High-tech entrepreneur and investor Marc Andreessen in 2011 famously wrote that software is eating the world. Just recently marketing has become part of the smorgasbord.
The always-on consumer, artificial intelligence, automation, big data, cloud communications, digitization, mobility, and good old-fashioned competition are transforming marketing as we know it. People and companies that had once used a combination of art and experience to formulate their messages and reach out to customers are now able to be much more selective in deciding who to target with what messages when. And they are now making much more informed predictions as to what specific customers and prospects will do next – and what they, in turn, should do to make the most of that knowledge.
This is now possible due to the widespread availability of marketing software solutions.
“There has always been a scientific aspect to marketing,” says Jamie Beckland, vice president of marketing and product at 10-year-old multichannel customer identity management platform Janrain. “But marketing is probably the most artful of business disciplines. At the same time, there’s clearly a push toward bringing more science and more accountability to marketing.”
Worldwide, the marketing software arena was worth more than $20 billion last year and is forecast to reach more than $32 billion in 2018, according to a recent blog by Scott Brinker, who headed up last month’s MarTech event in San Francisco. An October article by CIO magazine indicated that at least 3,000 companies now offer what’s become known as martech – or marketing technology – solutions.
These new companies, their investors, and existing organizations like IBM and Oracle (News - Alert) that are doing a lot of acquisitions in this space are taking their positions to be ready for what’s expected to be of tsunami of tech investment by marketing types. Indeed, Gartner’s (News - Alert) prediction three years ago that CMOs by 2017 will outspend CIOs for IT solutions made headlines and continues to be revisited in martech conversations today.
Ajay Agarwal, director of Bain Capital Ventures, which claims to be the most active venture investor in this space, says he’s not sure the Gartner forecast will become reality.
However, in terms of revenue, martec is a multibillion space with tremendous growth, and it could become a $30 billion to $50 billion space over time, he says.
That’s because in this new world of applications, devices, and websites – and fickle consumers – marketing has to be incredibly nimble so companies can react in real time to changing conditions. In the traditional marketing model, he notes, IT frequently acted as a bottleneck in the process, as marketers had to wait for their tech colleagues to write code or provide assistance with other technical aspects of their campaigns. Now, he says, a new wave of software tools allow marketers to manage IT-related tasks themselves.
Among the companies serving up these tools are 6Sense, bloomreach, Captora, Kenshoo, Optimizely, Persado, and SurveyMonkey – all of which are companies in which Bain Capital has invested. Optimizely, which helps marketers expedite the process of AB testing of their websites, is a young company yet already has signed on 6,000 customers, says Agarwal, adding that demonstrates the pent up demand for such solutions.
According to David Raab, principal of Raab & Associates, customer management has three layers – the data layer; the decision layer, where business rules, predictive modeling, and per-customer treatment decisions are implemented; and the delivery layer. VCs – which VB Profiles says have invested more than $25 billion in marketing software – are putting their money in the decision layer with stakes in such companies as Appuri, Blueshift, Clari, CQuotient, Custora, Gainsight, Infer, Lattice, Monetate, Sailthru, Velocify, and Wise.io. Meanwhile, he says, companies such as Oracle are snapping up companies that operate at the data layer, like BlueKai and Datalogix. Oracle and others, like Acxiom with its LiveRamp acquisition, are doing that, explains Raab, because the more data they can put together about one person the more accurate they can be in predicting that individual’s future behaviors.
Yet for all the action in the marketing software arena, Agarwal says, marketing software has yet to produce an iconic market player on par with what the finance space created with Intuit and Oracle, the manufacturing space created with SAP (News - Alert), the supply chain space created with i2, the human resources space created with PeopleSoft and Workday, and the sales space created with Salesforce and Siebel. ExactTarget was bought by Salesforce in 2013 for $2.5 billion, and Marketo’s (News - Alert) market cap is $1 billion, but that’s as high as any players in this space have flown to this point because marketing traditionally has been done offline, he explains, adding that Bain Capital is hopeful one or more of the companies in which it has invested will reach $10 billion in market value.
