0 ReachForce Buys SetLogik: One-Stop-Shopping for B2B Marketing Data Plus Database

B2B marketing data vendor ReachForce today announced its purchase  of SetLogik, which provides technology to build cloud-based marketing databases and do predictive modeling against them. (See my post from last October for more on SetLogik.)

There’s an obvious peanut butter-meets-jelly type of logic to this match. Reachforce’s core business is assembling data on marketing prospects, which it then sells for as many uses as possible: appending to Web leads, enhancing existing databases, and buying as lists. The SetLogik acquisition takes this a step further by letting them build databases to hold their data, thereby expanding the market beyond people with a database already in place. Conversely, having a readily-available data source encourages marketers to build their own database. SetLogik’s predictive modeling features make it even easier for marketers to get a return on their investment once the database is in place. Everybody wins!

The two products will be combined in what ReachForce calls the “Connected Marketing Data Hub”. The name is frightfully generic, but the key points are:

• cloud-based system, making it easy to deploy
• comprehensive customer view including data from marketing automation, CRM, transaction systems, and ReachForce’s own sources
• continuously updated and cleansed
• connectors available for Salesforce.com, Eloqua, and Marketo  

In other words, the ReachForce solution supplements rather than replaces your marketing automation or CRM database. As I wrote in my earlier SetLogik review, one particularly attractive result is the ability to match sales revenues with marketing leads, always a challenge in measuring the value of marketing programs.

ReachForce has just begun to offer the combined system, which is currently deployed at one pilot client. Pricing is based on data volume, whether the client wants a one-time append or continuous cleaning, and on the data sources included. Minimum is $625 per month for continuous cleaning on 50,000 records.

0 Marketo Files for IPO: Will High Growth Outweigh High Losses?

Marketo made good today on its promise to file for an initial public offering (IPO). Congratulations to them for reaching this step. It’s a major accomplishment.

The S-1 registration statement gives considerable new information about Marketo’s business. Revenue for 2012 is reported at $58.4 million, an impressive 80% growth rate vs. 2011 although not quite the doubling that the company had forecast earlier.

More significant, the company continues to have huge losses – it lost $34.4 million in 2012, or 59% of revenue. By comparison, Eloqua lost just 7% of revenue in the year before its IPO, and even Salesforce.com, the benchmark for all Software as a Service (Saas) start-ups, lost just 20% of revenue in its final year as a private company.

 A loss that big is pretty scary. Part is due to heavy spending on sales and marketing – 65% of revenue – but that’s not the whole story: Salesforce.com had also spent 65% on marketing before its IPO (although Eloqua spent just 40%).

The difference is that cost of revenue (costs of delivering service to clients, including subscription, support, professional services, and other) was 42% for Marketo, vs. 20% for Salesforce.com and 32% for Eloqua. That figure hasn’t changed in recent years, suggesting economies of scale have yet to appear. A high cost of revenue makes it hard for a company to become profitable even as it grows, since much of the new revenue is spent on the new customers. SaaS economics aren’t supposed to work that way.

Marketo’s other operating costs (research and development and general and administrative) are also high – 52% of revenue, compared with 35% for Salesforce.com and 33% for Eloqua. That percentage has also been pretty much stable for the past three years – again suggesting that expected scale economies haven’t appeared yet.

Another way to look at it is this: Marketo would earn just 6% profit even if its sales and marketing costs were zero. So its losses aren’t simply due to high investment in new customers.  The comparable figures for Eloqua and Salesforce were 39% and 45%, respecitvely.

The S-1 also reports the company had 339 employees as of December 2012. Of course, the average for the year was much lower but, ignoring that, this still yields a perfectly respectable $172,000 revenue per employee. But it also means expenses are $273,000 per employee – much higher than the $200,000 rule of thumb. I know everyone at Marketo works incredibly hard, but something is clearly out of line in their cost structure.

Perhaps stock investors will look only at Marketo’s growth rate. There is certainly an argument that the company will eventually become profitable as it spreads its fixed costs over more revenue.   On the other hand, as I argued recently in DemandGen Report,  it may not be possible for any large marketing automation firm to thrive as an independent.  If that's correct, then Marketo's growth will never happen and the investors' only hope will be a buy-out by a larger firm.  Let’s hope the stock market sees hope somewhere in all this: otherwise, Marketo stock will be much harder to sell than its software.

0 InfusionCon 2013: InfusionSoft Keeps Its Focus on Helping Entrepreneurs

I spent part of last week at Infusionsoft’s annual conference, InfusionCon, drinking the Kool-Aid and soaking up the Arizona sun.


