How Big is AppExchange? The Salesforce.com Guessing Game
I ran back to my office from Salesforce.com's Dreamforce conference with a mission -- to translate Marc Benioff's pronouncements about the size of his AppExchange marketplace into reality. In my last post about SF.com, I challenged the company to come up with some real numbers about the scope of the success that AppExchange partners are realizing. If, as Benioff claims, AppExchange is to challenge the ecosystems of IBM, Oracle, SAP, and Microsoft, it needs to show that partners are actually making money selling add-ons to the larger Salesforce.com suite.
So I asked Marc, first privately, and then in a Q&A session with industry analysts, what the total revenues of the AppExchange marketplace were. His first comment was straightforward: $100 million so far this year. Not bad for a marketplace barely a year old. I then asked him to break that down in some way in order to reflect an average revenue per partner, a top ten revenue winners -- anything that could put a little color into the number. Not possible, Marc said, but I could go to the AppExchange web site and see a "most popular" list that would give me some indication of the relative breakdown of that $100 million prize. One in particular, Hoovers, had made $3 million so far, Marc claimed. Armed with those data points, it seemed like a little analysis could give us some interesting viewpoints on AppExchange's success, and, assuming it was as good as Marc claimed, bolster his contention that he can "destroy" his much larger, more established competitors. Sounded like a plan.
But in the Q&A, things got a little less clear. It turns out that the $100 million number was an estimate for the entire year, based on a survey of partners. But there was still the "most popular" list, and... next question, please.
So, back in my office, I started looking around on the AppExchange website. What I had hoped would provide a little clarity about the relative rankings of AppExchange's partners wasn't any more than a list on the home page, with links to descriptions of the eight "most popular" products, nothing more. A further look at the the list showed that only two of the eight are from partners -- VerticalResponse and DreamTeam -- and have a price other than "free." The rest are from Salesforce.com.
Which basically stopped my quest in its tracks, leaving me holding an "estimate" of $100 million in revenues and no way to verify it or understand it. I'd be content with that number were it not for the fact that Benioff had already shown in his Dreamforce keynote that his estimating powers were, shall we say, interesting. Fellow blogger Phil Wainewright noted that Benioff claimed that a billion dollars of VC money was heading towards AppExchange companies in the coming year. Of course, it's very likely that the companies that are part of AppExchange together may be looking at $1 billion in VC money in the next year, but I would argue that it takes a massive, and unjustified, leap of faith to attribute those investments to AppExchange. It's certainly true that you can't get funded without having a software-as-a-service model, and many companies are interested in riding in on Salesforce.com's marketing juggernaut. But I highly doubt, absent any real numbers about the revenues of AppExchange from Salesforce.com, that the smart money in the VC community is throwing $1 billion at start-ups simply because they are part of AppExchange.
In the end, we're left with not a lot of info by which to judge how well AppExchange is living up to its billing as an Oracle/SAP killer. I can't imagine that some real numbers aren't out there to be had, and, they might even tell a good story about early success and the momentum that was clearly evident at the Dreamforce show. But so far the real story is anyone's guess, and for now, Salesforce.com's guesses aren't enough to make any sense of how well AppExchange is really doing. Absent those data, I give AppExchange credit for hype, but none for making that hype real. At least so far.