What are the reasons Salesforce.com has not acquired a marketing automation vendor?

Here are a few ideas:

1. Marketing doesn't put "butts in seats" (e.g. sell users), which is how SFDC makes money. For every 10 sales and support licenses they sell, they sell one marketing license. That doesn't mean they won't figure out how to monetize marketing, it's just that it would take a bit of a pricing philosophy shift.

2. Marketing Automation requires a lot of hand-holding / services. This is not necessarily a business that CRMs want to get into as they'd prefer to be products companies. Straight email marketing would be much easier for them.

That being said, I have no idea :-) SFDC has (rumored) flirted with email marketing vendors several times before so you never know. Also, the investment in HubSpot shows that they have some interest in the space.

It should be interesting to see what, if anything, they, Microsoft, NetSuite, or Oracle do in the space.

The other variable to throw into the mix is that marketing automation is transactionally expensive.

What this means is that it costs a lot of database space to track every email send, every open, every clickthrough and every conversion while managing CAN SPAM compliance and every other regulation internationally. There's a reason why Salesforce has imposed a limitation on email sends through their system.

Imagine if they had to scale up database sizes exponentially to account for all that transaction data. One big hit to a customer database could have serious implications for Salesforce's other customers.

On the other hand, Salesforce is big enough that it needs acquisitions to maintain their fantastic market cap. Radian6 was interesting in that they had $35MM in revenue, less than Eloqua's reported $50MM in 2010. That's enough to be interesting. Plus, with Oracle's rollout of the acquired Market2Lead technology, Salesforce may start feeling some competitive feature pressure this year or next.

I tend to agree with Raab and Dharmesh Shah. I actually just wrote a blog post about this on Friday http://gurl.genius.com/12df12f . While purchasing a marketing automation company would round out their marketing offering, their primary focus is really on what’s core to their business-- Sales and Service and extending the reach of those clouds. If they do end up purchasing a player in the marketing automation space, I would bet that it wouldn’t happen for at least a year and to David Raab’s point, it won’t be Marketo or Eloqua. Salesforce doesn’t need what would make both of those players too expensive, their marketshare. While Radian 6 and Jigsaw help extend their sales and services offerings and offer reach into areas they don’t already dominate, both Marketo and Eloqua are more revenue and customer redundant.

Further, I hope Salesforce has a longer-term vision and they are smarter than buying up their own revenue ecosystem. There are a number of players in the space that contribute to or rely on their presence on the AppExchange. Whether they’re a marketing automation company or back-office technology, if Salesforce continues to buy AppExchange partners to compete with other partners, what kind of message does this send to companies that want to develop apps for the AppExchange-- especially companies built on the force.com platform?

Scott,

Great question. Not sure I agree that SMM is further afield from CRM than marketing automation. At the high level, one is for listening to the marketplace, one is for telling them something.

Maybe Salesforce.com just thought it was better to start with listening first. ;) I wouldn't be surprised if that's the next step in their acquisition brigade and one vendor clearly stands out in my mind.

I’m surprised no-one has mentioned another key variable – namely, that Salesforce has been successful in large part by building and nurturing an open ecosystem of technology partners through AppExchange. If they were to get into the marketing automation business, it would be a warning shot across the bow of any company thinking of partnering with Salesforce, since that company would be required to consider the possibility that Salesforce might be a competitor months or years down the road.

I’d be very surprised if Salesforce buys a marketing automation company. It would be a slap in the face to their existing partners, and they know it.

I think David Raab pretty much captured the primary reasons.

Here's my take on it: Salesforce.com is a multi-billion dollar revenue company. They already have several initiatives that are potentially large and would move the needle for them:

1. Going deeper into CRM (a market they already know well -- and there's still opportunity)

2. Call / Center Support: Allows them to further expand into the enterprise. This is also a well known, large market with existing vendors. Salesforce.com has great expertise taking over a large, under-served market.

3. Force.com / Database.com: They want to be a dominant force in the PaaS market -- which is new, but very large. I also think they want to take on folks like Oracle and Microsoft head-on.

4. Chatter: This is one of their "high-beta" bets, and Benioff is clearly excited about it. It's a way to get *every* employee in a company using some Salesforce.com software.

So, as excited as we all are about marketing automation, the reality is that it doesn't quite fit into any of Salesforce.com's large initiatives, and like any organization, they too have a limited number of things they can pursue simultaneously.

I think they see future potential in the marketing software category (hence the investment in HubSpot), but it's anyone's guess as to when they will buy a company in the space.

Interesting question. Betcha they will - within 4 months. Marketo or Eloqua.

Almost there - Salesforce.com recently made a strategic investment in HubSpot in a $32 million Series D round (March 8, 2011):

http://www.hubspot.com/blog/bid/10491/Sequoia-Google-Ventures-and-Salesforce-...

Excerpt: “We back companies that are transforming their industries,” said Jim Goetz, General Partner at Sequoia Capital. “HubSpot is the emerging category leader in the SaaS marketing sector. Their customer base exceeds that of all the other relevant marketing software companies combined, including Eloqua, Marketo, Genius, and Manticore.”

"Today, every company needs to succeed in search, social, sales, and marketing... With 4,000 customers, HubSpot is already a clear marketing leader - now, with this new infusion of capital and recognition by Google’s venture arm and Salesforce.com, HubSpot has a great opportunity to separate itself from the pack and become the leading marketing platform in the small and medium business space," said Brent Leary, co-founder of CRM Essentials.

I think that in order to play in the marketing automation arena you need both analytics and campaign management combine You need the analytics and execution combination for the B2C market, like Unica/IBM, SAS, Ephipanny and Terradata/Aprimo. SFDC needs to look for a marketing automation solution that provide both B2C and B2B capabilities.

Hmmm, Oracle has acquired and integrated Market2Lead which was built on Oracle technology. SalesForce.com has invested in HubSpot....Microsoft hasn't moved yet, but Eloqua is based on Microsoft technology. Seems like the next move in the CRM wars is Microsoft's. As for SalesForce, Occam's Razor would lead one to suggest that continued Social Media investment will move the dial more than Marketing Automation investment for now.
-Kevin

I'll take that bet Jeff. I see Salesforce extending it's investment is Social Media and Chatter.

Perhaps there's an even simpler explanation - the leaders in the space (Marketo, Eloqua, Hubspot) don't want to - or need to - sell. At least not at a price Salesforce is willing to pay.

All 3 companies are, by all accounts, doing quite well and making IPO noises. While there are certainly other acquisition candidates, I believe Salesforce is unlikely to want to acquire a second-tier vendor (although as David Raab suggests that could happen too).

I suspect that, eventually, a deal will get done - Marketing Automation would be a very nice fit for Salesforce. We shall see.

Howard makes a good point about AppExchange partners. Salesforce have spent a lot of time, energy and money encouraging companies to sign up for this so that they can be seen to be 'open' - and of course strengthen their market position and make their implementations more sticky. So if they suddenly go and buy an email or marketing automation company they will completely piss off all the other ones. Maybe that's a risk they are willing to take but the other downside is that these companies will then go and form partnerships with other CRM companies and strengthen them as competitors.