It’s been wonderful this spring being a part of all the vendor briefings now in high gear because in short but sometimes painfully dense bursts we get to know what each vendor has in store for the months ahead. It’s a lot and that’s a good sign. There seems to be a breakout happening.
One of the themes running through all the events like a kid on a tricycle is marketing. Everywhere you look marketing is making noise. Oracle completed the acquisition of Eloqua, Marketo filed for an IPO, Salesforce is putting significant resources behind its Marketing Cloud and, most importantly, marketers are in the ascent.
SiriusDecisions, an analyst firm, is holding a conclave this week in which it is discussing its new marketing waterfall methodology and marketers as well as associated vendors like Lattice-Engines and Full Circle CRM, just to pick two, are sending contingents to the event to see and be seen and to soak up the new marketing vibe.
Closer to home, I am attending HubSpot’s second (?) annual analyst day at its Cambridge offices. HubSpot became an early darling of the new marketing movement a few years ago when it turned marketing on its head and said, no, no, no, try this — which turned into inbound marketing — and was very successful.
Generally, when marketing kicks it up a notch, as it is doing now, there are a couple economic possibilities. Either we’re entering a new market/category/paradigm or the economy is showing signs of life after a recession and I think it’s possible both are happening right now. The recession is slowly ending and marketing as a discipline is the new paradigm.
In fact, and this is most interesting, the marketing upsurge started at the depths of the recession when austerity was big news and almost nothing was getting traction. But it was almost as if the crowd said no, we don’t buy it, let’s get the economy moving again. Let’s go on offense, let’s start marketing and selling again and we’ll spend some money to make it happen.
Here’s where economics imitates life — a couple of weeks ago, the economic ideas underpinning the austerity argument, which has devastated Europe and made the sequester in DC a bad word, fell apart. Two Harvard economists named Reinhart and Rogoff whose work had led the austerity charge were proved to have made significant spreadsheet errors. If there was an Oopsie Award they’d win it this year for sure.
The translation is that the Austerians (as Paul Krugman likes to call them) got it wrong. The math errors and erroneous assumptions of the Reinhart-Rogoff model were inaccurate and the data did not support their conclusions. Over night austerity is, if not stinking like a dead fish, at least sitting in the sun and beginning to decompose.
What’s interesting to me is that the general marketplace began reacting long before the fall of the Reinhart-Rogoff model. No one needed to be hit over the head with an old tire tool to change directions. We’re anything but doctrinaire in this country and when something doesn’t work we make little adjustments, regardless of what officials and supposedly smart people tell us.
That’s the beauty of our free market system. It’s distributed and as non-hierarchical as you can get it and it works beautifully in a pinch. In my own mind, I often compare democratic capitalism practices in the West with totalitarian capitalism practiced across the Pacific.
The Chinese have a great ability to marshal their people and resources to output great quantities of goods but they still operate in a hierarchical, command and control manner. Democracy and totalitarianism are political systems just as capitalism is an economic one. Politics and economics have to operate together, you need one of each.
I could never fathom how totalitarian capitalism could orchestrate the changes I’ve seen this spring. The very idea of individuals deciding for themselves what to do in a confusing market with a totalitarian political system — even with free market capitalism as the economic model — and breaking away from official thinking is hard to imagine.
To me that’s part of what CRM captures. It’s the chaotic and the spontaneous that CRM tries to ride herd on. Sometimes it works well and at other times it can fail. But CRM has made important leaps forward. Like economics and sociology or any of the soft sciences, it has come into its own as it has adopted many of the tools of soft science — the bell curve, crowd sourcing, big data and analysis, and, most of all, probability. There’s just no way a political-economic system other than what we have in the West could come to the same conclusion. It would be like asking a fish to invent fire.
That’s it? Only $810.8 million? Not even a whole billion? I would have thought Eloqua would command a higher price, especially with a market cap in the $4-500 million range. Lots of people are saying nice things about the deal but I ain’t buying it just yet.
They IPO’d in August at $11.50 per share and raised $90+ million and in the last year had revenues of about $85 million. So from this perspective the strike price of $23.50 makes some sense. However, marketing automation is heating up and it’s a good place to hang out a shingle these days so I would have expected more of a premium.
This leaves Marketo and a bunch of smaller companies in the space and curiously opens up the market quite a bit. Eloqua is a good Salesforce partner but you have to wonder how much longer that will last given that Larry doesn’t even invite Marc to OpenWorld any more.
I think Eloqua’s Salesforce business goes in the tank immediately meaning that Oracle might have over paid given Eloqua’s revenue is somewhat dependent on good relations between the two companies’ sales forces. So look for Marketo to get a lot more interest from Salesforce (as if they don’t have enough?).
This acquisition clears the field for Salesforce and I could easily see Marc buying Marketo just to make sure he has something in the corral. If that doesn’t happen, then every SAP and IBM in the world will want Marketo and soon. Marketo would be a good fit for Salesforce, better than Eloqua in some respects, given the social direction of the Marketing Cloud.
At this stage Oracle is amassing an impressive string of software solutions that it is attempting to forge into some kind of suite. But maybe not. This reminds me that the last couple of years worth of Oracle acquisitions in the front office market resemble another spate of acquisitions the company embarked on in 2004-2005. It ended up buying such names as PeopleSoft and Siebel and each of those companies had bought up many other companies like J.D. Edwards and Upshot to name just two. I think of that as the Great Consolidation. Lately things are looking similar.
