On May 31st 2016, Vista Equity Partners announced a $1.79 Billion agreement for the acquisition of Marketo, the last remaining stand-alone, enterprise-grade marketing automation provider. For context, please recall that in 2012, Oracle acquired Eloqua, Marketo’s primary competitor, for $810 million. Also, way back in 2010, IBM acquired Unica for $480 million, followed in 2014 by their acquisition of Silverpop for an undisclosed amount.
When you add to all this the slightly more complicated, food-chain-esque series of acquisitions initiated in 2012 by Exact Target’s (an email service provider) purchase of marketing automation platform Pardot, followed by Salesforce’s $2.5 billion purchase of Exact Target in 2013, you have all the major marketing automation platform acquisitions plotted out.
While Marketo represents the second highest total price tag (although, arguably, the two-in-one Exact Target-Salesforce deal could be halved to $1.25 billion for Pardot and Exact Target apiece), there’s more at work here than simple market valuations of the technology.
This Acquisition is Different
Up until now, the results of these acquisitions have been more or less the same. Specifically, the acquired marketing automation platforms were combined with other marketing technologies in the parent company’s technology portfolios to produce bundles or packages of integrated solutions offered up as “marketing clouds.”
The Marketo acquisition, though, is different. In this case, we don’t have a larger technology enterprise swallowing up a smaller, more specialized technology company to expand its product portfolio. Instead, this seems to be an acquisition aimed at helping a specialized provider, Marketo, up its weight class against bigger, heavier hitters, in order to increase its value over the long term.
Marketing Automation: It’s Complicated
In Aberdeen’s report, Managing Marketing Automation Expectations: How to Win with the Right Approach, findings showed that, although the performance of marketers using the technology has not changed, marketing automation adoption rates have actually declined: from 68% of all marketers in 2014 to 52% in 2015. Although the rise of more comprehensive “marketing clouds” may be one cause for the decline in adoption, there’s also the challenge of complexity.
Marketing automation often takes a team of specialists and dedicated personnel to manage effectively. Integrated clouds, by allowing for a consolidation of resources, are one response to this complexity. Solution providers seem to see this as the better option as well – buy a bunch of solutions, spend some development time to make them work together, and give your buyers a complete solution out of the box.
Marketo, on the other hand, seems now to be positioned for a different approach: making the marketing automation platform itself more comprehensive, easy to use, and valuable to its users. From Vista Equity’s perspective, the opportunity to back the lone alternative to the marketing cloud offerings may have seemed like a no-brainer. From Marketo’s perspective, the financial backing to raise their level of competition may also have been a sizable upside.
What This Means for the Marketing Technology Space
For the marketing technology space at large, this might signal a shift from competing on portfolios of integrations, and instead, competing on comprehensive product utility. For marketers, this may also open the door to a competitive dynamic that puts their need for powerful – yet easy to use – solutions at the top of providers’ priorities.
While my primary opinion is that Vista Equity is into Marketo for the long haul, it’s possible that they too are playing the marketing cloud game. That is, this acquisition may position Vista Equity for a windfall comparable to that of Exact Target, though by slightly different means.
In acquiring Marketo, Vista Equity now holds the last available piece that the remaining enterprise players, such as Microsoft or SAP, would need to create their own highly competitive marketing cloud package. With Salesforce’s $2.5 billion acquisition of Exact Target, there’s already market validation for Vista Equity to turn a profit on a comparable sale, in which case, this may actually signal the end of standalone marketing automation. The marketing cloud would then become the sole focal point for enterprise marketing technology.
What Do You Think?
Personally, I prefer the more optimistic outlook, but I’ll be the first to admit this is all conjecture and forecasting. In any event, the acquisition of Marketo is interesting and exciting news, and for better or worse, it helps highlight the intricate connection between complexity and value in modern marketing technology.
Finally, since I enjoy being more of a conversation starter than a conversation controller, what do you think? What does the acquisition mean to you? What are your thoughts on the market for marketing automation as a whole? Share your ideas in the comments below!