The May 31 announcement that private firm Vista Equity Partners would be purchasing engagement marketing software maker Marketo, Inc. for approximately $1.79 billion USD is bad news for enterprise customers in the short term as they lose one of the sector’s last independent marketing SaaS providers to consolidation, according to a leading industry analyst.
However, it could prove positive in the long run as the need for end-to-end customer engagement makes it difficult for marketing automation vendors to go it alone, Cindy Zhou, a digital marketing expert with Constellation Research Inc., told ITBusiness.ca.
“Customers all want more data and insight into their buyers by integrating their marketing automation with eCommerce, social, physical events, etc. which makes the market consolidation inevitable,” she said. “It’s not about the number of clicks or emails opened, but conversion rates and proving revenue contribution.”
In a press release announcing the acquisition, Marketo said the deal would provide “substantial value” to shareholders, with Vista purchasing all of Marketo’s outstanding common stock for $35.25 per share – a 64 per cent gain over the company’s May 9 closing price.
In a statement, chair and CEO Phil Fernandez said that Marketo’s board of directors had unanimously concluded the sale was in the company and its shareholders’ best interests, and that the acquisition would allow Marketo to focus on delivering “an ultra-high-scale enterprise platform” for consumer engagement.
Vista, meanwhile, has a history of investing in SaaS platforms, with co-founder and president Brian Sheth saying the company was thrilled to support Marketo and its 4600-plus customers in their future endeavours. The company’s headquarters will remain in San Mateo, Calif.
In a May 31 blog post discussing the acquisition, Constellation’s Zhou noted that Marketo’s acquisition was only the latest in what has become something of an annual tradition since 2010: for example, Oracle Corp., acquired marketing automation firms Market2Lead in 2010 and Eloqua in 2012; in 2013 Salesforce.com purchased ExactTarget, which itself had aquired Pardot in 2012; and IBM purchased Unica in 2010 and Silverpop in 2014.
News that Marketo itself had approached investment firm Morgan Stanley regarding a potential sale broke in early May, she wrote, and it’s rumoured that Microsoft and SAP bidded for the company as well.
As for what Marketo customers can now expect, Zhou – a former “happy” Marketo customer herself – wrote that Vista, which among other investments owns event management software providers Cvent and Lanyon, and advertising technology company Mediaocean, is known for increasing shareholder returns by 30 per cent, usually with a rigid approach that she euphemistically said is often imposed “at the expense of talent retention and investments in marketing and R&D.”
Zhou’s guess is that Vista could be planning to combine Marketo’s digital marketing base, Cvent and Layon’s physical event expertise, and Mediaocean’s ad tech to create a 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,” she wrote. “Most of the options today require much manual intervention and [are] clunky at best.”
In the meantime, current Marketo customers should lock in their terms and pricing ASAP, or prepare to sign multi-year agreements during renewal time, as Marketo’s current one-year renewal options will cease to exist, she wrote. They should also expect delays on several products that Marketo recently announced, such as their platform re-write, Project Orion.
Customers will also likely notice a difference as Marketo’s approach to engaging customers and the broader marketing community takes a hit, she wrote, noting that employee satisfaction has a track record of dropping under Vista, and customer support will likely suffer as a result.
“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,” she wrote. “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 transaction is expected to close in the third quarter of 2016.