The Impact of Salesforce.com’s acquisition of Exact Target: The Experts Weigh In

Well, that is big news!  If you haven’t been following, Salesforce.com just bought Exact Target for $2.4 bill.  Once you are done picking your self off the floor, read this post. I asked some of the people I respect their opinions on the acquisition.
Please note: I plan to continue to update this post as people “roll in” with their opinion. Put your opinion in the comments box too..

Here we go!

Brian Vellmure
Independent Analyst

It took about 18 months longer than expected, but Salesforce finally filled a hole in its marketing cloud with marketing automation capabilities. I didn’t necessarily see ExactTarget coming as Marketo was was being mentioned in most circles once Oracle scooped up Eloqua.

With ExactTarget, Salesforce picks up a company with a large install base with at least twice the revenue of Marketo and for likely less than twice the multiple of trailing twelve months revenue. In short, it was simply a better deal.

The ExactTarget install base also likely leads to more new business opportunities as their customer mix is more diversified from a CRM perspective than Marketo is. A disproportionally large % of Marketo customers are also Salesforce customers.

ExactTarget brings with it the marketing automation capabilities of Pardot, which will need to be retrenched to move up into the enterprise, following the upstream path that Salesforce has been on over the last several years.

In short, a good acquisition that seems to make a lot of sense.

Raghu Raghavan
CEO, Act-On Software

The e-mail marketing sector has produced multiple winners in the past, such as Constant Contact (CTCT) and Responsys (MKTG). However, the public markets have not valued them fairly due to their singular focus on e-mail. Now, Salesforce is telling everyone that e-mail marketing is important after all. It is very clear that this acquisition is aimed purely at the financial markets as Salesforce tries to bulk up against the likes of Oracle and Workday, but it doesn’t serve Salesforce’s long-suffering customers. ExactTarget has a legacy e-mail marketing platform, and Salesforce has done very little to advance their own platform, so this leaves their joint customers squarely back in the 20th century.

Matt Heinz
Heinz Marketing

I’m a fan of ExactTarget and Pardot, but Salesforce is really late to the party on this.  They haven’t been very quick to integrate products and platforms either, so I expect this acquisition might deliver quick value in terms of revenue and sales, but it’ll be quite awhile before we see the true product integration that will make sales & marketing’s lives much easier.

Adam Needles
Annuitas

I think when someone sees the Salesforce acquisition of ExactTarget (and Pardot, which is ET’s stand-alone marketing automation platform), that they probably are thinking, ‘Well, another CRM acquisition of MAP, just like Oracle/Eloqua … wonder who’s next.’  But that’s the wrong way to view this news.

First, this is not analogous to the Oracle acquisition of Eloqua.  Salesforce has been rumored for years to be more interested in email marketing than marketing automation, and this is ExactTarget’s DNA; moreover, their Pardot platform is a recent acquisition, operated as a stand-alone company, and Pardot’s DNA is more SMB.  Also, many of ExactTarget’s largest customers are B2C.  This is very different than the B2B-centric acquisition of Oracle of a marketing automation platform — Eloqua — which has its roots in the hairy, complex issues unique to the largest enterprise organizations.  So not the same acquisition.

Second, Salesforce is one of the best examples of proving that building ecosystem around your platform is one of the best ways to drive its value — so Salesforce wouldn’t do anything to hurt that value.  Salesforce has done other acquisitions, such as Jigsaw and Radian6, but it does not preclude a customer from bringing and integrating their own data sources and social media platforms to the table.  And Salesforce won’t shut out other marketing automation platforms.  If anything, ExactTarget and Pardot, which will be the right choice for some customers, and not for others, will whet the appetite of Salesforce customers overall for marketing automation, and that is good news for firms such as Marketo and Silverpop, which are currently some of the top, best-in-class, stand-alone marketing automation platforms.

Third, this move by Salesforce, when compared to the Oracle acquisition but also compared to acquisitions by Adobe, and acquisitions by Marketo and Silverpop, actually point the reality that there is not an emergence of a singular CRM-centric gravitational pull.  (Sorry, David Raab.)  In fact, there are three major ‘mindsets’ around marketing and sales technology architectural stacks that are emerging:  Web/Inbound-led, exemplified by Adobe and Hubspot; marketing-automation-led, exemplified by Marketo and Silverpop; and CRM-led, exemplified by Oracle and Salesforce.  All are viable and have are the right approach for different companies with different needs and different go-to-market strategies.  No ‘one’ of these will be dominant.

