Vimeo.com, Inc. (VMEO) Earnings Call Transcript & Summary

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Good morning, everyone, and welcome to the 2021 Wells Fargo TMT Summit. Good morning. We're very happy to have with us Anjali Sud, the CEO of Vimeo. We have a limited amount of time. If you have any questions, you can fire them into [email protected], we'll try to get to them. I want to jump right into the fireside chat. Anjali, welcome.

Thank you, Brian. Good to be here.

So one of the things we get asked from investors frequently is the initial outlook pre spin was for top line growth at or above 30% for the next several years. And you did caution us back in May that we could see some back half deceleration, [indiscernible] around 20%. And then since then, it's been revised a bit, so -- so maybe at least from the Street's perspective. So now looking at 25% growth in the fourth quarter and then resuming 30% in '22. Back in May, when you were looking forward, and as things current stand, is that still the case? Or do you think we could see more deceleration in the first half of '22?

Well, we haven't provided a specific outlook on 2022 yet. We will, I think, when the time is appropriate. But what I have said and I said it in our Q3 earnings is our path to 30% growth is further out. It is a delay, no fundamental changes in the business. But for sure, as we have lapped the tough comps of COVID and seen some downward pressure in a few sort of discrete areas of the business, that has tempered sort of our view in the very near term. What we have shared is that we do think the first half is going to be more muted. And what we're really focused on is reaccelerating in the second half of '22. And that's going to come from both getting out of the tough comps in the first half as well as a lot of the pricing, product, go-to-market investments that we've made now really starting to bear fruit. And I think the biggest thing I would say is if you look at Vimeo's business, we've always had sort of this sort of an SMB, small business, kind of component, and where we've been really focusing in terms of our TAM and our opportunity is in the enterprise. And what we're really seeing, I think, is sort of headwinds and tailwinds in different parts of the business. And we've talked about it a little, and I'm happy to get into it in more detail, I'm sure you'll want to. But for me,that the most important thing is our primary thesis, that large companies are increasingly going to want to use video, are going to launch an all-in-one professional video solution and that we're just at the very beginning of unlocking that TAM and unlocking share of wallet and seeing a fundamental change in behavior among how we use video at work, I think those are very much intact. And so ultimately, that sort of medium- to long-term view on 30% growth hasn't changed for us.

Got it. And it seems like some of those issues driving the variances were around maybe pullback in live streaming and and over-the-top activity during the pandemic. Maybe some around the sales cycle in enterprises, maybe also related to reopening and then maybe around enterprise early-stage acceptance of the additional products like video library. So maybe I wanted to talk a little bit about, could we put a finer point on what are kind of the pullbacks you're seeing? And maybe very topical, do you see -- is the business that fluid where you see impacts from Delta or impacts from Omicron? And could you opine on that a little bit?

