0 My Take: Salesforce Acquires ExactTarget, Continues Marketing Automation Industry Consolidation

I've been in meetings all day and just emerged to hear that Salesforce.com purchased ExactTarget.  Having a had a few moments to digest the news (and some lunch), here are some thoughts:

- Good move for Salesforce.  They have been lacking large-scale email capability, which all types of sales and marketing departments require.  So this fills a gap in their core product offerings.  They also get a toe-hold in B2C marketing and in marketing automation (via ExactTarget's Pardot technology).  I'd guess those were bonuses rather than primary drivers of the deal.  Frankly, of the two, entry into B2C marketing seems more important because it's such a large business and Salesforce.com needs to know where it will get its next several billion dollars in revenue.

- Price is reasonable by today's standards.  ExactTarget had $300 million revenue in 2012, so the $2.5 billion price is 8.3x trailing revenue.  Marketo's market cap is $800 million on $58 million 2012 revenue, or nearly 14x trailing revenue.  Oracle paid $800 million for Eloqua, which had around $100 million trailing revenue, another 8x ratio.  (Salesforce's press release projects a net revenue impact of $120-$125 million for 2014.  That includes just six months of revenue, but it's still a much lower annualized rate than the ExactTarget figures.  It seems the difference is largely due to adjustments in deferred and unbilled revenue.)

- Not so terrible for marketing automation in the short term.  Sure, Marketo's stock dropped 8% vs. yesterday's close, on a pretty quiet day in the market (S&P down 0.55%, Oracle down 0.67%).  And, yes, more companies will buy Pardot now that it's part of Salesforce than they would have otherwise.  But I doubt Salesforce will suddenly stop integrating with other marketing automation vendors.  Small, independent marketing automation firms already had a tough time selling against big competitors, so this only makes their lives marginally harder.  The smart ones (and that's most of them) already have a strategy in place to differentiate themselves from the big industry leaders.

- Tougher for marketing automation in the long term.  I've long argued that CRM and marketing automation should be part of the same system.  Like a broken clock, the time has come when I'm right.  Marketing automation sits between email and CRM, in the sense that it uses both heavily.  So Salesforce has effectively surrounded the marketing automation vendors with its purchase, even ignoring Pardot.  This means that Salesforce will be in the room with a solution when email and CRM users discuss expanding into marketing automation.  In many cases, clients will extend their Salesforce deployment without considering anyone else..

- Salesforce isn't done, or at least shouldn't be.  Email and CRM are two big customer-facing systems: you get absolutely no prize for knowing that your Web site is the third.  (Ok, social is in there someplace too, but it's still more smoke than fire.)  A truly complete customer-facing solution would encompass Web content management as well.  This is another idea I've long pushed, and its time will come too.  Indeed, I see many Web content management vendors already adding marketing automation-type features.  Salesforce itself might not move into this space quite yet, but it seems inevitable that they'll do it eventually.

- Adobe, where art thou?  Since I'm exercising all my favorite hobby horses, we might as well let this one out of the stable.  (Actually, someone else mentioned it to me earlier today, so at least I'm not alone in my obsessions.)  Of course, Adobe already has a strong presence in Web site management and it keeps making noises about having a "marketing cloud".  Um, excuse me guys, but you really need email and marketing automation for that.  Silverpop -- already a large Adobe partner -- is the obvious acquisition candidate to fill that gap.  Sadly, Adobe has shown no signs of moving in this direction -- but time moves on, whether or not my broken clock is ticking.  (I don't know what that last phrase means, either, but sooner or later Adobe will buy something.)

Addendum: I've now had time to listen to the analyst conference call from this morning (available at 800-585-8367 passcode 89103168).  It doesn't change my analysis above, but clarifies that Salesforce's main goal was finding a single system that would support sophisticated cross channel marketing campaigns, with particular stress on heavy automation and new devices such as mobile.  They do seem more interested in B2C than I would have thought.  

Another comment made twice was that it was a competitive acquisition.  As others have pointed out, this means there's at least one other big company looking to buy a similar integrated marketing system.  There aren't many of those available -- traditional B2B marketing automation vendors are too narrow to fit the bill.  I'll mention Silverpop again as an option, and maybe Responsys and other high-end email products.  B2C marketing automation vendors including Neolane, ClickSquared, and perhaps RedPoint could be candidates but may be too small to be of interest.

0 Selligent Brings a New B2C Marketing Automation Option to the U.S.

I’m writing this post on my old DOS-based WordPerfect software, to get in the proper mood for discussing business-to-consumer marketing automation.* The late 1990’s were really the last time we saw major innovation in the B2C market, when vendors like Unica and Aprimo released their then-innovative systems to create lists for direct mail and, somewhat later, email campaigns. Since then, the number of independent B2C marketing automation vendors has actually dwindled** as major and not-so-major products were purchased by larger companies to bundle into integrated suites or just use internally. Even the leading survivors, including Neolane (founded 2001) and RedPoint (founded 2006) have their roots in traditional outbound campaigns, although they now support Web, social, and real-time interactions to varying degrees.

Still, I’m excited as an entomologist with a new beetle*** to see another vendor in the space. Selligent  isn't brand new – the company was founded in 2000 and its marketing automation system dates back about six years – but the company says it was built from the ground up to manage real time interactions. A deep dive left me seriously impressed.

