Some of the most interesting and underrated businesses operate in industries that are unknown to the mass public. Palantir Technologies was the brainchild of Peter Thiel and some members of the Paypal mafia. They went public on September 30, 2020, valued at 20+ Billion dollars. So how did this relatively unknown company achieve such a high valuation without being known by most of the population? Without traditional marketing or sales teams, Palantir has a well-oiled target market, product, and growth strategy. Palantir (from their S-1 filling) sells powerful data and analytics software to governments and enterprises around the world.
The same technology that makes our software so analytically powerful — its ability to construct a model of the real world from countless data points — is what allows our customers to monitor, properly secure, and control access to that data and its use. It is also why customers, including governments around the world, trust our platforms to safeguard their data, including their most sensitive information.
So what does Palantir do and how do they make money?
Palantir helps companies and governments understand all the data they collect in a meaningful way
For example a grocery chain, they collect millions of data points across their systems from in-store to merchandising to marketing analytics. All that data is not always put together and those large systems don’t “talk” to each other. Here is where Palantir would step in, they work like a consulting firm and software company combined. They help each company in a unique way setting up a data strategy, then layering Palantir’s software to make sense of that data.
In 2019, Palantir netted $742 Million in revenue from 125 customers
20 customers = 66% of revenue
It’s fair to say, they don’t work with anyone and everyone. Their customers are looking for a very specific service and product, and that’s what Palantir delivers. The reason Palantir needs to ramp up their marketing is because of the high reliance on it’s top 20 customers who contribute to 66% of their revenue.
The records show that Palantir has just 125 corporate and government customers, a relatively small number for a large, publicly-traded tech company. Two-thirds of its revenue comes from its top 20 customers, raising concerns that it could lose business as long-running government contracts are renegotiated. It generated an average revenue per customer of $24.8 million last year.Washington Post
Marketing and Growth Strategy
Palantir’s top-paying customers have been working with Palantir for an average of 6.6 years. They have spoken through customer excellence, word of mouth. Their site has some case studies, these provide good social proof for horizontal and vertical prospects. Palantir relies on increasing its current customers’ spend and leveraging these existing customers to refer them to new business opportunities.
This strategy is similar to what AWS uses in acquiring customers, AWS would convince it’s customers that their dependencies should move to AWS so as to prevent any harm to the customer, i.e if an eCommerce operation moved to AWS and their backend shipping broker was not on AWS (Amazon would convince the eCommerce company to get the supply chain vendor on AWS so as to “prevent” any outages that would affect the eComm brand) the same example of the grocery chain can be applied here, Palantir would convince the company that it’s suppliers, vendors, and partners should use Palantir’s technology to enhance their data management and analysis thus helping their clients efficiencies while of course acquiring a new customer for Palantir
Cross-Selling Software and Capabilities
The advantage of having a trusted customer base with such a large need is the ability to cross-sell services, Palantir offers a whole variety of data-focused services, the first opportunity is selling additional products that complement their customers. But the other strategy is the size of the companies and organizations Palantir services allow it for cross-selling to other industries that these large customers operate in, i.e a current customer is the Ferrari F1 team, their existing rapport would allow them to involve themselves in the manufacturing division after prooving itself in the F1 side of the business
Category Specific Implementations
Another opportunity Palantir will leverage is by growing out their category-specific implementations and products. I.e Palantir would enhance its capabilities for the media industry and offer a media-specific solution or a multi-national specific solution. These are great for marketing as the companies core product works across all industries, but just creating some product enhancement that is category-specific along with marketing and sales material allows them to pursue new industries in a faster and targeted way, often resulting in higher conversions.
For each customer, we evaluate our revenue growth and margin potential on a continuous basis and seek to allocate our personnel, including our FDEs, to the highest revenue growth opportunities. As long as we continue to see opportunities to scale our revenue base at an existing customer, internal resources may continue to be allocated to that customer even if those allocations reduce contribution margin in the short term.
The concept of data analysis and management is ever evolving and companies can’t stay ahead with every change happening in the industry. Palantir has a highly targeted content marketing strategy that focuses on educational blogs, product heavy informational pages, case studies, product updates and policies, they also have a detailed behind the scenes R&D blog that is the type of content executives searching for palantir might read.
Their website generates about 120,000 users from search engines, 90% being branded keywords, but they do rank quite well for non-branded niche specific keywords like legal intelligence, financial compliance, ai ml, etc..
Palantir has built its brand and reputation, so a lot of the traffic could be direct from referrals and highly targeted industry landing pages make that one of the first pieces of content prospects interact with, it’s detailed and contains enough jargon to confuse anyone who doesn’t know what they are reading about.
Points of Differentiation
Palantir understands one thing, their competition is their customers themselves. In recent years, the value of data has exponentially increased, companies are wary of how and who they want to have access to their data
Organizations frequently attempt to build their own data platforms before turning to buy ours. In trying to build something on their own, they generally rely on a patchwork of custom solutions, outside consultants, IT services companies, packaged enterprise and open-source software, and significant internal IT resources.
Palantir understand how they are better versus both internal teams at companies and external competition.
- Platform capabilities and product functionality: They have superior product capabilities, a head start on most companies all three of their products are robust and focused Gotham, Foundry and Apollo are all robust for their use cases. They keep innovating and adding to their current product offerings. They filed over 149 patents from January to September of 2020. Interestingly enough their patent fillings almost doubled as soon as the news that they were going public was announced. September being the highest month (the month they went public)
- Data security and privacy: Their detailed privacy and civil policy kill two birds with one stone. First, it helps alleviate customer concerns regarding privacy (especially at the high level) but the second strength is that it is an evergreen PR move. They explicitly say they won’t work with a government that goes against civil liberties (no more dictatorships)
- Ease and speed of adoption, use, and deployment.
- Product innovation; For a company operating in secrecy for the longest time, they have some great marketing material. Content that talks to their innovation and engineering. Their medium blog is a great read and so is their product upgrade page on their site.
- Pricing and cost structures; Similar to enterprise pricing models, it’s seasonal and custom to every customer.
- Customer experience, including support; When pitching initially to the CIA, For nearly three years, Palantir engineers would fly out to Washington DC every two weeks and talk with the analysts using the software. This company knows customer service and support that is needed for enterprise-level clients, you can’t hire any regular salesperson you need someone with a highly technical background a “Sales Engineer”
Brand awareness and reputation: A big factor in their initial growth without a Sales team according to their CEO Alex Karp is the strength of word of mouth. This brand awareness and reputation they have with their longstanding customers helps them position themselves as industry leaders in the data analysis and management space for large enterprises and governments. Their initial contracts with the CIA, NSA, FBI, and 12 other U.S government agencies was a seal of approval – if the US government uses them for counterterrorism analysis, they probably know what they are doing.
If their stock price is not an indication of market confidence, soaring over 50% of the target price. The company understands it’s market quite well, and it also has such a small customer base (definitely need to work on lowering CAC and diversifying customer industries and verticals). Palantir is a leader in their niche and their product marketing positions them that way along wiht the robustness of the products and services they provide.
Their S-1 filling shows they have a $116 Billion opportunity (TAM) that they can peneratrate. Their revenue keeps growing, product keeps improving, and more importantly they hired very smart leaders and employee’s witha strong track record (this sets them apart). Palantir is the Mckinsey of data consulting and the Salesforce of data analysis software. Two companies that are the best at what they do.
This essay meant me reading 230+ pages of SEC fillings, USPTO fillings, Tech Crunch articles and other publications.