Two Marketing Automation vendors announced VC funding this week. Thoughts on trends in 2011?

Hi Brian,

Ignoring "fire-sales", the topic of consolidation has been talked about for over a year. History has shown that maturing markets will segment before they consolidate. Larger companies buying in to this space will want to make sure that what they're buying fits in to their existing market segment, for instance.

However, it is clear that this market is maturing and beginning to segment, ie. all the players are staking out their slice of the pie, and that is what all of this money-raising is impacting.

My $.02: Eloqua and Marketo are moving upstream targeting the enterprise (which will be interesting considering Aprimo/Unica sitting fat up there). LoopFuse, Genius, and Pardot tend to concentrate in the SMB space. Silverpop and Act-On are enigmas to me, so I can't comment there.

I mention the segmenting market, because it will directly impact who likely acquirers are. I feel that most acquisitions will be technology-based. Vendors that habitually raise money (hail mary?) have a significant premium on their heads, and that is an enormous price to pay for someone like Adobe, ExactTarget, SalesForce.com, or VerticalResponse wanting to simply buy technology and integrate it in to existing products. If you build a service-heavy business, good luck finding a buyer - IBM already ate their slice. ;-)

As Roy points out, the upper tier of the marketing automation world is already occupied by Unica, Aprimo, Neolane, etc. with systems that are much broader in scope than the B2B products like Marketo. Nor is that much of a market -- even Unica had barely $100 million in sales when it was sold. No way a VC could justify the kind of investment we've seen in Marketo if that's the target segment.

So that means Marketo's investors have to be looking at either the middle market or the small business market. Competition and margins in the small business segment are too brutal for anyone to make much money and I can't see that changing soon. That leaves the mid-market as the only reasonable space where a few companies could hope to build a large and profitable business.

(I know I'm not defining my terms here. I actually think of the "small" market as split into very small businesses, e.g. served by Infusionsoft, MarketingAutoPilot and HubSpot, and small businesses, say up to $100 million revenue, served by Genius, Pardot, LoopFuse, etc. The mid-market is companies with more sophisticated needs but not yet big multi-national enterprises. Maybe give it a revenue range of $100 million to $1 billion. Those companies have the needs and money for a more powerful system, so it should be possible for vendors to earn a decent return on each engagement. And there are enough firms in that space to build some good volume.)

For additional discussion, see http://customerexperiencematrix.blogspot.com/2010/11/why-put-another-25-milli...

Interesting comments from 2 of the other competitors. I see things a little differently. As a long time B2B software junkie and marketing consultant for past 9 years, I think this sort of investment is great for Marketo and not so great for the 2nd and 3rd tier MA players. I see this investment as a solid endorsement that Marketo belongs in the top tier of SaaS MA players - Eloqua, Silverpop and now Marketo.

With that type of money, Marketo can make some serious investments in product, sales & marketing, channel, international, etc. Vtrenz got that when they were acquired by Silverpop in 2007 and Eloqua got the same amount of investment $25mm at that time. Add in Marketo's sales performance the past 2 years has been at the expense of the other major players. They have significant momentum on multiple fronts and now with this sort of investment they will be top of mind with even greater audience of buyers, influencers, etc.

Sirius Decisions put market adoption rates at around 10% earlier this year. That means there is substantial upside in growth over the next 3-4 years, especially in the market sizing of $100mm to $1b companies that David has highlghted as being the prime target for Marketo. I agree and I would take the sizing down to $25MM, because of the ease of use of Marketo's system, and price point.

For the other smaller, less funded players, I would be worried.

Henry Bruce
@hebruce

To Carlos' point: there's certainly a danger that we're approaching the top of the "hype cycle". I think everyone who reads this is aware of the problems that CRM faced after the initial flush of enthusiasm. I'm starting to feel more than a bit of that with marketing automation too.

You could argue that the vendors' focus on revenue analytics is a way to prove value, but that only works if value is actually delivered. Otherwise, revenue analytics just proves failure.

That noise you just heard is me smacking the side of my head. Henry's use of the word "investment" triggers the should-have-been-obvious thought that Marketo will use some of the money for acquisitions. Duh.

Nice discussion here folks! Thanks for your input and insight to my question.

I think we have all experienced similar trends from the evolution of the PC, networking, Internet/Web, Salesforce Automation-turned-CRM, Dot-Bomb, SaaS, and more....

I agree with Manticore's Christopher Doran that money essentially chases trends and perceived leaders. But with the money comes the pressure to deliver ROI. My hope for this space is innovation and customer focus continues, not to be overtaken to achieve quarterly revenue goals.

2011 shall be interesting indeed. Thanks again for all the answers and please feel free to keep the discussion going!

Cheers,
BH
@RemarkMarketing

I think it's all part of something bigger: the collision of CRM, CMS, marketing automation, social marketing platforms and analytics.

Let's face it, marketers want one big view of their world and one place to drive their market engagement. Whoever gets to scale and scope first, wins.