The first thing you need to know about Selligent is that while it’s new to the U.S. market, it is well established in Europe, where it serves 400 brands in eleven countries. It’s particularly strong among retailers and publishers. This experience translates into the types of refinements that can only be based on client demands. To pick a couple more or less at random, these include a matching engine that selects among hundreds of news articles to find those most relevant to individual subscribers (a sort of dynamic-content-on-steroids that’s important to publishers) and tools to manage product give-aways and rewards for viral sharing (important for retailers). They also include standard B2C features that are still lacking in most B2B products, such as precise control over user access to specific pieces of content, data, and system functions; planning hierarchy to schedule and budget for multiple marketing programs in separate organizations; and rules to limit the number of marketing messages each customer receives.

The basic architecture of Selligent is typical for B2C marketing automation systems. That is, it attaches a marketer-friendly interface for data access and analytics to an externally-built customer database. Brave users can add new fields and even entire data tables, and can import external data directly into the system. But the data must be matched on a fixed identifier, such as account number or email address, or combination of fixed identifiers. Data standardization, identity resolution, and change history (such as new vs. old mailing address) are largely handled elsewhere.

Selligent also uses the familiar flow chart interface to design its campaigns. Beyond the superficial graphics – where Selligent is no better than average – it takes a connoisseur to spot the subtle differences among these implementations. Selligent does hit a number of fine notes, including A/B tests, option to reunite branches after a split, mix of data segmentation with marketing outputs in the same flow, ability to enter and leave flows at multiple points, option to direct customers to other flows, separate schedules for individual objects within a flow, and automated warnings of incomplete designs.  Did I mention hints of almond?

But the big differences are not visible. For example, you see that a campaign flow can include a survey.  What you can't see is that surveys go beyond progressive profiling (replacing questions as they’re answered) to include branches based on customer profile and in-session answers, ability to re-ask questions after a specified period, asking questions in different languages but storing answers in one language, using the same question on multiple surveys and storing all answers in a single location, and providing statistics on completion rates, average time to complete, and which pages have the most validation issues and drop-outs. This is definitely above average for survey features in marketing automation tools, and more than competitive with many dedicated survey systems.

Selligent flows also support business processes that include external steps, such as manual review of an order. To do this, the system assign a “state” to a customer and then reacts differently within the flow based on that state. A separate “FrontOffice” module provides an interface for call center and other agents, and can apply rules to route customers to specific centers, teams, and agents. The system supports Microsoft’s computer-telephone integration (CTI) features, but doesn’t integrate with other phone systems. Basic campaign flows can send data to external systems via file exports or by calling an Application Program Interface (API).

As these examples may suggest, one key theme for Selligent flows is tight integration across all channels. Perhaps the best example of this – and something I’ve looked for in many other systems and never found – is that its flows can control movement from one Web page to another. That may not sound unique, but if you look closely at other marketing automation flows you’ll see they typically end with serving up a Web form and then start independently with events triggered by completion of a form. All well and good, but it means you need to build a separate flow for each step in a multi-stage interaction. Even the real-time interaction management systems treat each recommendation independently, so the only way to create a multi-part dialog is to build separate campaigns or to build one campaign with complex qualification rules that test for completion of each dialog step before moving to the next. Both approaches involve much painstaking labor and room for error. Selligent, on the other hand, lets users connect one page to another on the flow diagram; the system then automatically embeds URL links to make the connection. I’ve had three clients ask me for this in the past year alone.

Back in the realm of the normal, Selligent also offers a graphical email/Web page designer that supports the usual design features, personalization, dynamic content.  More impressive, it has integrated multi-variate testing and lets users convert an email to a Web page, or vice versa, by pushing a single button. A single email or Web page can be shared across multiple campaigns with  changes to the master object automatically deployed everywhere it’s used. Selligent doesn’t automatically store previous versions of contents as they’re edited and doesn’t provide formal check out/check in to avoid conflicting edits. But users can save and restore backup copies.  The system also keeps an audit trail of who made changes and issues a warning when someone opens a document that someone else is already editing.

Reporting in Selligent is based on information gathered from each object in a campaign flow. The specific data depends on the nature of the object.  Users can also insert objects that capture specific information such as the number of people who have passed through. There are no standard campaign reports; instead, users build their own reports by assembling the object-level information. I found this a bit odd, but Selligent said each client wants something different and prefers to create their own. The vendor has recently added a Business Intelligence module, using Quiterian (recently purchased by Actuate and renamed BIRT Analytics) which provides ad hoc analytics and visualization. Data is exported from Selligent to the Quiterian database, but this happens automatically and selections made in Quiterian are automatically copied back to Selligent as segments for marketing campaigns.

Selligent does have its weaknesses. It doesn’t easily support some advanced queries and splits, such as finding the top 100 customers per store or selecting the highest-spending person per household. It has no built-in predictive modeling or integration with third-party modeling systems, although it can easily import externally-created model scores. Somewhat surprisingly, it lacks geographic radius selections (although Quiterian has these) and doesn’t adjust sending dates or hours for the local holidays or time zones. Apparently it hasn’t needed these in Europe, where clients run separate campaigns for individual countries, countries don’t span time zones, and local units, such as provinces, are small enough to make distance-based selections unnecessary. This will surely change as it adapts to the U.S. market.

Pricing for Selligent is based on modules used and number of unique customers. There is no separate charge based on message volume or number of users. The system can be purchased as a vendor-run service, deployed on-premise, or deployed locally with Selligent executing the emails. Price for the base system starts around $6,000 per month for 250,000 contacts.  The vendor says its cost is often equivalent to what high-volume clients are paying for email alone.  As in Europe, Selligent expects to sell primary through marketing agencies and service providers in the U.S. market. 


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* Not really. I tried, but WP.exe won’t run on my current computer. Too many bits or something.

** See my list of mid-tier B2C systems.  Seven of the twelve listed are now owned by someone else.

*** Probably more excited. New beetles are pretty common.  Nearly 250 have been discovered this year alone in New Guinea  and Central/South America.