Company of the Week: Agora
Who is Agora, and what does it do?
Agora is a CPaaS (Communication platform as a service) company with research centers in China and the US. The company provides easy-to-use API and SDK for developers to embed real-time video and audio communication functions into their applications with minimal effort. By leveraging Agora’s product, application developers can focus more on innovative use cases, customer engagement, and go-to-market strategy without worrying about the backend technology. Think about it as selling an easy-to-use camera to photographers so that they can focus on capturing the most beautiful moment in life without worrying about the complicated setup of a traditional single-lens reflex camera.
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Who are Agora’s customers, and how does it generate revenue?
Agora is not a familiar name for most people, but it has a long list of respectable customers ranging from education, online entertainment to financial institutions. Some marque customers include online dating platform MeetMe, China’s largest private education service provider New Oriental, and TikTok’s owner ByteDance. The latest addition to the long list is the audio-based social platform Clubhouse, which went viral during the pandemic. One interesting aspect of the business is that all revenue it generated is usage-based: the more successful its customers are, the more they use Agora's platform, and the more revenue the company generates.
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Putting Agora’s numbers into perspective
Accelerated revenue growth at scale. Since founded in 2014, Agora has grown revenue rapidly, reaching $64 million in 2019. The usage of Agora's platform surged during COVID, and the total revenue doubled in 2020.
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The steady growth of developers' pipeline. One of the unique operating metrics to track for Agora is the number of registered developers. In less than two years, Agora has doubled the number of developers using its platform. As the company makes the platform easier to use and attracts more developers, it is more likely that one of these developers will find innovative use cases for the technology. One of the latest examples is the viral audio-based social platform Clubhouse. It is reported that Clubhouse was built on Agora's audio platform in about a week, highlighting how Agora can help developers quickly turning an idea into a product.
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More new customers are joining the platform. As more developers joining the platform and build applications on top of it, Agora has steadily grown the number of paying customers from less than 600 two years ago to more than 1800 in the quarter ended September 2020. The net adds per quarter surged to more than 300 in recent quarters due to the COVID impact.
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Existing customers increased their usage. Another critical metrics for tracking Agora's business is the Dollar-based net expansion rate (DBNER). It measures whether the current customers are spending more on the platform. A ratio greater than 100% means the existing customers spend more than the prior period, while a level less than 100% indicates the existing customers are cutting back. A level greater than 130% is usually considered best-of-breed in SaaS-based businesses. Agora has consistently reported 130%+ DBNER before COVID. During the last year, Agora's DBNER supercharged to %180+ as existing customers significantly increased their usage.
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