Sure. I think there's a couple of things in there, some of which are very much drivers and some of which aren't. So worth me unpacking a bit. First, I'll say that you're right, the 2 areas where we've seen the most sort of downward pressure have been in live streaming and then really small, safe and fitness companies who are using us to stream and charge for digital classes. And sort of makes sense. If you were a yoga studio or a gym, your urgency to purchase and your willingness to pay for a very robust kind of enterprise offering, a Netflix-like quality service, we are seeing the urgency there come down, and we're also seeing that the price points have started to come down, not because these studios and gyms don't intend to use video, they always will want to now have in-person and virtual offerings, but obviously, the way they think about their need has changed. And so on that front, that is definitely something that we did not predict with precision as we looked into the back half of this year, and it's showing up now. I think it's worth calling out, though, I still think that market is a really exciting and interesting one. And what you'll see us do, talk about the creator economy, what you'll see us do is better orient our product and price point to have a self-serve version of that OTT offerings that we can actually better serve those users with the right value proposition. So for me, that one is definitely a delay. And it is something, and I think we shared in the past, that part of faith and fitness vertical for us is, it's a mid-teen percentage of revenue on the enterprise side. So it definitely does have an impact. On live streaming, we have seen sort of the frequency come down from COVID peaks. It is still materially up, multiples higher than it was pre pandemic. But just the sort of volatility there and how quickly it sort of hit right after the summer seasonality was something that was also difficult to foresee. Outside of that, Brian, we are not seeing any signals on our enterprise -- core enterprise offering that there is an issue with competition, customer education and adoption. I shared a little bit of color around this, but we launched a Video Library product. In the summer, we just launched Vimeo Events product. We are seeing, I think, good validation that companies were looking for this. We know this because they asked for it, and it's why we build it, and that the product is delivering, early days, delivering on their needs. And I think I've given an example in earnings that last quarter, we did -- we had a Fortune 500 large, Fortune 500 retailer reached out to us for a self-serve live streaming offering. And we ended up signing a multiyear, annual 6-figure deal with that company specifically because we were offering not just live streaming but a video library solution. And that's an example where the sort of annual contract value on that deal is far, far greater than our typical average. Our deal cycle there took a bit longer. It was about 2 months. Still, I think, a very, very quick kind of turnaround for this sort of traditional enterprise software. And so there, we talked a little bit about sales cycles. We are seeing sales cycles move up a little. But I would call that a very natural and welcome dynamic that we're seeing as we move upmarket. And ultimately, we're talking about sales cycles on average going up by days, not months. And so if anything, on that part of the business, I see momentum and real tailwinds that we think are going to persist. And so we're going to have to just work through the kind of the headwinds and tailwinds happening simultaneously, different parts of the business. But ultimately, if you think about the thesis, really nothing that says that enterprise video, is it going to just continue to grow and expand, that Vimeo doesn't have a winning product and solution.

Got it. You're in a position right now, certainly not unprecedented, we see a lot of software companies that kind of make changes to the sales motion. They come out on the other side quite successfully, kind of flying the plane as you're also kind of building it in terms of redesigning and implementing the new pricing and the packaging, the go-to-market motion and even doubling the sales force this year. So when you look at what you're seeing across the business right now, how much of this is stuff you think you can solve with tightening up internal processes and improving sales productivity as the reps mature versus maybe more fundamental issues around customer education and acceptance?

Yes. As I said, I don't see any challenges. I only see opportunity on customer education and acceptance. And the thing to remember is we're launching -- we launched Vimeo Library a few months ago. We launched Vimeo Events, which is our webinar solution that goes after a totally new market, B2B marketers, weeks ago. So for me, there's nothing that indicates that we aren't spot on, on that strategy and that we won't be quite successful. Again, customer feedback right now has been very consistently I need this, I want this. I will pay for it. And by the way, I will choose Vimeo because it has an all-in-one solution. And a great example is Whirlpool. We as a customer -- it was a competitive replacement. They were working with another provider. And they chose Vimeo because our UX and sort of the customer -- the user experience is so much more modern and intuitive, because of the quality, because of our support, because of the breadth of our solution. So I'm not seeing anything on that front. To your point on execution and how do you kind of -- you're launching a whole new products, we have to figure out how to sell them while scaling a sales force and moving fast in the market, for sure there is opportunity there. And I'd put it in a couple of buckets. I think one is when you ship new products that go after a new market, it takes a little bit of time to figure out what the right message and motion is. A great example is that as we've moved upmarket to larger companies, we are seeing that we now have to go through a procurement process, an infosec process, legal approvals. We're basically selling to different decision-makers. We used to basically enter the enterprise with a single offering, live streaming. And it was to a single buyer that didn't need a lot of approvals. Now we want to have a wall-to-wall deployment within organizations. We want the CIO signing off and saying, let's do a multiyear deal, where every video across my organization is hosted on Vimeo. But that sort of understanding how to perfectly sell through that process is a different skill set. And so one thing you will see us do is specialize our sales force more. Up until now, believe it or not, even the scale we've been at, our sales force has been generalized. So you had the same person selling a $20,000 deal that's just live streaming with a 10-day sales cycle trying to also sell to a Fortune 100 company, a much larger deployment. And most enterprise software companies segment their sales force based on things like company size or use case. And that's something we're moving to that we expect to have an effect in January. We're bringing in, I think, a lot more seasoned SAS patterns who have seen other parts of our go-to-market, customer success, solutions and business operations. These are all areas that are very new for us. They are not in Vimeo's historical DNA, and you have to first build the products to sell to be able to then kind of get the go to market, right? So I think those are all real opportunities, I would say, Brian, and I'll take execution risk any day over something existential. And then the very last point I'll make is pricing. Our pricing has not been really optimized for the offering we've just launched. And you will see us and we've talked a bit about it, but you'll see us over the next couple of quarters on the enterprise side roll out, we're beta testing right now, sort of what we believe is much more optimized pricing packages that are better aligned with the success of our enterprise customers and that we believe will unlock more share of wallet in the medium term. So yes, all of those things are happening at once. And I think ultimately, it's the appropriate thing in a market that is -- the demand is now and we're moving fast. And in many ways, I think the scrappiness of Vimeo, despite our scale, is an advantage.