Seven or eight years ago Oracle was chided for becoming the new Computer Associates and it was widely expected to cease all development and enhancement of the products and just collect the maintenance revenue stream. That didn’t happen, the company pledged to keep the brands going and today they are. It also promised to build powerful software that would link everything together in one big, happy mass. The project was supposed to take 3 years but it reached double that before Oracle threw up its hands and declared victory in a parallel universe.
Fusion is still evolving and the separate applications are, well, separate. But the focus now seems to be on bringing together RightNow, Siebel, ATG, Eloqua, and the other recently acquired systems under the Fusion umbrella. Maybe it will work, I dunno.
For now, Oracle may have stolen first base buying Eloqua. The marketing market is still hot, Salesforce is committed to big time social marketing, Marketo might be a target purchase for them but that’s not certain. Sooner or later Oracle needs to put some stories together about how its new applications all work together otherwise the CA rumors will start all over.
A couple of weeks ago, Marketo announced its research-based belief that its form of revenue performance management (RPM) could help grow global GDP by $2.5 trillion by 2015. I love it when emerging companies talk about big plans this way. It reminds me of the young plumber who upon seeing Niagara Falls for the first time says, “I think I can fix it!”
But there’s something to this proposal that ought to be taken seriously and when you talk about trillions of dollars you are presumably talking seriously. Global GDP in 2011 is predicted at $68.65 trillion by the International Monetary Fund and the Marketo announced figure was spread over three years. But that’s a lot of improvement no matter.
To put this into perspective you have to back up and ask about the assumptions involved and Marketo was kind enough to anticipate the questions and perform a little research. According to the announcement, Marketo did some analysis of its customers’ revenues as they took advantage of the company’s marketing automation, sales effectiveness and analytics tools.
Side note: No one’s crown jewels were harmed in the analysis. Having a big pile of relatively homogeneous data for analysis is a side benefit of multi-tenant cloud computing. Multi-tenant cloud computing could provide important analytic benefits like this to all users if we could only 1) Put down some ground rules governing the use of the aforementioned crown jewels, thus creating a data commons; and 2) Get over our hang-ups about maintaining the pristine nature of our data in clouds. Really, it’s like the five year-old who can’t stand seeing the peas touching the mashers on the plate. But I digress.
The three tools, marketing automation, sales effectiveness and analytics, combine to provide the tools a company needs to implement revenue performance management strategies. RPM is still a relatively new idea but other companies like Eloqua, with whom Marketo competes and Cloud 9 Analytics (a Marketo stable mate in venture capitalist Bruce Cleveland’s menagerie) are conspiring to give the idea critical mass.
In the nub, RPM is simply about using the data that is routinely given off by our business processes as fodder for the analytics engine. Too often the data goes unused or simple reporting engines choke on the abundance. But an analytics engine spits out all kinds of ideas like what to offer the customer based on its experience, or generally offering insight that a human eye might miss but which a statistical model would discover easily.
So, two and a half trillion bucks over three years averages out to a bit less than one percent a year. In percentage terms that is not much but the existence of all the zeros in a trillion will get your attention. After all, that’s growth and incremental improvements like this are how markets and economies grow.
More importantly, the ROI can be stunning. Given the fact that RPM would not be applied evenly across big corporations and lemonade stands, the places where it could make a difference would notice the change. Moreover, the cost of implementing RPM where it’s needed would be much less than the incremental gains, especially with modern cloud computing delivering the tools cost effectively.
I am not an expert on RPM, yet. I am more like the one eyed man in the land of the blind. But my thought is that we ought to get familiar with this idea, which is essentially applied analytics. Our economy is still climbing out of the recession and the jobs numbers that I have seen for May are disappointing. Every recession ends with some new product or idea taking off and leading the way. I haven’t seen the big new idea yet but maybe this is it. Regardless, a little investigation won’t cost anything.
All the chatter about the Salesforce acquisition of Radian6 is quite interesting. A couple of postings from people I respect make good points. First Joe Payne, CEO of Eloqua:
“Conspicuously absent from Salesforce’s network of role-specific “Clouds” is one that centers on the marketing function. Is the Radian6 acquisition the beginning of a Salesforce Marketing Cloud? Someone on the investor conference call asked Marc Benioff whether this was the first move toward business-to-consumer. His answer was worth noting: ‘We’re really seeing the beginning here of the Marketing Cloud.’ Given the excitement we have seen around Revenue Performance Management – a discipline that requires both sales and marketing data – in the executive suite, it is not surprising to see Salesforce moving this direction.
And here’s Jon Miller CMO of Marketo:
“Personally, I think Salesforce will continue to make acquisitions “around” the marketing automation space (such as Jigsaw and Radian6) without moving directly into the category; I also would not be surprised if they bought an email service provider. Salesforce has never shown much interest in a “Marketing Cloud;” they seem more interested in Chatter, the Force.com Platform, and Service Cloud 3, and I suspect future acquisitions will focus on augmenting those capabilities more than in marketing.
It reminds me of the old joke, if you want three economic opinions ask two economists. We’ll need to wait a while to know which is right but I’m betting on Payne’s analysis more or less.
IMHO Salesforce has been deficient in marketing for a long time. Perhaps that’s because marketing’s business processes have been more amorphous compared to sales and service. But more likely, it was because Salesforce grew up selling to emerging tech companies that were selling new category products. Your marketing needs in such a situation are rather minimal. But today, there is much less category formation going on — that will likely change with the introduction of the tablet PC— but for now, companies wanting to sell, and who doesn’t, need to market like many of them never have.
Marketing and customer intimacy have driven the social CRM market for several years and the demand destruction caused by the financial meltdown a couple of years ago tipped the scale. That’s why ideas like revenue performance management are so important today and in order to do RPM you need tools. So it’s not surprising that Salesforce bought Radian6. It was time.