And this speaks to the overall counsel we always provide to clients, and the big-takeaway here, IMHO — that there is not a one-size-fits-all marketing and sales technology architecture.  Instead, different organizations have different go-to-market models — different Demand Process Architectures, as we call it at ANNUITAS — and it is this architecture, not a technology architecture, per se, that should dominate choices made about marketing and sales technology investments.  Technology decisions should support business process, not vice versa.  And in the marketing and sales world, Demand Process should dictate the right technology architecture for each company, whether B2B or B2C, and whether enterprise or SMB.

As a final comment, I’ll say I believe this is a great move but should not be evaluated as ‘Is this a good move for CRM … for marketing automation … etc.’  Rather, I view this as, ‘This is a great development for marketing and sales organizations because it will help drive awareness, education and maturity, as well as integration, to help organizations get closer, faster to the right systems and data architecture for their individual Demand Process needs.

Congrats to Salesforce, ExactTarget and specifically to the Pardot team.

Justin Gray
LeadMD

Two and a half billion dollars. This is Salesforce.com’s largest acquisition ever – and the money is being spent on an idea. It’s Salesforce.com saying that if a company wants to grow and is not focused squarely on marketing to drive that growth, it will die. This acquisition means that all CRM applications will need to embrace enterprise marketing functions with open arms. ExactTarget has a long way to go in the enterprise space, but Salesforce.com can take it there.

But for these systems to be successful, even with the cohesion between these two marketing powerhouses, skilled marketers are needed more than ever. This acquisition doesn’t eliminate the need for the endangered species of adept humans – it increases it. Without the people and those skill sets, companies don’t buy, marketing technology doesn’t sell and all of this posturing is for naught.

David Lewis
DemandGen

The acquisition will serve as a catalyst for fusing demand generation and customer relationship management into a unified process and system for companies.  For most firms, these initiatives are still treated as separate functions, but the best strategy for increasing customer acquisition and loyalty can be best achieved when treated holistically.

Mike Volpe
Hubspot

The deal shows that the marketing software industry is big and growing. It is so important that Salesforce now seems scared of the up and coming marketing software companies, and have spent over $3.5 billion on 3 different acquisitions to try to protect themselves from being disrupted. There are two questions we should now ask. Are email and social media the right technologies for the future of marketing when we’re all moving to inbound and content marketing? And will they be able to effectively integrate the 5 separate marketing products they now own (core CRM database, Buddy Media, Radian 6, Exact Target and Pardot) into a good customer experience? Time will tell.

I will keep adding as more roll in!

  • Howard J. Sewell

    We’re a Marketo agency partner, so (selfishly) my first thought is how it impacts that company and their customers. We’re already hearing nervousness from some customers about whether this impacts Marketo’s capability to fully integrate future functionality with Salesforce. Marketo’s blog post this morning seems to address that concern head-on. And given that Salesforce has built their business on being an open platform, I suspect any fears in that area are likely overblown.

    In the short term, I have to think this gives Marketo an overwhelming advantage in the market for new customers, given that both their competition on the high-end (Eloqua) and low-end (Pardot) are now part of much larger entities. Say what you will about the future potential for Oracle’s and Salesforce’s “integrated” solutions, companies considering Eloqua and Pardot will surely have their questions about whether they want to be tied too closely to one vendor. It’s a good time to be a Marketo sales rep.

    I agree with David Raab and others that this only accelerates the move to consolidation in the marketing automation marketplace. The company to watch is SAP. With marketing increasingly demanding more and more IT dollars, this is a space where SAP can’t afford to be left behind on the sidelines. (Yes, I acknowledge they have some capabilities in this area.) Will Marketo be the next to be swallowed up? As the #1 independent marketing automation firm, now by a long shot, they’re a clear target. One thing’s for sure – if it were to happen, the price tag just got a WHOLE lot bigger.

    Howard Sewell
    President, Spear Marketing Group

  • luispaez

    The biggest question that this news bring up, specifically in the minds of Salesforce customers, is – what does this portend for all of the other Email Service Providers and Marketing Automation vendors that have invested heavily in the appexchange force.com ecosystem. Those apps & companies have a presence on the appexchange and compete either directly or indirectly with ExactTarget. Will those companies continue to invest in bringing their apps tighter into “the platform”? Or will they invest “outside the platform”, creating a possibly more disjointed application experience for Marketers?

