Is ZoomInfo finished?

A case study in what happens when a tech company stops innovating

A wild story caught my attention last week. My fellow fractional CRO, Anne Pao posted on LinkedIn about her horrendous experience dealing with ZoomInfo after she’d let them know her company did not intend to renew their subscription.

Did ZoomInfo respond with a request to hop on a call to diagnose the problem? Did they offer to help her team get the most value out of the remaining months on the subscription? No they did not.

ZoomInfo’s first response was to send a legal notice informing the startup that if they cancel they will have to immediately remove all ZoomInfo data from their CRM, or be forced to renew, or be sued.

Her LinkedIn post went viral as hundreds of GTM leaders commented on having had the same experience. Reading through these comments and others on Reddit I got some fascinating insights into the sorry state of ZoomInfo’s current business practices:

• They insert fake contacts into the data they sell you to track whether you are using their product out of term. This explains in part why every team I’ve ever advised who was using ZoomInfo for outbound complained about poor data quality.

• Emails to the fake data are routed to ZoomInfo’s legal team to trigger renewal notices and additional action. Imagine running so low on product ideas that this makes it to the top of your product backlog. The comments show that a few customers have figured out how to remove the fake contacts by running them through an email verification tool; everyone else is just getting pressured into a renewal that they don’t want or need.

• They have a full time litigation counsel in house to deal with customers suing them and to pursue customers who hit the fake data tripwire. Who needs a customer success team when you have customer threats team.

• Their contracts automatically renew 3 months before they expire with no reminder sent beforehand. Missed the deadline? Too bad, you’re in for another year. Even if you hate our product. Companies who make it this hard to cancel their services usually do so because they know that their product does not deliver recurring impact.

• They shut off a customer’s integration because the customer waited until the last day of the contract to renew then failed to reinstate it, rendering the customer’s data pipeline unusable for several months. Even though the customer was still paying for it.

• Their salespeople spread lies about their competitors during the sales process. In fairness they’re not the first company to do this, especially in the adtech/martech/salestech world but whenever you see this behavior in sales teams it tells you that they know their product isn’t differentiated.

Stringing these pieces of information together starts to paint a picture of a company that has stopped innovating, fallen behind the market and turned to dark arts to stay in the game. Now layer on unfavorable market trends and below average financial performance and you start to see trouble ahead:

• Their data product is an over-priced commodity. There are over 250 companies in the Sales Intelligence category on G2, in which ZoomInfo is listed. Companies like SalesIntel, Apollo, Clearbit and Cognism, Dropcontact, Hunter et al sell highly similar better products for a fraction of the price of ZoomInfo.

• The product no longer warrants a premium. While ZoomInfo was the original fuel for cold outreach 10 years ago, response rates have since plummeted, dragging down with them the price of data. They’ve tried to counter this by being all things to all people but in doing so have become a generic product with generic filters that encourage customers to pursue generic ICPs. That startup GTM team who tells you their ICP is “SaaS companies with 50-5000 employees”? I guarantee you they are also using ZoomInfo to build their target lists.

• They have cut back on investing in product development. ZoomInfo has been cutting back on R&D with spending down 8% from 2022 to 2023. Chorus, a once excellent product for analyzing customer calls has been rolled into ZoomInfo OS, hasn’t changed in forever and fallen way behind the competition. Meanwhile S&M spending is up 8% and G&A is up a whopping 42%. Those lawyers clearly aren’t cheap.

• Investors don’t seem impressed either. The stock price is down 2/3 from its IPO, with a below average consensus rating score of 2.5 and 4 downgrades in the last 90 days (vs 1 upgrade). Everyone knows that maintaining a tech company multiple is all about selling the dream of your future and you can’t do that without innovating.

All of these issues are what commonly happens when a management team has run out of ideas and resorts to squeezing what they can out of a business whose best days are behind it — including $10M+ compensation packages for its top execs.

ZoomInfo today looks a lot more like a private-equity takeover target than a market leading public company. It’s not surprising there has been activist investor speculation in the last 3 months.

You also wonder how long it will be before these types of highly aggressive business practices get on legislators’ radars. Today’s SaaS looks a lot like the B2C subscription economy of several years ago, an area in which we’ve already seen California regulators clamp down on aggressive billing practices with SB 313 and Assembly Bill 390.

So, is ZoomInfo finished? I don’t see them disappearing tomorrow but as their customers realize that the days of doing high volume outbound are over, that they can find more specific data elsewhere for cheaper and that the rest of the industry is continuing to innovate at a rapid pace, its very hard to see them becoming the vendor of choice again.