Salesforce.com CEO Marc Benioff's big spend
He addressed his company's quest to reach a billion dollars in revenue and why he spends more than half of salesforce.com's revenue, which was about $500 million for the year ending January 31, 2007, on sales and marketing. He responded deftly, like a well-schooled politician avoiding a specific or revealing answer, that a significant investment in worldwide marketing and distribution is required to meet demand. So far that investment has netted salesforce.com nearly 30,000 customers and 650,000 subscribers, and not much in the way of profit margin, but a $4.9 billion market cap as of today. Wall Street seems to be alright with the customer acquisition costs.
In part, the big spend on sales and marketing is a remnant of his heritage, growing up professionally in Oracle with Larry Ellison. He apparently believes that to take on Oracle, SAP and Microsoft, you have to have a differentiated solution with clear benefits--in this case a pioneering on demand application and platform--and to spend on marketing and sales like his much bigger rivals. And we thought on demand software and Web 2.0 was more about self-service and word of mouth marketing--not if you want to go through the front door of the Fortune 1000.
He discussed the impact of acquiring Koral, which brings to Web 2.0-style content management to the salesforce platform. He expect that Koral functionality will be baked natively into the salesforce Apex platform by the end of year, which would allow developers to take advantage of the capabilities.
Benioff also talked about the role of the AppExchange marketplace in salesforce.com's acquisition strategy, and whether he wants move into the Office productivity space, with email, spreadsheets and other applications. His answer was that salesforce.com is just a "big database in the sky" and not a user interface for office productivity apps. The productivity apps space is already very crowded, he added, and can be integrated with the salesforce platform.