The latest in Salesforce’s spree of acquisitions is a company that many people have never taken note of before: Krux. CEO Marc Benioff seems to have quite high regards for the 6-year-old start-up considering that the deal has been closed at $700 million, and not only in cash but also in shares. Considering Salesforce’s level of scrutiny, Krux is undoubtedly a successful company with a seemingly bright future. So, what is Krux and why is it worth so much? Here is everything you need to know about Salesforce’s latest addition to its acquisition’s inventory and why it is worth so much.
A Brief History and Overview of Krux
Krux is a company in the internet commerce, media, and advertising sectors. It was founded in 2010 by CEO Tom Chavez with the aim of helping publishes to monetize content in new ways, totally manage web experience, and secure their data.
Krux brainchild is a cross-screen DMP (Data Management Platform) that seamlessly captures data from any including computers, smartphones, tablets, and smart TVs and integrating it into mobile browsers, apps, internet commerce, and internet ads. This is meant to give the client maximum control over his/her data and to maximize coverage and uncover new ways of monetizing the data.
Over time, Krux has proven to be successful and has even stood out among giants to win awards such as The Most Promising Data Company. The company was also included among the AlwaysOn Media Top 100 for showing great potential of growth. This and other factors are what have made Crux so valuable and appealing to Salesforce.
Insights into the Deal with Salesforce
$700 million is just an aggregate figure of how much Krux may be worth to Salesforce. This is because a portion of the money will be paid in terms of company common shares. Only $340 million will be paid in cash, and the rest of the amount will be issued in terms of shares.
It is not yet clear how many shares will be issued by Salesforce upon acquiring Krux since the figure will depend on the volume-weighted average closing price for ten days prior to, and including, the day of acquisition. To this end, experts speculate that the real value of Krux may range between $650 million and $750 million as shares are expected to go for at least $57 and at most $100.
Why is Krux worth So Much?
The figure in price, $700 million, does not astound people for its size but rather for its exponential growth in a period of just two years. In 2014, the company was valued at approximately $150 million, which is less than a quarter of its current value. However, over the past two years, the company has made significant leaps financially and in repute. As mentioned earlier, it was recognized as one of the most promising private data company. Additionally, it has been able to attract substantial funding and used it to expand at an impressive pace considering its current value and future expectations. But why is Krux worth so much? Krux has a different approach to data management and e-commerce. Unlike most other companies that depend on common platforms such as social media and Google, Krux has its own platform and it does not sell its ads. What’s more, its DMP platform comes as a somewhat comprehensive solution to data management and monetization as it works on all devices as long as they are connected to the web. Coupled with the fact that it is capable of fronting an independent platform as big as Google, Krux undoubtedly shows great promise.
Krux’s promise is evident in some of the companies it has on its inventory. Although it has a moderate customer inventory of a little over 200 customers, some of its customers are major companies who would ideally choose only the best data management company. Some of the biggest names under its belt include Time Warner and Kellogg.
What Does Salesforce Stand to Gain?
Salesforce had established a strong working relationship with Krux long before the decision to acquire the company was made. Coupled with the amount that Salesforce is willing to front, there is no doubt that it stands to gain a lot.
Salesforce had originally developed its own company meant to provide a cloud-based platform for businesses to better manage their data and improve monetization. However, this platform has proven to be ineffective and will soon be unprofitable as most businesses are shifting to data for marketing and advertising. Hence, considering that Krux is perhaps the most promising company in this industry, its acquisition by Salesforce is expected to boost the latter’s reach in the market.
Additionally, Salesforce stands to sale a lot of money in the long run as it will no longer have to pay for services rendered. In fact, it stands to generate a lot of money as the market expands and as more and more companies such as Kellogg join its customer base.
However, the road may not be as smooth as would be expected as Salesforce has strong competitors to contend with.
Potential Shortcomings of the Proposed Acquisition
Krux has undoubtedly helped to revolutionize data management and advertising, but it is not alone in the race as major companies such as Google are also developing similar platforms. For instance, Google is dumping cookies in favor of long-in data for tracking users online. Facebook is also making similar changes. This may deal a deadly blow to Salesforce as Krux’s current platform may become unprofitable once the changes fully kick in.
However, it is not all gloom as there are rumors that Salesforce may be eyeing Twitter, one of the most popular social media platforms. If the acquisition were to be successful, then Salesforce would stand a great chance of surviving the cut-throat competition.
Krux has been a significant part of the revolution in the data management and advertising industry, and it is expected to revolutionize Salesforce’s position in the market. For a total cost of about $700 million, there is no doubt that Krux has great potential. However, only time will tell whether Salesforce has made a sound decision as the competition continues playing out.