In some industries, achieving scale has always been incredibly difficult, either because they require too much human capital, or logistical challenges stand in the way. The real estate, car dealership, and legal industries are great examples of this. The internet has opened up new opportunities to climb those hurdles, but artificial intelligence (AI) is proving to be the most valuable piece of the puzzle -- completing tasks that used to require many employees, doing so in repeatable ways, and evolving along the way.
DocuSign (DOCU 2.90%), Carvana (CVNA 0.12%), and Zillow Group (ZG 3.57%)(Z 3.23%) have adopted artificial intelligence both organically and through acquisitions, and they are using it to dominate their industries, areas that are still largely stuck doing things the way they've always been done. All three companies have achieved exponential growth and blazed new trails that have changed consumer habits forever.
1. DocuSign
DocuSign is best known as one of the leaders in digital-signature technology, but it has evolved into significantly more than that, especially through aggressive innovation in its Contract AI platform.
Image source: Getty Images
Contract AI uses a combination of machine learning and rules-based search to identify specific issues in legal documents. The company provides an example surrounding regulatory changes -- in which case, the technology can be used to identify which contracts would be impacted and therefore need adjusting. This would typically be the work of a team of lawyers, so the cost-saving opportunity for businesses is immediately apparent.
DocuSign Insight, which is part of the DocuSign Agreement Cloud, applies artificial intelligence in a different way. It can be used to conduct sweeping searches of legal agreements for specific clauses (or types of clauses). Paired with DocuSign Analyzer, which specifically identifies the existence or absence of particular points of interest, this suite of products helps to mitigate risk to companies negotiating multiple agreements.
The company is growing rapidly. It delivered $469 million in revenue for the first quarter of fiscal 2022, which was a 58% year-over-year increase. While the company has struggled to generate a profit, it almost tripled full-year revenue between fiscal 2018 and fiscal 2021 -- and it looks set to extend its momentum in the current year.
Management has guided for fiscal 2022 revenue to reach $1.97 billion, and analysts expect adjusted earnings to surge nearly 90% to $1.68 per share.
2. Carvana
Cars are typically the second-largest purchase a consumer will make (their home is the first). Looking for cars online is commonplace in the modern age, and some manufacturers even let you build a new car to your specifications through their website. Used vehicles are a little trickier, but Carvana is leveraging artificial intelligence to value and purchase them at scale from consumers.
Image source: Getty Images
The company is most famous for its giant car ''vending machines," and there are now 28 of them across the U.S. They act as a pickup and delivery point for customers who have made a purchase through Carvana and are arranging to trade in (or sell) their existing vehicles. If a consumer isn't in close proximity to a vending machine, the company will arrange pickup and delivery directly to their house.
Selling and valuing a car used to require a physical inspection, but Carvana has removed the hassle -- just enter your license plate into their website, with a few additional details, and you're likely to get a valuation back. It's an achievement made possible by big data and machine learning. The company even uses these tools to monitor sales at used-vehicle auctions to detect in-demand vehicles and bolster the accuracy of its algorithm.
Building scale is paying off in a big way -- Carvana is now the second-largest car dealer in America and is inching closer to profitability.
|
Metric |
Q1 2020 |
Q1 2021 |
Growth |
|---|---|---|---|
|
Revenue |
$1.10 billion |
$2.25 billion |
104% |
|
Retail vehicles sold |
52,427 |
92,457 |
76% |
|
Net loss per share |
($1.19) |
($0.46) |
N/A |
DATA SOURCE: COMPANY FILINGS.
3. Zillow
Not long ago, it was inconceivable to buy or sell a house online. Now, nearly all real estate agents have a presence on the internet, if only to showcase their listings. Zillow has taken this a step further, directly buying houses from sellers who want a quick and easy transaction.
Image source: Getty Images
Covering every property market across the entire U.S. would typically require an army of agents and assessors, but with the addition of artificial intelligence, Zillow can provide a ''Zestimate'' on its database of 100 million homes. It uses machine learning to aggregate several data points in real time, including property records, previous sales, and images -- updating as market conditions change.
When ''Zillow Offers'' acquires a home from a seller, it then aims to sell it for a profit. The company sold $704 million worth of real estate in the first quarter of 2021, making up 58% of total revenue.
The offers segment has grown enormously in the last couple of years, reaching $1.71 billion of sales in 2020.
While Zillow reported a full-year loss in 2020 (partly due to the pandemic), analysts expect a rebound this year with $1.04 in adjusted earnings per share. They also estimate the top line will total $5.54 billion, up 66%. Maintaining this rate of growth is crucial to achieving scale and long-term profitability, and artificial intelligence will be at the center of those efforts.
