Salesforce.com announced in early June that they were acquiring ExactTarget for about $2.5 billion. That is a LOT of money for an acquisition. To put that number in perspective, Google acquired YouTube for $1.65 billion (in 2006). This may seem like it was the culmination of some building acquisition frenzy. The reality, though, is that this was just the early stages of a massive consolidation in the marketing software industry. On June 28, Adobe announced that they were acquiring Neolane, a maker of marketing software for $600 million. The pace of mergers and acquisitions is likely to pickup as more players realize that they need to move now or be left behind.
But, why is this happening in the first place?
All Roads Lead To Inbound Marketing
As someone who is heavily involved in search, I’ve seen the evolution of thought leaders’ conversations about SEO and Marketing over the last few years. The first time that I really took notice of the phrase “Inbound Marketing”, I was helping Gillian Muesseig, aka @seomom and co-founder of
SEOmoz Moz, with Spanish translation while she gave a talk at Search Congress Barcelona in 2010. She threw up a chart that she, Rand and others at SEOmoz were using to distinguish between Outbound (now often called Interruption) Marketing and Inbound Marketing. I had heard the term before but not paid much attention to it previously.
The chart easily summarized many of the activities that companies could pursue to build interest and community with prospects. These methods aim to develop relationships that offer something more than merely “listen to our pitch and give us money”, an approach that companies had been pushing on us for decades. I had seen the growth of these different Inbound channels in isolation but hadn’t really pieced it all together as one coherent strategy until listening to Gillian’s clear and compelling delivery of the need for Inbound Marketing.
At the same time, you had other people who were putting together ideas that meshed perfectly well with the content/Inbound Marketing story that traditional SEOs were starting to explain to us. HubSpot espoused the virtues of going Inbound while others such as Hagel, Seeley Brown, and Davison talked about using the Power of Pull to turn our passions into success. Others, such as Jim Collins in both From Good to Great and Built to Last, described the characteristics of successful companies whose cultures and processes had self-reinforcing mechanisms for building momentum and further success. And don’t forget all the other influential thinkers such as Seth Godin and Avinash Kaushik have added to this movement and conversation towards Inbound.
Coupled with these shifts in thought, Google began an ever intensifying push for “quality content” – the uniqueness, authenticity and authority that would be rewarded with preferential ranking in search results. Beyond search, the rise of Social Media further enabled these trends and empowered consumers in a way not seen since pre-industrial times. Us SEOs realized that we could no longer rely on as many gimmicks (although some still appear to work even today) and that an investment in quality content was not only a requirement of continued search success, but also the way that we could be discovered and build trustworthy relationships with customers and prospects. Beyond SEOs, every segment of the Marketing community came to the same realization and conclusion.
So, Inbound Marketing has come into its own. Traditional Brand Marketing and Marketing Communications are on the decline while content and Inbound are on the rise, picking up steam. If you still don’t believe me, take a look at this chart from Google Trends.
The Quest to Own Inbound Marketing
Just as marketing professionals gravitate towards one unified theory of Inbound Marketing, SaaS and other types of software providers all are heading to the same destination. Each has its own perspective (and spin) due to how they arrived at Inbound Junction, but make no mistake, most want to be at the center of Marketing for any company.
We are entering a period of what will be a rapid consolidation of various software providers. Almost all of them are SaaS providers and they will be racing to piece together the most complete suite of tools and services to meet the needs of today and tomorrow’s Inbound Marketer. The largest MAP, CRM and ERP vendors will be the most active buyers at this stage because they have the biggest war chests and most complete view into real customers today. Acquisitions are nothing new and Salesforce “went social” a few years ago. However, they know as the other MAP and CRM players do, that no one has a complete solution. Picking off successful Inbound startups will fortify their position with the CMO now that they already have deep ties to the heads of Sales and Support.
The Inbound Marketing Software Players and Acquisition Targets
All-In-One Providers: HubSpot is the strongest player to attempt being a complete solution. It’s not (yet) complete but it is the furthest along in having an end to end approach to Inbound. To me the biggest piece missing now is the lack of structure for developing content in an organization (e.g. Editorial calendars, idea buckets for new content, workflow for composing great online content – often the writer needs design, graphics and interactive help from others to “produce” the post) and robust integrated social promotion for new content. They know that they have something very special. That is why they have not been acquired yet. Others such as Optify target smaller clients who want to be able to do a little bit of everything. ExactTarget itself entered the all–in-one space when they previously purchased Pardot Software.
Marketing Automation Providers: The heavyweights are Eloqua and Marketo. Both come from B2B with strengths in email nurture campaigns, workflows, stand alone landing pages, and tight integration with the CRM. They have limited capabilities in social and they have no support whatsoever for SEO or sustainable content generation. They are flush with cash, however, because Eloqua is now part of Oracle and Marketo recently had a successful IPO. Adobe’s purchase of Neolane fits here as well since Neolane’s main background appears in lead nurturing and management.
SEO Providers: Moz.com, Conductor, BrightEdge, Analytics SEO and others have deep support for knowing how content is performing in the search engines and give you the tools to help prioritize and understand what needs to be done to drive more traffic. They focus increasingly on the role that social and authorship play on driving high quality traffic to websites. These tools, however, are purely analytical and have limited or no transactional support for marketing activities as well as the least understanding of actual individual customers and prospects.
Email Providers: ExactTarget, Constant Contact and MailChimp lead this market, which has the most comprehensive emailing and list management capabilities. Despite all of the talk and interest in social, email continues to be a dominant force and one of the most powerful ways to stay connected with existing customers as well as to nurture new leads.
CRM Providers: Salesforce.com is the 800 lb. gorilla that defined the SaaS market and owns the customer database. Coming from sales force automation, they’ve grown to be the provider that tries to cover all touch points with customers and prospects. Every other marketing tool either has or wants an integration with Salesforce to connect lead, contact, contract and service information to their marketing capabilities. Other major providers such as Sugar CRM, NetSuite, Microsoft Dynamics, and Oracle are hungry to gain the advantage that will let them take share from Salesforce.com.
Social Providers: This is probably the most diverse group of vendors as they range from free toolsets to expense enterprise platforms. The functionality ranges from multiple account handling in various platforms, scheduled messaging, sentiment analysis, and social analytics. We’ve already seen consolidation in this space such as Salesforce.com’s purchase of Radian6 and Buddy Media.
Other Niche Providers: Companies who specialize in one aspect of Inbound Marketing not mentioned above. For example, Kapost and Compendium focus on enabling collaboration and structure for creating and distributing all of the content that Inbound requires.
There’s Always a Bigger Fish
I am not sure who will end up acquiring which companies and in what order, but I do believe that the landscape will change dramatically over the next 18-24 months as competition continues to heat up, players get access to more cash from IPOs/ larger corporate treasuries, and a growing sense that you’ll need to make your move before someone else acquires the good companies in each vertical market. I spoke recently with Dharmesh Shah, CTO of HubSpot, and he agreed on the trend, “It has already begun and it will continue to accelerate…the market is well funded”.
It will be curious to see how much longer before the other 800lb gorillas (IBM, Microsoft, SAP) really get involved in the acquisition spree and each make their play to be the king of marketing software and the CMO’s best friend. Current leaders may be happy with their positions, but they need to remember that there’s always a bigger fish.
What do you think will be the next big acquisition in the Inbound Marketing market? Let us know in the comments.