Yes. Maybe stepping back a bit on enterprise video solutions in general. People have been talking about this opportunity for a while, for over a decade. It certainly hit a point in a moment during COVID. Vimeo has talked about it being a $75 billion TAM. When you talk to an enterprise or sales assist a customer for the first time, that's typically been with Vimeo Live or for OTT as an entry point. When you think of that core of what the enterprise suite will become over time as you step into that TAM, should we be thinking about library or asset management as the central hub? How are you thinking about that? And how are you more -- your more forward-looking customers thinking about that today?

Yes. So certainly, we've seen a pretty notable shift in the way that enterprise customers think about video. When the pandemic hit, it was reactionary. It was, Wow, I got suddenly a team distributed. Work has to continue. I got a sales team that's got to sell. I got to reach my customer. I got to communicate internally, give me video and I'll take whatever is available. There has clearly, I would say, in the last few quarters, we're seeing many more customers really approaching strategically. A lot of companies investing in digital transformation, a lot of CIOs, comms teams really being tasked with how do we be video-first in the future. And I will tell you, we don't think of any of our features, whether it's video library or events as sort of this is the one thing. It really is about a holistic solution. And I'll tell you why. Because ultimately, our view, and I think what we see from customers more and more, video is just a means to drive ROI. If you are a marketer, you want to reach more customers. And if video and running webinars enables you to get more customers, great. If you are an HR or comms leader, you want to increase employee engagement and morale. And that means you want to be able to communicate and share information in a way that will be retained and that lives on so that it can be accessed as evergreen . And you don't want that to happen -- you don't want all that content and information to be locked behind shared drive and e-mails and chats. And you want to -- everyone's got short attention spans now. We're all used to Netflix style quality at home, we wanted it at work. And so those are really the things that I see driving the demand. And so when we think about our offering, library is super important. It's a system of record. It's a retention driver for us. It's a way for us to touch every employee of the company. But from a user customer perspective, it's a centralized place to share information and knowledge in a much more engaging way than you could before. If you think about the traditional internet, nobody thought of that as like a cinematic, engaging, interactive experience. And so really what we're seeing, I think, is -- and it's been certainly escalated a bit from the pandemic, but these were trends that were going to happen anyways. Workforce is getting more distributed, our attention spans come down, employees expect the same kind of quality of their technology and what they consume at work as what they do at home. And so really what's, I think, fundamentally changing is that companies, because of the pandemic, are now seeing the ROI. They're understanding that once you actually produce a beautiful engaging event, your employees will retain that information better. They will feel more connected to their leadership. Your sales teams will be more successfully trained. Your marketing teams will be able to reach their customers on social media and websites. And so it's really, I think, just the technology is finally both available at a price point that's accessible. And enough people have been forced to adopt it, that the ROI is now becoming clear. And that's how we think about it.

And are you -- so are -- it sounds like your -- in terms of asset management and moving from a point of live and over the top to that asset management, it sounds like you -- are you competing against other solutions? Or are you competing against this kind of disparate hodgepodge of people, to your point, saving it in hard drive in here and there? And then is that pain point becoming acute? Because over the past maybe 18 months we've created so much content and now we're actually reaching ,oh s***, how do we manage all this stuff?

