Acquisitions Continue as Marketing Automation Space Consolidates And Slows In Growth


The consolidation of the Marketing Automation world continues with the latest news that one of the remaining independent enterprise marketing automation providers, Marketo, will be acquired by Vista Equity Partners for $1.8b.  Trading on Marketo stock has haulted this am.

Marketo Vista Analysis from Constellation Research on Vimeo.

News around Marketo engaging investment firm Morgan Stanley to prepare for a potential sale broke May 9th 2016, at the beginning of their annual conference, the Marketo Marketing Nation Summit.  Multiple suitors including Microsoft and SAP were rumored to be part of the bid process with Vista sealing the final deal. Here's Constellation's analysis to current Marketo customers and prospects.

*Disclosure: I was a happy Marketo customer at two different companies for a total of 5 years, and a 2016 finalist for the “Marketing Executive of the Year” Revvie Award. 

Vista Equity Partners Heavily Targeting CMO Spend

Vista Equity Partners focuses on enterprise software company investments and according to prior media interviews, has a track record of delivering 30% plus shareholder return.  To deliver this type of return, Vista is known to have their portfolio companies follow a “playbook” approach to maximize EBITDA.  This is often at the expense of talent retention and investments in marketing and R&D (just read some of the Glassdoor reviews of Vista companies).  Vista recently invested $1.65 billion to take event management software provider Cvent from public to private on April 18th, and they also own another event software company Lanyon and advertising technology company Media Ocean.  All of these acquisitions make Vista the PE company with the biggest stake in the Marketing and Advertising technology space.

My POV: Vista’s acquisition strategy could be to combine the digital marketing base of Marketo with Cvent and Layon’s physical event expertise to create an end-to-end marketing platform with the ability to provide analytics on customer behavior from digital to physical.  Add in Media Ocean for ad tech and done right, this could be a marketing customer journey analytics juggernaut.  I like the concept as there hasn’t been a smooth way to integrate the customer journey and behavior from physical events into a marketing automation platform without leveraging integration tools.  Most of the options today require much manual intervention and clunky at best. Even if Vista keeps all the companies operating separately, the opportunities for collaboration and integration still has much potential.

With the Lanyon, Media Ocean, Cvent and now Marketo acquisitions, Vista is making a big bet on the Chief Marketing Officer’s (CMO) growing budget authority and influence over technology decisions that involve customer engagement.

What It Means For Customers And Prospects

Advice for current Marketo customers:

  • Customers in a renewal cycle should lock in pricing and terms ASAP.  Customers who wait must be prepared to sign multi-year agreements during renewal time as part of Vista’s playbook approach.  Those 1-year renewal options that Marketo customers enjoyed will cease to exist.   For those looking for a good deal, sign a multi-year agreement with minimal CPI price increases as Vista's team will try to build price increases into future multi-year deals.
  • Expect delays on Project Orion and more.  The product releases Marketo announced at Summit such as their upcoming Orion platform re-write and new Account Based Marketing features should continue to be delivered, but expect delays as the Marketo leadership goes through the deal process.  Vista tends to slow R&D investment at portfolio companies, but if they look into the Marketo + Cvent + Media Ocean idea, that will likely be the innovation in the future. 
  • Prepare for the unique culture of Marketo to fade away.   The “fun” aspects of how Marketo has been marketing to customers and engaging the broader marketing community will likely suffer as Vista tends to scale back on portfolio company expenses and in particular Marketing expenses. Employee satisfaction has a track record of dropping under Vista (see Glassdoor reviews) and customer support is likely to suffer as talent retention will be an issue.  Try to build in SLA’s around support into renewals to ensure quality of service.

If you are a Marketo prospect:

  • Marketo remains a robust and attractive marketing automation solution. Marketo currently prices by package and database size (number of customer email contacts).  Get a good estimate on  database size and lock in  pricing and contracts asap.  Try to have language included for price protection on future license renewals. 
  • Work with a Marketo services or a partner to help in implementation planning.  Talk to other customers to get a sense of the real scope and impacts
  • Feel free to work with Constellation on how to negotiate that price into deals.   Many customers focus on the software subscription and forget services, which can be a costly mistake.


The Bottom Line: Expect Negative Impact From Vista In Short Term, Potential Positive Synergies In Mid-Term

With the Vista deal, Marketo can continue to operate independently and customers won’t be deluged with the cross-selling of various “clouds” by companies like Oracle, Salesforce and Microsoft.  This is positive for customers that take a best-of-breed approach to their marketing and sales tech stack, and good for Marketo’s ecosystem of partners. Constellation remains cautious on the future development of the company under Vista and their strict playbook.  One could expect a mass exodus of key leadership and talent as innovators and early employees struggle with Vista’s various employee tests and focus on expense reduction. As a former customer, I've enjoyed being a part of the “Marketing Nation”, and hope that the vibrant, fun culture Marketo has built doesn’t diminish too much. 

The consolidation of the Marketing automation space begun with Oracle’s acquisition of Market2Lead then Eloqua, Salesforce’s pick up of ExactTarget and Pardot, and don’t forget IBM’s Unica and Silverpop.   Now all eyes turn to Microsoft and SAP as they are both in need to beef up their marketing solution to round out their solution set.  Will HubSpot be the next?