Zapier: The $7B Netflix of Productivity

Source: https://sacra.com/research/zapier-netflix-productivity/

Highlights

• Our base case model values Zapier at $7B based on its growth rate, its high penetration and lack of competition in the no-code integrations space, and the rapidly growing market for no-code tools and citizen developers more broadly.
• While it might seem a strange comparison, Zapier is like Netflix. It’s a master of demand generation, with 6 million people visiting the Zapier website every month. It’s close to its customers. For millions of SMBs, startups, solopreneurs and individuals inside larger companies, Zapier is where their business logic lives: the actual tools behind that logic are incidental, just as the studios that produce content are.
• And the data on millions and millions of SaaS workflows that Zapier collects every day will be crucial if Zapier is going to conquer the big challenges ahead of them:
• The disintermediation threat posed by native integration API products like Tray.io and Paragon
• The ability of verticalized, drag-and-drop automation solutions like Parabola and Alloy Automation to peel off Zapier’s market share in specific markets
• Other horizontal tools like Airtable building out their own integration tools to keep users on their own platforms
• In March of 2021, Zapier hit $140M in ARR, growing at about 50% from the year before and maintaining a 50% CAGR3, comparable to Shopify and CrowdStrike and faster than Datadog (40%), DocuSign (40%), and Twilio (35%).
• Few companies reach $100M ARR without taking in a substantial amount of outside capital. Stripe, Databricks and UiPath, for example, all make $400M+ ARR per year but have raised about $2B each: a 0.2x ratio of ARR to funding. Zapier’s, meanwhile, is 100x.
• And as Zapier became more and more popular, their authority in Google became stronger, increasing the likelihood that they would appear first on a given search results page and lessening the likelihood of a competitor being able to get their pages to rank first—with the 1 result for any search soaking up 33% of all demand on average.
• Rather than simply a piece of glue between products, Zapier was becoming an ecosystem unto itself—a marketplace for applications driving discoverability and setting standards versus merely a utility you might use to connect them.
• Dropbox was undone when file storage and sharing became a commodity/component of all cloud apps—the same could happen to Zapier.
• There’s a future where companies natively integrate with their 10~ most popular partners and relegate the rest (which represent 5-10% of usage) to Zapier.
• In interviews, current and former Zapier partners said that while Zapier collected usage data from its third-party partners, it did not share any of that data with its partners. That’s the kind of data that would, for SaaS products, be highly useful in determining which handful of native integrations to build.
• The term “AWZ stack” was coined by Zapier CEO Wade Foster for the three products—Airtable, Webflow and Zapier—frequently used together in no-code projects. It works in something like a model-view-controller (MVC) pattern:
• End-users interact with an app’s logic through Zapier
• Zapier listens to and updates the database stored in Airtable
• Webflow exposes and visualizes the contents of the database to the public
• To win, Zapier should be doing the flip of what Airtable is trying to do in building its own integrations platform: disintermediating Airtable by building its own Zapier-native data store.
• While Zapier—like Netflix—was originally seen as a harmless middleman, these searches show how powerful Zapier has become in the productivity world
• Zapier has gone from modularizing apps to producing its own native actions the same way Netflix went from modularizing content to producing its own movies and TV.
• Zapier’s problem, however, is that it lacks a data store: Airtable owns the data layer of no-code. A Zapier data store would go a long way towards removing the main constraint on Zapier’s utility today, which is the lack of deep utility.
• Unlike Airtable, Zapier wouldn’t have the challenge of convincing people to store their data in a new tool. They’re already hooked into all the SaaS tools that you know and use on a daily basis—they already have your login information and your authorization to pull data out of them. All they’d have to do is pull it all into one place.
• The ultimate vision: Zapier becomes the primary aggregator of all SaaS applications and the main conduit between them and millions of business users around the world.
• Eventually, Zapier would learn even more from how you use your tools, and offer even more native actions to replace your existing stack. Zapier would be the conduit through which the entire no-code ecosystem runs: a no-code super aggregator.
• And with their close proximity to the SaaS application workflows of millions of users, they have an extremely high resolution view into how people use their tools.