Yes. So I think on the first part, you look at our #1 competition, it's not an existing solution. It really is people not having invested in video software in the past. And it is actually this. Well, now suddenly, I have all this video content and I need a place to house it because I had to react during the pandemic and now I need a proper strategy and there's a total willingness to take some budget from certain different departments and put it towards this because we've seen the impact. And that's definitely been a big one. The majority of our wins are -- on enterprise wins are net sort of new greenfield deployments. They are not sort of competitive replacements. When we do replace a competitor, if you look at the market today, and I've said this before, we don't really see a direct 1 player that has the breadth of offering that we have today. We don't assume that, that will be how the future works. And that's why we're investing, we'll continue to invest very, very substantially in our product road map. But today, it is a hodgepodge. And there'll be some players that are really strong in one area or another. And to give you an example. When we launched Vimeo Events a few weeks ago, that, for us, opens up the webinar market. We didn't previously have a really a webinar solution. There are a whole public companies that just do webinars. And so of course, we will go up against them. But we'll go up against them with a very, very different value proposition, which is, this is not a webinar solution. This is a one-stop shop for all of your video software needs. And once you host that webinar and you're doing 6 webinars a week, you want that content to be automatically recorded, archived, edited, transcribed, turned into a sizzle reel that you can put on your blog. And you want every member of your marketing team regardless of who leaves and comes to have access to it in a secure portal. And you want to be able to control the permissions. And that sort of full life cycle of video really doesn't exist in any other offering at the breadth that Vimeo has. And that is what we are seeing really resonate. It's allowing us to win deals today that we could not have won a year ago. And it is allowing us to move upmarket. I think I shared in earnings, our pipeline for companies greater than 1,000 employees or the largest kind of companies is up 150% year-over-year in Q3. And we shared our enterprise revenue in Q3 was 60%. That includes the sort of drag from OTT. So if you look at how larger companies and sort of our real target within the enterprise are kind of adopting, we see a lot of momentum.

Yes. interesting caveat. I was -- I was talking to one of our vendors, it might be the one we're actually using right now for this conference. And they were using Vimeo, and I asked them why. And I wasn't dealing with C-Suite people, I was dealing with the technician. And they said, "Oh, because it literally we host the video live and then it's available a second later. It's just so easy and seamless in terms of a complete solution." We got a question inbound. Can Vimeo elaborate on the partnerships with TikTok and Shopify?

Sure. So we -- our partnership strategy is new but, I'd say, very exciting. So we kind of embarked probably about 18 months ago on this idea of, okay, we see the power of video, how do we open up the market more by exposing more businesses to Vimeo on the platforms that they're already at? And so the thesis was, how do we bring Vimeo's capabilities into platforms like TikTok, like Shopify, like GoDaddy and so that small businesses can actually really experience the tools with the least amount of friction. And the belief was, if you remove the friction for small businesses to create video content, which is the #1 barrier for them, they will actually quickly be able to do more. And I would say in each of these cases, whether it's Shopify or TikTok or GoDaddy, we are seeing that -- same with Facebook. We are seeing that when we get our tools in the hands of small businesses, they are creating content, they are happy, they're getting better engagement, they're delivering better outcomes from the ads they're putting on social media platform and so they want to do more. And what's most encouraging is we partner very closely with TikTok, with Facebook, with others, to help drive sort of the right results. And our incentives and their incentives are very much aligned. If we can build technology and tools that help their businesses sell more product on the social media platforms, then obviously the social media platforms are very happy as well they get a cut of that revenue. So we're seeing really positive signals. And actually, a couple of large social media platforms have actually tested our tool against others, including their own homegrown tools. And you're seeing us very kind of steadily expand our relationships with each of them because the results have been positive. I also just want to add though, one of the things that I'm really excited about going into 2022 and that we started to see this year is, that same strategy that we've taken for small businesses on social media platforms, we're also now applying on the enterprise side. And so we've announced integrations with Asana, with Figma more recently, where we're actually taking things like our screen recording tool as a free tool, natively integrating it into collaboration software and then developing a relationship where we're then turning that into a way to acquire enterprise customers in the future. And I see all the same -- it's earlier, far earlier because we've just really embarked on that strategy, but I see all the same dynamics and potential. So the ability to basically remove friction, put the power of video and Vimeo directly in the hands of these enterprise customers and then add value for them over time such that they want a direct relationship with us. So in each of these cases, the goal is really opening up the market and then scalable acquisitions. It's really a way for us to attract more of our target customers that are off Vimeo and be able to bring them into the platform. And so again, it is early. I would think of the impact on the P&L of this as much more of a 2022 thing, but what we're seeing is user adoption for sure, user satisfaction and partner satisfaction and deeper engagement. And those are really good indicators that we should be successful with the strategy.

