Datadog Acquires Eppo to Enhance AI Experimentation and Feature Management Capabilities

Datadog Acquires Eppo, a Feature Flagging and Experimentation Platform Datadog, a leading cloud monitoring and security company, has continued its aggressive expansion by acquiring Eppo, a feature flagging and experimentation platform. This move comes just a few weeks after Datadog acquired Metaplane, an AI-powered observability startup. While the exact terms of the deal were not disclosed, a recent report from Ustarts Media suggested that Datadog might be paying around $220 million for Eppo. Eppo will operate under the brand "Eppo by Datadog," continuing to support its existing customers and onboard new ones. This merger aims to integrate Eppo's capabilities into Datadog's ecosystem, enhancing the company's offerings in product analytics and feature management. The demand for tools that allow developers to experiment with different versions of applications is significant, yet building the necessary infrastructure remains a complex challenge. This complexity arises not only from data pipelines and statistical methods but also from the difficulty of configuring analytics workflows in cloud environments. Eppo was founded by Che Sharma, inspired by his experiences as a data scientist at Airbnb and Webflow, where he encountered these very challenges firsthand. Sharma explained that Eppo simplifies the process of interpreting randomized app experiment results through "confidence intervals." This feature helps users understand the reliability of their test outcomes, making experiments more accessible and actionable. Moreover, Eppo supports experimentation with AI and machine learning models, enabling real-time comparisons to determine which version performs better. Despite the growing number of startups aiming to simplify app experimentation—such as Split, Statsig, and Optimizely—Eppo has managed to distinguish itself in this competitive landscape. Prior to being acquired, the San Francisco-based company had secured $47.5 million in funding from venture capital firms like Innovation Endeavors, Menlo Ventures, and Amplify Partners. By June 2022, Eppo had a valuation of $80 million and a customer base that included notable companies like Goldbelly, Netlify, and Kumu. Sharma emphasized Eppo's mission in a press release, stating, “Eppo aims to bring a high-velocity, experiment-first culture to companies of all sizes, stages, and industries. With Datadog, we are unifying product analytics, feature management, AI, and experimentation capabilities to help businesses reduce risks, learn faster, and deploy high-quality products.” For Datadog, this acquisition could significantly enhance its product analytics solutions. Despite reporting better-than-expected net profits, Datadog's revenue forecast fell short of analyst expectations, making the acquisition of Eppo a strategic move to strengthen its market position. The product analytics sector is a lucrative and growing market, valued at $9.09 billion in the past year and projected to reach $27.01 billion by 2032, according to Fortune Business Insights. Michael Whetten, Vice President of Product at Datadog, highlighted the importance of experimentation in handling the increased complexity of deploying multiple AI models in production. He stated, “Experimentation addresses the correlation and measurement issues that come with deploying various AI models. It allows teams to compare models side-by-side, assess user engagement versus costs, and develop AI products that offer tangible value.” This acquisition aligns with Datadog's broader strategy to provide comprehensive tools that help businesses optimize their application development and deployment processes. By integrating Eppo's advanced features, Datadog aims to streamline the experimentation journey, making it easier for developers to innovate and make data-driven decisions.