It’s about time. Someone should have acquired Neolane a while ago and I can say I told you so to more than one player in the Marketing Cloud universe and I will. I told you so.
What Does This Mean?
Adobe announced its intent to acquire CRM Watchlist 2013 winner Neolane yesterday, in arguably the best move since all the marketing cloud jockeying began. For an actually reasonable price of $600 million (even though its slightly more than 10X Neolane’s 2012 revenues, which were $58 million), Adobe puts itself into a strong position in the fight for the leadership of the marketing cloud. They’ve essentially filled the holes they had in what is now almost a paradigmatic digital marketing suite. I’ll get into what that is and means in a few minutes DPRT (digital print reading time).
Look, I’ve been a critic of Adobe’s overall enterprise strategy for a long time. They have attempted to make inroads into the enterprise software market (as opposed to the productivity market where their on-premise Creative Suite reigned supreme).
Their approach was to spend an inordinate amount of time awkwardly trying to justify a customer experience management market, when there was none to be had, rather than focus their strategy and messaging on enabling a better customer experience. When Rob Tarkoff went to Lithium to be its CEO in 2011, they lost one of the few folks they had who understood the enterprise. So they floundered.
But a byproduct of this clumsy move was the creation of a set of cloud-based marketing tools focused in and around a digital customer experience. They were the kind of tools that a creative agency would be drawn to. The toolset consisted of:
- Social marketing – more engagement than management. Integrate social media into advertising efforts; respond to customers’ conversations in their own choice of social channels. This is standard fare; table stakes.
- Digital Analytics – Omniture powered predictive analytics
- Web focused customer experience design and development – a unique feature of a marketing cloud.
- Media “Optimization” – their term. Monitors media performance and suggests best media mix for whatever you are doing.
- Testing and targeting – personalized messages sent to customers – scalable the key here.
If you look at this suite, it is aimed squarely at the comfort zone of Adobe – the agencies. While certainly an interesting group of services being delivered in the cloud, it ignores the management that is necessary at the enterprise level and thus, what marketers need. That deficiency haunted salesforce.com until they bought Exact Target and in my eyes, even more importantly, got Pardot as part of the bargain.
When Adobe announced that they were playing their hand in marketing cloud poker, I took a look and was impressed. (Thanks to Brent Leary telling me to take a look.) But to play in the schoolyard they wanted to play, they needed to do what Oracle had done with the acquisition of Eloqua, and what Salesforce had done, which was to provide enterprise-grade marketing tools for both campaigns and overall management that still was tuned in to the trends transforming how marketing was done.
Core marketing automation functionality still had to be there since marketers are still using it and they will continue to do so with no foreseeable end. Social marketing doesn’t do it by itself. Remember, Crowdfactory was the leader in that area and still didn’t provide what Marketo did and thus, it was going to be limited in its ultimate success as an independent company. So, wisely, Marketo bought them and Crowdfactory let themselves be bought.
Brent Leary and I discussed the Adobe Marketing Cloud, pre-announcement in an episode of CRM Playaz that we did last week. Here it is (listen around the 16 minute mark).
The stakes in marketing are high. Marketing has been last to the Social CRM table as marketers had to wrap their heads around the fact that what they had been taught - the 4Ps – product, price, place and promotion – and all that was associated with it – was no longer what marketing was.
Marketing had gone from pushing messages to becoming the first line of conversation/interaction with the customer. Studies galore had been done that showed that customers trusted their peers thinking more than the companies that were pushing their brands when it came to the products and services the companies provided. Marketing had to take a new direction. Content mattered as companies went from pure brand to trusted advisor.
Due to the proliferation of competition in market after market – thanks to ecommerce and especially Amazon – the battle shifted from brand competition to needing to get the attention of the customer as they were assaulted with a million messages of all kinds a year. How could you personalize individual messages based on the behaviors of customers in almost real time – in addition to capture and analyze the data created as the customers responded to something or talked about something - and do this for millions of people? We weren't only dealing with competitive branding in particular markets, but capturing attention of a customer being hit with messages across all markets all day.
But, what tended to get lost in the technology world was that all this had to be managed at what were almost unheard of scales – and that the information that had to be managed to optimize the marketing campaigns was often unstructured and raw. But coolness in design tends to rule the airwaves and customer experience in all its right-brained glory (and I’m a right brainer big time) rose to the top. Management, which doesn’t excite much of the brain – tended to sit at the bottom. Interacting in social channels with the new social customer, where the emotional conversations were carried out became the “thing.”
Reality began to set in, when time after time, the Marketing Clouds were deficient in those very management capabilities. Salesforce.com, as we know and said for a long time, had Radian6 and BuddyMedia, both terrific in what they did, but they didn’t have standard marketing management and automation. Now, they do and they spent $2.5 billion to get it.
Adobe had to have felt strong upward pressure from Oracle’s Marketing Cloud adding Eloqua and then salesforce’s Marketing Cloud adding Exact Target, though I have to think that the conversations with Neolane were going on before the Exact Target acquisition increased their urgency.