And on that create screen recording and like the partnerships with Asana, do you view that as -- we kind of view it as essentially multiplying the number of users within organizations who are creating video and then that builds momentum around, now that's got to motivate asset management and uptake over time because we've got more creators creating stuff. Are you starting to see that flywheel start to turn?

Absolutely. So a couple of years ago, we kind of doubled down in creation and the concept of unlocking video creation because that's the very beginning of the video journey. Everything else you do, hosting, publishing, distribution, analytics, all comes after you've actually created content and that you're doing it at scale. And I think you're absolutely seeing that turn out to be a very prudent investment. And what's really exciting, if you look to the future is we believe in sort of this concept we call internally employee-generated content. And it's the idea that you used to have professionally generated content only. So the Hollywood studios and video professionals and filmmakers were creating content. Then you had UGC, user-generated content, we're all on our phones on social media creating content. And we think that very soon in the future, sort of the next wave in the future of work is going to be employees generating content on a daily basis. And that's going to be everything from doing a product demo or a training or hosting a live event or making a video message for social media or for the website. And really if you think about most employees today, pre pandemic, people would have said that, that's crazy, that's intimidating, that's complex. I don't want to be in front of a camera. And we've really seen a fundamental shift in that behavior. We, as workers, have fundamentally changed our sort of desire to be both the talent and the creator in video. And so you will see us, Brian, not just through partnerships, but if you look at a lot of the innovation in our road map and our product road map that's coming, you will see us not just build the things our customers are asking for today but really, really look to sort of empower this next wave of employee-generated content. And that's going to be with really simple, intuitive, self-serve tools, but that are extremely powerful and help you generate professional quality output. And that generally are more engaging and will actually be more powerful for communicating your message in the future. And I will tell you, we are very early still. I've seen -- I spent a lot of time talking to startups. I spent a lot of time with our labs. We have a lab group that does quite a bit of sort of forward-facing work here. We are extremely early in what video can and will do. And if you think about what we're experiencing now, it's going to look very different in a couple of years. So I'll think a lot of good adoption will come from that.

Got it. We may have time for just a couple more. One quick one that came inbound was, given the focus that companies like Facebook and NVIDIA are putting into AR, VR, Meta versus -- does Vimeo face any obsolescence risk over the next number of years in terms of other people building 3D AR/VR creation tools?

No. I think there's just a ton of opportunity. I mean, if you believe in AR and the metaverse, then you believe we're going to have wearable devices that are recording tons of video content. And that content needs to be organized, it needs to be utilized to actually then after that experience of which it's been recorded, it has to be useful. And actually, if you think about many of the things that we're doing, the more people create content, the more video content that's recorded, the better for Vimeo. We will -- you will see the rest of that sort of solution and ecosystem just become more and more valuable. And if you think about a lot of the things we are investing in, whether it's video library or automatic transcription or using AI to automatically take a ton of video content and turn it into something that is much more usable and digestible, these are all seeds we've been planting now for a couple of years and are investing in heavily. And I think they will play very nicely in a world where there's a lot more video content recorded in many more surfaces. The more surfaces, the better for us.

Very good. We are out of time. So I think we're going to have to put a pin in it there. Anjali, thank you so much for being with us this morning.

Thank you, Brian.

Thanks, everyone.