What Confluent’s IPO signals about the rise of real-time analytics

The successful public offering, which followed Snowflake's monster IPO last year, is yet another signal that data is the new foundation for enterprises.

​Confluent CEO Jay Kreps (center) marks the beginning of trading in his company's shares on the Nasdaq exchange.

Confluent CEO Jay Kreps (center) marks the beginning of trading in his company's shares on the Nasdaq exchange.

Photo: Confluent

Confluent's IPO proved that the age of real-time data analytics is upon us. And that shift could have ramifications for an influx industry that is chock-full of legacy vendors and an exploding number of fast-growing startups.

The Apache Kafka-based startup, which raised $828 million, saw its shares pop 25% on the first day of trading Thursday, giving the company a market cap of $11.4 billion. The successful public offering is yet another signal that data is the new foundation for enterprises and the cloud is the primary access point. But it's also an acknowledgement that technology like Confluent's, which enables customers to constantly capture information from a fast-expanding number of sources and act on it immediately, will play a critical role in the architecture of the future.

"There's a ton of excitement around modern cloud data systems, what that unlocks for companies," Confluent CEO Jay Kreps told Protocol. "When you look at most of the other data companies, they're about storage. That gives us unique differentiation … and it's a key aspect of how companies connect all this up."

Snowflake was a signal to the broader industry that a cloud-based warehouse not affiliated with the hyperscalers could thrive. But Confluent's IPO indicates that enterprise data strategies are beginning to mature. Apart from more dedicated use cases, the tools are increasingly being used outside of specialized roles, like data scientists, and more by lines of business users who have different needs and don't come armed with the technical knowledge that was required to operate legacy databases.

"Cloud is changing buying patterns pretty significantly," said Kreps. "We try to make it possible to start as small as possible."

There are already a number of up-and-coming vendors that are seeking to tackle the real-time analytics market, fortified with considerable funding. Amplitude has raised $337 million. Smaller players like Rockset and Imply have raised $62 million and $115 million, respectively. And there are many other competitors, including more established players like MongoDB and DataStax.

The adoption of those types of tools could ultimately impact company spending on other data-focused products. Instead of running everything on Snowflake or Google's BigQuery and risking skyrocketing costs, they can route real-time queries to a separate system designed specifically to handle those workloads. That could help organizations avoid getting massive data warehouse bills, according to providers like Amplitude which offer such services.

"As companies use our product, it typically frees up the data scientist to be able to work on other use cases. It's not that they are trying to reduce their spend on Snowflake, but they are optimizing it more," said Amplitude's Justin Bauer, senior vice president of product. "If you try to do everything [in Snowflake], it's going to get very expensive."

But as in many other parts of the software industry, cooperation and competition go hand in hand. Right now at least, providers like Confluent are eager to strike partnerships and go-to-market agreements with larger suppliers like Google and Snowflake.

"There's a $50 billion market around data in motion that's quite distinct," said Kreps. "It's a different world. Things may change over time, but at the present time we're the beneficiaries of this huge movement to the cloud."

Changing data demands

The rise of real-time analytics providers gets to the heart of how different parts of the organization think about data. A business analyst, for example, may need to pull a report at the end of each day, while a marketing chief may want up-to-the-minute reports on the status of a campaign.

Confluent, along with startups like Rockset and Amplitude, say they can gather and then analyze data coming in from various digital sources — Twitter, mobile apps, website traffic, etc. — in lightning-fast speed compared to services from AWS, Microsoft and Google, as well as Snowflake and other cloud-based data warehouses. The time difference usually amounts to a few minutes or longer, which may not seem that important, but it is for enterprises that are striving to make more data-driven decisions — and make them quickly.

The adoption of real-time analytics, advocates say, gives users the ability to quickly pinpoint tech issues that could undermine sales, personalize marketing, better understand varying customer needs and, ultimately, drive higher sales. Advance Auto Parts, for example, used Confluent to help institute region-specific pricing, like higher costs for weather-related products in areas where thunderstorms were more common. And Postmates used Amplitude to help inform real-time changes to its "Bachelorette" marketing strategy, ultimately leading to a threefold increase in spending efficiency.

Those capabilities could end up dividing providers between those that support the operational analyses that help drive immediate decision-making, versus the analytical queries that rely on more structured data.

Such a shift could reverberate through different parts of the industry. Tableau, Domo, Power BI and other common data visualization tools connect into Snowflake and other data warehouses, giving users the ability to turn the stored information into reports that then drive top-level decision-making. If more of those real-time analyses are run on platforms like Confluent or Amplitude, it could undermine revenue growth for those providers, rivals claim.

"They're going to need to respond in some way. Or they are just going to be part of that reporting layer, which may not be as high-growth for them," said Bauer. "There's a reason why I'm at Amplitude."

Still, the market is nascent. And neither the companies nor the businesses themselves really know what the future is going to hold or how the tech stacks of tomorrow will end up looking. Ultimately, many of these decisions will fall to those in roles like the CIO, who have to evaluate which areas of the business warrant the super-fast speeds but nascent tech that Confluent and others offer, versus the more proven methods that are still the gold standard for many end users.

"It's a delicate balance," Linh Lam, CIO for mortgage tech at the Intercontinental Exchange, told Protocol. "Real-time analytics can be extremely powerful, but it can be extremely detrimental if there isn't integrity behind the data that's being presented."

But Confluent's IPO is sure to increase attention on the space. And that usually means more competitors and more promised innovation.

"It raises awareness of the importance and use cases around real time. That raises all ships," Bauer said.


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