  • Rory

    Howard, your thesis on the price tag getting higher for marketo after this is totally off. Unlike many other platforms, marketing automation has a dependency on CRM to drive the value both enterprise valuation and customer ROI. With 90% of marketo’s revenue stuck in the SFDC install base it erodes the valuation very quickly of the revenue base & growth prospects hence the move on the stock price today which will likely tumble if they continue to be independent over the next few quarters once growth gets stalled by SFDC’s move into the market. The only company that would pay a higher premium potentially for this would be Microsoft as they aggressively compete for mid-market share against SFDC & they have been Marketo’s number 2 CRM partner . SAP are astute buyers and buy relatively conservatively it is unlikely they would buy something that would have a 50% churn rate in the initial year. Just my two cents

    • Howard J. Sewell

      Hi Rory, with respect, I’m not sure I’m “totally off.” Mildly optimistic, perhaps! For one, I don’t believe SFDC’s “move” into the MA market will stall Marketo’s short-term growth as you do, no matter the knee-jerk market reaction (and after all, SFDC stock took a beating also.) Time will tell, but today Marketo is a far superior B2B solution than either ExactTarget OR Pardot, and I just don’t see SFDC customers ripping out their current platform en masse and flocking blindly to an SFDC-branded solution. I stand by my contention that this could be even be a short-term advantage for Marketo as they exploit fears about the future of the Pardot product in particular. Marc Benioff says this move was about being “#1 in Marketing.” He may yet succeed, but he’s got a long road ahead of him.

  • inthewoods

    Volpe basically calling Salesforce a scared company is interesting given that SFDC is invested in Hubspot.

  • http://www.raabguide.com David Raab

    Since my friend Adam Needles has taunted me by name, I feel impelled to reply. Yes, every company has different needs and should find the technology architecture to match. But the #1 rule in software is “suites win” — that is, the vast majority of companies will pick a single, integrated system over multiple point solutions, even though the individual point solutions are functionally superior. That why Oracle and SAP are as big as they are, and why Microsoft, IBM,.and Salesforce itself keep expanding the scope of their systems.

    There’s a case to be made that “the cloud changes everything” by making it easy to integrate point solutions — but, honestly, that is still an unproven theory, and quite possibly just wishful thinking. The practical reality at most companies is that the cost of integration is higher than the incremental benefit of superior separate products. The exceptions are very large enterprises that have the technical skill to do integration and the huge business volume that makes the small incremental worth more in absolute dollars than the integration cost.

    So, very large enterprises aside, we can expect companies to buy suites. Perhaps some of those suites will be based on each of the three “mindsets” proposed by Adam: inbound/Web-led, marketing automation-led, and CRM-led. But while Web and CRM are huge software industries, marketing automation really isn’t — and that makes me think Web or CRM are much more likely to be the core of a company’s architecture than marketing automation. In fact, I ultimately expect Web and CRM themselves to merge…and marketing automation to be swept up in their wake.

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  • http://www.conversionation.net/ J-P De Clerck

    Thanks for this Craig, redirecting my readers to this blog post, keep coming them in! in regard to Marketo: very Salesforce-oriented today, despite reassuring claims. Also agree with David that suites usually win, certainly in corp. My input (and that of David) for what it’s worth here: http://www.socialemailmarketing.eu/2013/06/analysis-and-expert-views-impact-of-the-exacttarget-salesforce-deal/

    • craigrosenberg

      Thanks J-P! Good post — I shared it to my network

      • http://www.conversionation.net/ J-P De Clerck

        Thanks Craig, looking forward to those updates. Very important evolutions. I guess you saw David Raab’s post as well? Cheers and good luck!

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  • Michael Kopp

    Everyone seems to be focusing on the downstream (getting closer to the sales transaction) aspect of MA and CRM… but for me, in the trenches of marketing using these solutions, by far the biggest challenge I have is around integration between my web CMS system and MA. This is really where marketing interacts with potential customers… and there is so much room for improvement!

    • craigrosenberg

      Thanks Michael for your practitioner point of view!

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