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In recent months, the digital marketing software arena has been active, rife with mergers and acquisitions abounding. The fast-and-furious nature of these events indicates that the market is active for a reason, with companies paying billions of dollars to integrate new marketing capabilities into their portfolios.
The digital marketing software market has been heating up for some time, enabling companies to reach out to new prospects and existing customers through more personalized, real-time and informative messaging. Companies can only engage in this kind of interaction with customers if they have access to real-time information and can use marketing automation successfully to enable them to work at scale. But at the same time, as we look down the road, rapid-fire mergers and acquisitions may not signal growth over the long term.
Let's consider some of the specific events. On May 31, private equity firm Vista Equity Partners purchased the last remaining major independent marketing automation vendor, Marketo, for $1.7 billion. The next day, Salesforce bought omnichannel e-commerce vendor Demandware for $2.8 billion. And two weeks later, Microsoft announced plans to buy LinkedIn for $26.2 billion, its largest acquisition ever. Each acquisition was competitive, with multiple suitors.
Trend No. 1: Platforms continue to grow
Many agree that Salesforce purchased Demandware to fill out its platform with additional e-commerce capabilities. Dominant in CRM and service, and with growing clout in marketing, Salesforce has lacked the commerce capabilities of Oracle, via its ATG acquisition; SAP Hybris; and IBM. Microsoft may also become competitive with its LinkedIn capabilities combined with its own CRM offerings.
While the breadth of the marketing and CRM platforms is growing, their depth is not growing nearly as fast, so expect platforms to cover more ground in major areas over time. But don't expect platforms to have the depth of single-purpose marketing products. If you want depth, you may need a best-of-breed technology that integrates with one of the major platforms such as Salesforce, Oracle or IBM.
Trend No. 2: Marketers want to deliver omnichannel experiences.
The Salesforce-Demandware acquisition signals the growing importance of delivering seamless customer experiences and a proliferating number of communication channels. Sure, omnichannel is about commerce, but it's really about bringing every interaction -- e-commerce, desktop web browsing, mobile, social media interaction -- together for a seamless experience wherever companies interact with the customer.
Omnichannel extends beyond simple commerce to create a true digital experience regardless of the medium. Ultimately, mobile platforms should be designed to engage with users in an immersive way. Today's mobile platforms offer a compelling story, but the lines will blur further between mobile and desktop, such that marketers can deliver a message anywhere, anytime and to anyone, regardless of location or device. And the experience should move seamlessly with a customer so that, for example, a customer service representative, website or mobile app can tell what the customer just bought in-store, through a mobile app or on a website.
Trend No. 3: Goodbye, B2B lead; hello, accounts.
Much of the true innovation in traditional one-to-one marketing automation platforms lies in past developments. Today, the development surrounding marketing automation really involves platform integration. Over the past several years, just about all the major platforms have been acquired by the likes of Oracle, IBM and Salesforce.
But there's something else happening in the digital marketing software arena, and Marketo's leadership changes offers clues. Marketo's acquisition by a private equity firm will enable the company to remain independent. But could it be a recognition that the traditional marketing automation market has matured, requiring the company to shift its focus from innovation and growth to -- dare I say -- cost cutting and profitability? In a sense, the digital marketing software arena has moved on from one-to-one lead generation -- à la Marketo and Oracle Marketing Cloud -- to account-based marketing.
What is account-based marketing? If you've marketed complex products to businesses, you know that the buying process can be equally complex, often involving many people -- say from various business functions, from IT, from purchasing and others. The traditional approach of sending email messages to prospects is a recipe for failure since it doesn't map how sales reps sell to accounts, and can thus miss out on critical players in the buying process. That's why many companies are turning to account-based marketing, which coordinates marketing and sales activities for an account. Various new tools are coming to market to address this need, such as those offered by Miller's new company Engagio.
Trend No. 4: Connections and context matters.
As Recode recently noted, LinkedIn shopped itself around for several months before agreeing to be acquired by Microsoft. In addition to Microsoft, they spoke with the usual suspects -- Google and Salesforce among others. Certainly Google wanted to extend its social footprint. But it's intriguing that B2B application, not social software, vendors Microsoft and Salesforce were interested. Why? Because business -- i.e., our professional lives -- is social. Professional people are connected to each other either by informal and company networks. As any sales pro will attest, knowing how who connects to whom, who influences whom and who works with whom is all critical to the sales process. And it's equally important to marketers, as well, so that we know whom to influence and how social networks can come together to influence a sale. Account-based marketing fits into this trend, as well.
Trend No. 5: Consolidation is coming, and it's getting closer.
The rapidly expanding "martech" universe should stop, but it has continued to grow, abated. Incredibly there are 5,700 marketing tech companies, according to Industry experts Scott Brinker of the ChiefMartec blog, and Anita Brearton, CEO of CabinetM. Could a black hole be on the way? Unlike CRM, where most companies use one of the top five products, martech is different. There are too many martech providers chasing a relatively small set of buyers.
Another reason for caution: Over the past 12 months, leading martech stocks have fallen dramatically -- even though they have recovered more recently. During the past 12 months, the top five stocks -- two of which are being acquired -- Bazaarvoice, Brightcove, HubSpot, Marketo and Shopify, dipped as low as 38% compared with July 1, 2015. These companies recovered somewhat, but by the start of July 2016, they were still down by 11.5% compared to a year ago. I'm not here to advise you on which stocks to buy or sell, but there's a good chance that more and more venture capital firms, boards of directors and investors will be pushing to cash in and sell to the highest bidder, which is what happened at LinkedIn, and probably Marketo, as well. That gobbling sound you hear could be a platform vendor gobbling up a point technology. Stay tuned.
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