There seems to be very little doubt that some marketing software companies will eventually reach that milestone, but what companies and when are of course the questions.
One gating factor for more rapid growth of marketing software solutions is the cultural and organizational change it requires at businesses. As Arje Cahn, CTO of content management system company Hippo, notes, there was a sense at the MarTech event that most people are struggling with the adoption of marketing technology from an organizational standpoint. Some marketing folks may also feel overwhelmed by the amount of technology and analysis now involved in their jobs. In fact, Brinker talks about how today’s marketing people need to possess not only marketing, but also technology and management experience. It’s difficult to find this breed of individual, he says, referring to them as unicorns and writing in a recent blog “Good luck finding such mythical creatures.”
Jay Henderson, director of product strategy for IBM Commerce, adds that some marketers are hesitant to invest in software because they are worried about betting on something that fizzles out. Five to six years ago a lot of people thought the future of marketing was about second life (meaning virtual worlds and avatars), he says, but that never played out as expected.
The industry is in the second inning of this new marketing software game, according to Beckland, who compares what’s happening now with marketing due to software, to what happened with marketing due to mass media in the 1940s, ‘50s, and ‘60s.
“TV and radio created whole industries for mass marketed goods and taking messages far from manufacturing facilities,” he explains. “That caused Coke, Unilever, other regional players to rise.”
The rise of marketing software may well create new industry giants, but at the moment this space is extremely fragmented. That can lead to integration challenges for the businesses that use the software, and many believe it’s an indicator that this category is ripe for consolidation.
In fact, the consolidation has already begun.
Several large companies like IBM, Oracle, and Salesforce, which have made their mark by providing software for other business disciplines, have put together what are commonly referred to as marketing clouds that include software that addresses marketing from various angles. These solutions tend to consist of a mix of acquired and homegrown software.
IBM offers a collection of analytics, campaign management, email, mobile and social software – which is available both via the cloud or using a customer premises-based model. Meanwhile, the Salesforce Marketing Cloud is advertised as a solution that helps businesses to create content, connect to customers with personalized content on any channel (email, mobile, social, the web) or device, gather and analyze data, build a single view of their customers, automate real-time customer journeys, segment customers, and more. But, as Eric Stahl, senior vice president of product marketing at Salesforce, notes, although the concept of the marketing cloud is widely discussed, there’s no consensus on what it includes in terms of functionality.
The idea of these marketing clouds, however, seems to be that it’s easier for businesses to get an array of marketing software from a single source (or at least fewer suppliers). However, if you think that users leverage such solutions in an effort to break down the silos that exist between various departments and marketing systems to enable the 360-degree view of the customer we keep hearing about, think again. Because these big software companies have cobbled together their marketing clouds, the data layer between different components of some of these solutions are not completely uniform. Alexander Hooshmand, vice president of product management for Oracle Marketing Cloud, indicated as much in his comments at MarTech.
In any case, he added, most clients start out leveraging only piece parts of these cloud solutions. Responding to a question about the unification of advertising and marketing, Hooshmand (who co-founded BlueKai, which Oracle purchased last year) said the biggest challenge there is melding them in a way that is both seamless and ensures privacy.
The fact that marketing continues to evolve and more companies and solutions appear on the martech scene regularly would seem to signal that a best-of-breed approach for marketing software will live on at many companies for the foreseeable future. However, one source who asked not to be identified suggested that the bigger players like Adobe (News - Alert), IBM, Marketo, Oracle, and Salesforce are likely to become more selective in the future about who they partner with on integrations.
Today, the average company has 12 marketing applications or systems in place, says Raab, who mentions a recent IAM & Winterberry Group study indicating that 30 percent of those surveyed prefer best-of-breed solutions on this front, while 30 percent prefer an integrated suite, and the rest don’t know or don’t have a preference. Whatever their preference or knowledge about the issue, however, Raab says the broad swath of software solutions has made for a “hellacious mess” in terms of implementation and integration, because too many systems need to talk to one another.
Edited by Dominick Sorrentino