Marketo looks to buy into social

Marketing automation vendor Marketo has earmarked some of its latest $50 million in VC funding for acquisitions of social influence marketing companies, says CEO Phil Fernandez. The potential move would round out Marketo's offering to support relationships throughout the customer lifecycle rather than simply in the prospect-to-customer phase, he explained when we met in London late last week.

"Our space has been extremely focused on customer acquisition. Clearly that's not quite right," he told me. "You'll see us next year starting to change this dialog towards customer lifetime value, customer lifecycle, customer engagement."

Traditionally, Marketo and rivals such as Eloqua, Silverpop, Hubspot, Genius, Pardot and others have focused on what's known as 'lead nurturing', which is the art of following up on an initial contact from a prospect so that they are reached by a salesperson at the time when they're ready to buy. In B2B sales cycles, many months can pass between that initial contact and the final buying decision. A service such as Marketo monitors the contact's interactions with the website and follow-up emails, with the aim of identifying the best moment during the sales cycle for a sales person to engage with the prospect. If all works well, the software will have a significant impact on the productivity of the sales team by maximising the time they spend interacting with 'hot' prospects.

Companies in this sector have previously expanded their scope by focussing on bringing more high-quality leads into the funnel, for example by optimising keyword advertising or by developing other forms of what is known as 'inbound marketing' — activities designed to help prospects find a company online when they are already thinking about or looking for what it sells. Clearly, social media is a part of this (if, for example, you maintain an informative blog and an engaging Facebook page or Twitter stream about the widgets you sell, you will pop up in search results or recommendations about those widgets more frequently than if you don't). But Fernandez' comments imply that Marketo is also thinking about engaging in and acting on conversations that might take place with customers after the initial sale.

Such a move makes sense given the age-old mantra that your best prospects are often found among, or through referrals by, your current and past customers. It's also in line with the emerging trend, supported by online technologies, towards ongoing, subscription-based relationships rather than the traditional pattern of disconnected, one-off sales events — see my take on subscription billing vendor Zuora in my blog last week, Enterprise software pivots to new stacks. Another factor in Marketo's thinking may be a strategy to help it expand out of its core B2B customer base to embrace more consumer-focused brand owners, where maintaining the brand relationship forms a big part of the marketing spend. Certainly, this is where some of the most successful of the emerging new breed of social influence vendors have been building their businesses.

"The relationship between buyers and sellers is changing," said Fernandez. But he added that fields such as social campaigning and influence marketing, in which a company works with independent social media advocates to get its message out, were "still very much a work in progress." This inevitably creates an environment where there are a lot of start-ups trying out creative new ideas, but few are going to be successful enough to reach sufficient scale to stay independent. This is the pool in which Marketo will be fishing, he said: "There's some wonderful little companies that are not broad enough to be standalone companies but have built something with social media."

Without giving any inkling of who might be on Marketo's shopping list, Fernandez did say that, "In the brand space, horizontal integration of social influence marketing is ripe for full integration into a platform like ours." He cited Buddy Media, which in August secured $54 million in venture funding for its social media publishing and tracking platform, as an example of a company in the field that had been able to reach "escape velocity". Other companies with similar offerings include HootSuite, Involver, Vitrue, Context Optional, — acquired for $50 million in May by ad performance management provider Efficient Frontier — and CRM Idol finalist Crowd Factory.