Pleasant as the 80 degree temperatures were to a refugee from the still-wintry Northeast, the real warmth at the conference came from 2,300 attendees bubbling with enthusiasm for their entrepreneurial adventures and how Infusionsoft supports them. Keynote speaker Jay Baer captured the mood perfectly when he went “all Oprah” on the crowd by promising them each a free Camaro. (Either he was joking or I registered incorrectly.) The group was indeed drenched in Oprah-style self-empowerment.

As you’ve probably guessed, this isn’t my native habitat. Even though Raab Associates itself is a small business and runs in part on an Infusionsoft-like system (OfficeAutoPilot), I’m a professional manager by training and most of my clients are mid-size and big businesses. What really matters, though, is that Infusionsoft itself remains committed to its small business customers, despite growing to nearly 400 people and $40 million revenue. This consistency is no accident: Infusionsoft managers are quite vocal on their very conscious efforts to build a culture that is committed to helping entrepreneurs and is itself entrepreneurial. It’s a tall order, but there’s some serious missionary zeal at every level, so they might just succeed.

In any event, I did manage to spend most of the conference in my own comfort zone of analyzing Infusionsoft’s business. A long conversation with Chief Marketing Officer Gregg Head provided some interesting tidbits, including:

- the company’s customers fall into three main groups, each roughly one third of the total.  hese are: Internet-enabled business coaches and experts, who are selling books, videos and other products in addition to their personal time; local service providers, such as dentists, home services, and fitness centers; and businesses selling to other small businesses.

- most clients want either to increase sales or free up the owner's time. The latter goal – taking back your life from an all-consuming business – seemed to resonate more than anything with the attendees. Reducing costs is a lower priority.

- Measuring return on investment isn’t much of an issue. Small businesses can see changes in revenue or free time immediately.  Detailed analysis isn't needed.

- Some companies are too small even for Infusionsoft. A client must have a stable revenue base to expand, or be successful enough that the owner is looking for some free time. The average Infusionsoft client has been in business for five years, which means that nearly all were in business for at least several years before purchasing the system.

- Facebook is by far the most important online channel for Infusionsoft customers, in many cases replacing Web sites as the primary online presence. Search engine marketing and blogs are much less important. The primary sources of new customers are still offline: referrals, partners, events, and direct mail. (Incidentally, trendsters, direct mail in general and post cards in particular are hot. But that might be old news. I did receive a message about personalized pizzas today, but am pretty sure it was an April Fools joke.)

And what of Infusionsoft itself? The company did announce its next release at InfusionCon, although by its own admission the changes were incremental enhancements in usability rather than major expansions in function. The main items were more efficient scheduling of personal tasks, a simple way to prepare quotes, and branding templates that automatically deploy style changes across all types of content. Campaigns can also now easily include GroSocial Facebook campaigns (GroSocial being a social marketing firm acquired by Infusionsoft in January.) Modest as these changes are, the company says its users wanted them more than new acquisition channels.

Infusionsoft also announced several non-technical initiatives, again with the goal of making users more productive. These included a set of prebuilt campaigns. including actual content; on-demand training videos integrated with the product, and accelerated expansion of sales and service partner networks. The onboarding process has also been revamped to deliver results in 30 days rather than 60, the main change being that Infusionsoft staff now does more of the actual setup for new clients and spends less time on a conceptual success map.

All these changes confirm what was already obvious: that Infusionsoft’s entrepreneurial customers are a separate breed from the professional marketers who use traditional marketing automation systems. The functional differences between the two sets of systems may be hard to spot, but there’s no mistaking the difference in the services and attitudes that surround them.

0 How to Get the Most from Social and Behavioral Data: Webinar, March 19

Raab Associates has been gradually relocating from New York to Pennsylvania over the past two weeks. I won’t subject you to a post like “what B2B marketers can learn from moving companies”, which is one of my least favorite ploys for repackaging old advice in a “fun” format. In fact, I only mention it to explain why I haven’t been writing with my usual frequency and why this post is relatively brief.

Still, I did want to let you know that I’ll be giving a Webinar next Tuesday, March 19 at 2 p.m. Eastern on “Making the Most of Social and Behavioral Data for B2B Marketing”. It’s sponsored by Mintigo, a hard-to-classify vendor with technology to scan the Web for prospects and predict their interests. You can register here.

The chaos of moving has slowed down my slide preparations, which are made even harder by the fact that our 100-year-old house has such uneven floors that my chair keeps rolling away frrrrom mmmy desssssk. But I did finish my research before they packed up our computers, so the content itself will be solid. Without giving away all the goodies, some of the more interesting things we’ll cover include:

- where social and behavioral data are used in the marketing process. This actually matters quite a bit: there are some things that social and behavioral sources can provide, and others they can’t. You have to be sure you’re using them correctly and supplementing with other sources where appropriate.

