year, you put out less than negative 20%, which is well below the guide of negative 11% this year. So can you maybe just provide some more color on what are like the key investment areas next year? And where will incremental spend go? And beyond 2022, how should we think about the margin trajectory towards breakeven?

Yes. So we mentioned this during our Investor Day. Based on kind of the tailwind we're seeing in the market, [indiscernible] seeing in the customer and the new products we're launching and all that, that we just felt like despite kind of maybe what may happen one quarter versus another quarter, when you look out into a few years, business now -- I mean, we probably should have done a heavier investment 18 months ago, 24 months ago, but obviously, whether it's COVID hit or other things. So we kind of really wanted to accelerate and to where -- I would say we're doing actually across all fronts, to be honest. I mean, in product development, we now have multiproduct solution and creating a suite, and we're willing to add more to that. So we're going to be doing some pretty heavy investment in product development. Same thing on the go-to-market side. I mean, one of the reasons why we went public and why we think that the number of 1,500 customers is still pretty low. We want to actually not only add capacity, but we also want to raise awareness. And so spending money to do an amplified event, spending money to expand internationally, domestically and capacity required those are the areas of investment. And so we look at it as things that we've been planning to do all this year, and then obviously, you'll have most of that kind of being fully burned next year in terms of cost. And as far as the last portion of your question, look for us, it's really right now, you talk about the market sizing, $37 billion. You talk about being multi product, we talk about growth those things are really are -- growth is kind of our priority #1 right now. And as far as we can make sure that we're winning in that market and creating the best solution for the Chief Product Officer, I think we want to kind of stay pretty heavily vetted into that growth. And we'll obviously look at our operating margins, we constantly look to be effective. I mean, we've driven higher gross margins. We've shown that we can be very effective in prior year. And so -- but we do think that like we don't want to like lose the market because we're being too cautious about our investment in product development, our sales and marketing. And so we gave longer-term guidance in terms of kind of where we see. And I think that will be really a big factor of that versus growth. But when growth can kind of be in the north of that 40%, I think that's the right area where we want to lean into.

Got it. And maybe in the last few minutes here, we'll zoom out to some broader questions. We've heard a lot about talent shortages in the software industry. So curious if that impacts Amplitude at all in terms of its ability to retain or hire? And as like a second part of this, also curious if it benefits Amplitude, meaning have you started to see this drive more interest and demand as companies look to automate or replace jobs historically done by data scientists? Is there a player at play there at all?

Well, I think on both factors, and I'll add -- the first one, I think almost every tech company there, they are saying no to that, they're probably lying. Obviously, there is a shortage, and it does impact kind of all of us. I think that we're fortunate to be at the position over in given our growth story, the challenges that we have in trying to build out a product. And success that we've had over the last few years. And so I think that narrative and our ability to compete competitively continues to allow us to do really well in the late market, even though those challenges continue to increase. I think that as your second part, I think that companies [ are possible ] not because of data scientist to be honest. You actually just trying to figure out how do you make your existing resources more productive, right? How do you make your product manager, your [ product ] marketer, your customer success person or your engineer to be able to access and understand their customer journey and how that customer journey impacts the product and how can they make that experience even better to guide growth. I think making that level of efficiency is not only -- not only cutting back, but if you can just make some of the folks you have more efficient, I think that's going to be the bigger driver. And then at the same time, I think you're going to be right. You haven't seen -- well, kind of [ we can correlate exactly ], but it would make sense to me that like in the long run, you have to kind of pick more and more of your core competency. And so if you haven't built out kind of like this huge infrastructure, like no one today goes out and build their own ERP or own CRM, 4, 5 years ago, if you wanted to understand your customer journey and your product, you have to go build it. I mean, that's what kind of Netflix did, and Facebook did, and Amazon did. I think we fast forward this, and it's going to be like, wait a minute there's no way we're going to catch up to what Amazon is doing nor does it really make sense of our core competency. And so I think those trends in market are very favorable.

Yes. And no one is cutting back on data science talent or product data, everyone is trying to invest there. That's the one part that's growing. And so everyone's needs is just -- is continuing to grow and accelerate there in spite of any ups or downs in the macro. And so -- I talked to one company that was trying -- they were trying to hire a data scientist for every single product manager. And that was crazy, and it's like, okay, well, that's actually something Amplitude can help out with. So instead of having -- trying to have a data scientist, who's like a very expensive and high leverage resource for every single product person in the company, you can actually substitute a lot of that need with Amplitude. And so as the need of demand for understanding product data and user journeys digital just continues to grow. The question is how you're going to meet that need. And so we're absolutely a huge part of that story.

Yes. That's interesting. So maybe as a, like final question to wrap this up and a fun one, very broad, but is there any part of Amplitude's story that you both feel is maybe misunderstood or something that people can understand better as they're taking a look at you guys?

I think -- yes. I mean, I think we've definitely gotten out everything that we needed to. I think the big underlying trend is this idea that digital is going from a marketing based channel to the product itself and understanding all the implications that has, not just for us but for the ecosystem as a whole and what that means, companies in the future are going to look like. I think that's one that I think folks have maybe made one level connection, yes, I should have a data science team, or I should buy some piece of infrastructure. But understanding, okay, well, this is really the revenue center of companies. That means the revenue center starts to shift away from sales and marketing and all the same investments you saw in those functions actually go to the digital product. And what are the full set of implications. That's where -- I think that's where a lot of the industry is still coming to really appreciate. What does it mean to have digitalized as the revenue center for my company. So that's why I keep saying we're in the early days of this trend because I don't think all the implications of that have been thought out. And the exciting thing is that if you're early to that, like we believe we are -- you have this massive opportunity. That's just a question of execution.

Hoang, anything from your end?

I think that is definitely the high-level. For me is I treat down a one level. I think that a lot of this still kind of get confused with things that other like just an analytics or analytics only or -- and you kind of really forget that to really be that product lead, it's really about a problem for all those users who will use it on their day and what they're trying to do and how they're going to make that experience always better. And so as we kind of roll out more solutions to that tree, I think that's kind of when it really begins to open with mind understanding, oh, this is not something that's just a few people are using to kind of answer a few questions and why you can't just do that with data warehouse and some kind of the BI tool. It is really is a platform just like we probably [ will be ] getting Salesforce for sales or Adobe for marketing your product-led organization, Amplitude should be the platform that you're on.

Perfect. So with that, maybe we'll end it there. Spenser and Hoang, thank you so much for joining us today and sharing more thoughts on the Amplitude story.

Thank you Taylor.

Thank you, Taylor, thanks to everyone. Great to meet everyone. Thanks, guys.

Thank you to everyone listening in too.