The pressure was applied another way too. Neolane was the target of multiple other vendors, something that I have direct knowledge of and Adobe had to know that. So if they didn’t buy Neolane, someone else would have. This was an inevitable acquisition – unless for some reason, Neolane didn’t want to be acquired – which clearly wasn’t the case.
To repeat, Neolane was the arguably the best acquisition of the three. Its valuation was genuinely reasonably given what it offers. It has the added benefit of a strong customer base in Europe. While it has a few marquee customers in the U.S. like the Philadelphia Flyers, Barnes and Noble, and Disneyland Resorts, it doesn’t have much real presence here. That will clearly be remedied by this acquisition.
The only other downside of Neolane: It was bit by the same bug as Adobe and tried to create a market where there wasn’t one to be created. That would be “conversational marketing”, a term that is actually fairly meaningless when it comes to a market. But luckily that is irrelevant with Adobe’s acquisition since Adobe’s messaging will be at the forefront – as long as Adobe doesn’t try to create a CEM “market.”
This is what Adobe bought when they got Neolane:
- Campaign management
- Interaction management (recommendation engine)
- Social marketing
- Message Center (high volume personalized messages)
- Leads (kind of obvious)
- Marketing Resource Management (planning, spending, resource allocation)
Most of the analysts’ focus -- and Adobe’s, too -- has been around the cross-channel campaign management capabilities that Neolane provides – and that is absolutely one of their great strengths. But what has been curiously ignored and really shouldn’t be, is the last piece here – the marketing resource management components – vitally important parts of any enterprise marketing.
With the scales and the complexity of the efforts aimed at personalization – planning the allocation of resources; managing the content and other assets, budgeting all become mission-critical. Without those capabilities, the costs associated with the complexities of personalization by the millions in near real time, become almost incomprehensible. Okay, I’m exaggerating a little – but only a little.
At this point, Teradata Applications and Microsoft Marketing Pilot are the two that provide pretty robust MRM; now, so does Adobe. This is a very important asset for Adobe and it shouldn’t be subsumed to the cross channel campaign management. It sits at the same table as an equal partner.
I'm going to take my earlier statement further. This is perhaps the best technology acquisition for the price made this year, perhaps bar none. Though that’s more metaphorical than not – since I’m not really looking at all the acquisitions made this year in technology. It puts Adobe into a position where -- if they do it right -- they have a shot at becoming the “interloper-as-leader” of the marketing technology world. I’m not saying they are that. They still have a long way to go to prove that.
They’ve only announced their intent to buy Neolane; they haven’t bought them yet. Even after they buy them, they will have integration concerns. They will be merging disparate cultures. They will have to revamp their messaging and start showing up in places they normally don’t show up. They will be in verticals that they don’t normally play strongly in like healthcare and financial services. This is not an easy path. But unlike several days ago, they have their shot now.
What Does This Mean to the Market?
The acquisition pace in marketing technology has been breathtaking. Here are the most important ones in the last 18 months or so:
- Teradata acquires Aprimo (now Teradata Applications)(2010, $525 million)
- Oracle acquires Eloqua (2012, $871 million)
- Microsoft acquires Marketing Pilot (2012, undisclosed)
- Salesforce acquires Exact Target/Pardot (2013, $2.5 billion)
- Adobe announces intent to acquire Neolane (2013, $600 million)
That leaves a few marquee independents out there – Marketo, Hubspot and Silverpop, Responsys come immediately to mind – but it seems to be only a matter of time before they get snatched up too. Not that there is anything pending I know of. But Marketo has been a constant acquisition target discussion in the industry and, of the remaining vendors, they are the strongest in overall capabilities, with Hubspot the leader in the inbound marketing space.
What makes this breathtaking is the recent speed of the acquisitions. With the exception of Aprimo, they all have been in less than a year. These are high stakes plays. Gartner (though I’m not 100% in agreement here) has highlighted the shift in budgets for technology moving from the CIO to the CMO by 2017. Marketing is the hottest area for customer-facing technology sales. Marc Benioff, in his earnings call in August 2012 identified the marketing cloud as his next “billion dollar business.” There is nothing that would make one think otherwise. With Gartner’s additional optimistic view of CRM (of which marketing is a part) as a $36 billion revenue play in the same year as the budget shift, 2017 (from last week), there is nothing but high stakes here.
As the larger players snatch up the independents, there is a lot of opportunity opening up for niche marketing technology such as content marketing or influencer/relationship analytics, to name a couple. Marketers are trying to get the attention of the crowd. To do that, they have to figure out how to address the crowd or engage the crowd.
Content that is customized to targeted groups is one way. How we create, distribute and consume information has been irrevocably changed by the decade long communications revolution. Content marketing addresses that. Thus, a valuable niche. There are many others, horizontal and vertical.
Ultimately, I have to presume the exit strategies of the niche marketers will be acquisition since for now, with the thirst to be at the head of the pack by the big guys, acquisitions will continue – at least at the niche levels. While the Marketos are out there and will continue to compete independently until they are acquired (and that’s still an “if”), this is a big game with scary big numbers attached and thus big names going at it.
Okay, I’m done. In sum, great move for both parties, huge market opportunity, still have hurdles ahead, but if they are jumped, look out.