ExactTarget, Responsys, meet your newest nemesis: Sailthru, on track for a $50M year & an IPO

You’ve probably never heard of Sailthru. But it knows where you live.

In fact, it’s probably sitting inside your inbox.

If you pay a little more attention to email newsletters from media companies such as Business Insider and Huffington Post or commerce companies such as Alex and Ani, you will find a little blue logo at the bottom of each email: Sailthru.

Since 2008, Sailthru has been powering commerce and media companies with personalized email newsletter, targeted on-site recommendations, and in-app notifications to the end users. From 2009 to 2012, the marketing communication platform has gone through 7,322 percent revenue growth and was listed as the No. 2 fastest-growing startup in New York City by Inc. magazine.

Although it’s kept to its own corner of the advertising world — personalized marketing — it is bumping up against bigger and more established competitors such as ExactTarget and Responsys. Even more challenging to the company is the rising concern over consumer data and information privacy: How can it earn the trust of the end users?

Still, the five-year-old company shows it can take on the challenges. By incorporating multichannel marketing and user-centric personalization into its products, Sailthru has now become the hidden hand behind over 400 companies and keeps adding new clients to its giant database.

One of Sailthru’s biggest clients, Business Insider, has seen 100 percent growth in pageviews driven by the personalized email newsletters created by Sailthru, according to Ian White, co-founder and chief technology officer of the company. When subscribers browse Business Insider, Sailthru will glean the preferences of each user based on the articles they read and send personalized recommendations via pop-up windows, on-site links, and email newsletters.

“When you receive your newsletter, it’s the permutation of stories that we generate based on the digital finger print of your interest.” said White, sitting in front of a sign that reads, “Every user is unique.”

Not far from the room, a poster featuring a boat was up on the wall. With eight sails representing “marketing”, “sales”, “people”, etc., the boat was sailing on the blue ocean.

“It’s like getting a message across, getting your message sailing through to the other person you are trying to reach,” said White, explaining the company’s name.

On the upper right corner of the poster, two numbers reveal the boat’s next stop: “$50mm in revenue, 1 billion events a day.”

Sailthru’s revenue comes from a flat subscription fee it charges companies. White declined to disclose the exact number but said it was in the range of $50,000 to a couple of million dollars, depending on the size of the contract. Based on the subscription model, Sailthru reported $8.1 million of revenue in 2012 and has gone through “over one hundred percent year-over-year growth” in 2013, according to White. In the next two years, White said, the boat could reach a milestone of $50 million revenue for the year.

However, a smooth journey does not only depend on the structure of the boat or the talent of its crew; it relies on another important factor: the wind.

One strong wind comes from the overall prosperity of the marketing and advertising industry during the last few years. According to Inc., the marketing and advertising sector has grown for 170 percent from 2009 to 2012, making itself the fourth fastest-growing industry in the United States. One of the newest areas of growth is personalized marketing, like Sailthru’s services, which was made possible by a new generation of technology that enabled advertisers to track consumers’ online behavior and provide more targeted marketing pitches.

Of course, Sailthru is not the only company to benefit from this trend. In fact, it was not even the fastest-growing one: Five companies in the same industry expanded even faster between 2009 to 2012, according to Inc.’s 5000 list. Competition among personalized marketers is tough, with Sailthru up against industry leaders such as ExactTarget and Responsys, both of which are public traded companies that focus on digital marketing.

But White argued that Sailthru could take on these larger players because it allows its clients to communicate to end-users through “omnichannel” methods — reaching out through a variety of devices, including computer browsers and mobile applications, not only through emails. Unlike companies such as ExactTarget, which are built on earlier generation of technology that focused only on email marketing and expanded its reach to users through acquisitions, White said, Sailthru’s technology is innately more unified in terms of multichannel communication. It’s built on a “user-centric architecture,” rather than “email-centric,” as White put it.

“There’s no true, true competitors for us that do everything that we do,” White said. “There’s no vendor that does full service in a way like Sailthru does.”

The “full service” mainly involves the optimization of the recommendation links, on-site personalized content in mobile apps, and targeted email newsletters. For example, Business Insider subscribers can find pop-up windows at the bottom of the webpage that link them to articles similar to they have just read; potential consumers on online retail store Fab.com will be given suggestions based on their previous purchase records.

The key to Sailthru’s products and all the digital marketing platforms is simple: data. Typically, companies will pass along information such as user’s email address, articles they read, and products they viewed to Sailthru, which uses its algorithm to provide users with more relevant content. Gradually, the database of users has amounted to half a billion people, White estimated.

At a time when there are greater concerns about privacy and data breaches, the number pressed another layer of concern: how does Sailthru deal with half a billion people’s data?

“Data is money,” said White,“but data must be used in a way that respects the end users.”

People targeted by Sailthru are protected in a number of ways, White said. First, consumers are able to opt out of email newsletters and being tracked by Sailthru in one single step with no sign-in or multiple pages required. Second, access to raw and unencrypted email addresses is prohibited on the API shared with programmers outside the company and is strictly limited to selected individuals of the company. Third, no data is shared between Sailthru’s clients. The bottom line, White said, is to make sure consumers “choose”, not be forced, to receive personalized information.

“If you are on a particular website, just like you walk into a store, there’s expectation that the store is going to do a better job trying to communicate to you based on your reactions on the store,” said White.

“If you are on a website, there’s expectation that the website is going to try to do a better job of controlling what kind of information that website is displaying to you.”

A bigger challenge for Sailthru than privacy comes from the fast growth itself. In two years, the company added offices in San Francisco and London, expanded its talent pool by five times, and added $39 million in funding. In the next five years, the company is aiming to establish more foreign offices and filing for IPO. The most pressing issue for White and his co-founders is how to manage such an expanding organization.

“It’s a very different organization now when we are 140 people from when we were 50. And it will be very different when we are 300,” said White.

“An organization is like an organism, as it grows, things change and we try to keep getting better at what we do.”

Danny Rosen, an engineer who joined Sailthru on January 2012, has witnessed the rapid changes.

“I feel like I’ve been under five different companies being under one company,” Rosen said.

One change he recently experienced came from management: Three managers in the engineering team were cut down to one, which Rosen said would put a larger amount of responsibility on the manager to make the right decisions.

This is one example of Rosen believed structural changes would come along the expansion of the company. Sailthru’s motto, “Think Big, Speak Up, Get It Done” encouraged a culture where “anyone can make a change,” he said. Along the way, more challenges are to come, more mistakes are to be made, but with a growing number of talented team members, Rosen is very optimistic:

“We trust each other to make mistakes, we trust each other to learn from those mistakes, and we also trust each other not to make those mistakes again.”