- what to do once you capture the data. Traditional marketing data was pretty easy to manage because there wasn’t that much of it.  With social and behavioral, you’re surfing a flood. We’ll talk about how to keep your head above water.

- how to deal with the ephemeral nature of much social and behavioral data: without belaboring the flood analogy, conditions change rapidly and marketers must react quickly. We'll discuss what this means and how to do it.

- which data elements are available from different sources.  It isn’t news that each social network works differently, but it’s still eye-opening to see just how distinct they are. We'll talk about which network is best for different purposes.

- what all this looks like from a sales person’s viewpoint. Most marketers will try to swim in this data despite the rough surf. Sales people are more likely to leave the water and have a hot dog. We’ll talk about ways to keep them immersed.

I’m more curious than anyone to see my final slides, but have no doubt that the session will be useful and interesting. It’s an important topic: join me if you can.

0 Yesterday's News: Marketo Plans IPO, Eloqua Eyes B2C

There were two bits of news from Marketing Automation Land yesterday: Marketo announced it has filed a draft registration statement for an initial public offering, and Eloqua CEO Joe Payne was quoted as saying his company plans to expand into business-to-consumer marketing.

The Marketo news is long-expected. CEO Phil Fernandez said last September that the company planned an IPO for first half of 2013, so they are pretty much on schedule. Of course, it’s still possible that someone would purchase the company instead, but the asking price is probably too high, and the prospect of an IPO just made it higher. No word on timing of the actual filing. Hopefully this means we soon get to see a filing statement with lots of juicy financial details…my mouth is already watering.

I have little doubt that Marketo can manage a successful IPO.  But it's less clear it can survive long-term as an independent company.  Previous marketing automation leaders including Eloqua, Unica, and Aprimo all ended up as part of larger organizations.  The fundamental reason is that marketing is ever-more-closely related to other business activities, as companies strive to provide an integrated customer experience.  Clients prefer to buy complete, integrated suites for all customer-management functions.  They good news for marketing automation vendors is that they can plug a gap that many big vendors need to fill.

This makes Eloqua's plan to pursue B2C marketers even more interesting.  Perhaps it they aren't really plans -- it was just a comment in a phone call, which I didn't hear myself.  But my immediate reaction is that Oracle already has a B2C marketing system, cleverly called Oracle Marketing and derived from its Siebel acquisition.  I've never heard an enthusiastic comment about the system, but as I recall from the last time I looked at it -- many years ago -- it was reasonably capable.  The only reason I can see for Oracle to use Eloqua as a B2C product is that Eloqua is a true SaaS offering, while Siebel was originally engineered for on-premise deployment and is still largely oriented that way.

This is pretty much consistent with a presentation last week by Oracle CEO Mark Hurd, along with Payne and Oracle EVP for Product Development Thomas Kuria. They set out a broad vision of customer experience management that included content management, social relationships, marketing, e-commerce, sales, and customer service, with Eloqua as the marketing component.
 

I wholly agree with the theory.  As I wrote recently in Why is B2B Marketing Automation Growing So Slowly?, today's marketing automation manages just one slice of the customer life cycle, and indeed just one slice of the acquisition cycle. Marketers need a broader system that itself fits into a larger puzzle. Oracle’s presentation showed they understand this quite clearly, and see exactly how Eloqua contributes to a solution. In this context, using Eloqua for B2C makes sense, since there’s no distinction between a B2B marketing cloud and B2C marketing cloud.


But the real world is more complicated than the picture suggests. B2B and B2C marketers have different requirements. Eloqua is more flexible than most B2B marketing automation systems but still can't match a good B2C system. The biggest issue is data structure: Eloqua is built around a standard model based on CRM systems.  It does let users add auxiliary tables but even those are subject to some constraints. A true B2C system can accommodate any data model. There are also issues of scalability and of specialized needs such as programs with hundreds or thousands of segments. It’s hard to imagine Eloqua competing in the top tier of B2C. It might be able to support mid-size B2C systems, but that doesn’t seem to be Oracle’s intent.

Oracle’s diagram might make  you think they have actually addressed this issue by replacing Eloqua’s own database with a “customer experience foundation” that includes data management and integration, along with automation, decisioning, collaboration, and business intelligence. That would be really great: one database to serve all the customer experience business functions, including marketing. But, alas, that’s not how Oracle does it. Each component of its customer experience cloud is a separate software application, many of which were purchased. Oracle does some data synchronization and sharing of certain functions, but that’s it.

So we're back to where we started: with an essentially separate Eloqua that is is engineered for B2B marketing automation.  Oracle has the money and engineering talent to rebuild Eloqua to meet B2C needs, but their track record for enhancing acquired products isn't good.  If Oracle wants a serious B2C cloud marketing product, it will probably need to buy something else.