The deal was announced yesterday afternoon: Sarah” kennedy ellis>, Marketo’s CMO, and TechCrunch” noted> in their coverage of the news, “[This acquisition] was a pretty nice return for Vista Equity partners, which purchased Marketo in May 2016 for $1.8 billion in cash. They held onto it for two years and hauled in a hefty $2.95 billion in profit.”
Here are my initial thoughts on the deal:
1. It’s a major vote of confidence in martech.
We don’t know exactly what Marketo’s current revenue is, but back-of-envelope estimates — extrapolating ~30% year-over-year growth from Marketo’s last published quarterly revenue as a public company back in 2016 — likely puts them below $475 million.
That would put the Adobe acqusition at above a 10X multiple of Marketo’s revenue.
That is a major vote of confidence in the future growth potential of martech.
2. Consolidation in martech revenue — but that’s only one dimension.
“Ah ha, see! Consolidation in martech! Take that, Brinker, you logo lunatic!”
That’s not a verbatim comment I’ve received about this deal, but it might as well be.
Make no mistake. This deal represents a huge consolidation in martech. But, at least in the short term, it’s mostly revenue consolidation. Adobe adds half a billion dollars to their Experience Cloud revenue that would have otherwise been attributed to Marketo as an independent company.
But it’s not necessarily product consolidation.
As Adobe%E2%80%99s” official comments on the deal>, it seems like they will keep Marketo separate from their existing Adobe Campaign solution (which originated from their Conway%E2%80%99s” law> applied to software-built-by-acquisition.
But setting that debate aside for now, for a B2B enterprise, you still have the same number of choices for tentpole solutions for marketing automation that you had before this acquisition. It’s just that your Marketo choice will now have an Adobe logo.
Now, that being said, I do believe this revenue consolidation will put pressure on smaller competitors or new competitors who want to go after the enterprise marketing automation space. The continued rise of CDP (customer data platform) solutions may be contenders there, but it will be a battle. (And some will almost certainly be acquired by the giants.)
And I do think that Adobe will move to integrate Marketo more tightly with the rest of their portfolio, which will make their combined “suite” more attractive — and further deepen their moat as a tentpole enterprise martech platform.
But by number of companies, how much will the broader martech landscape consolidate?
3. One martech company acquired. How many new ones spawned?
This is the question of the ages. Well, okay, maybe not up there with, “Why are we here?” or “What exactly is Cheez Whiz?”. But for us martech nerds, it’s in the top ten.
My best guess at the moment is there will be a significant
bloodletting shake-out of the current marketing technology landscape over the next 12-18 months as vendors that were funded by VCs in the past 5-7 years who have failed to achieve either a breakout growth trajectory or profitability run out of money and are either sold or shut down.
As an over/under, I’ll predict — even though I hate predicting anything in a world of constant change — that 25% of the existing landscape will euphemistically “consolidate” within this next 12-18 month period.
It’s worth noting that a day before the Adobe/Marketo deal was unveiled, Salesforce crossed more than 6,000,000 installs from their App Exchange business app store.
There are approximately 3,500 apps in the App Exchange, and many of them are exactly these kinds of more specialized niche players.
But Salesforce’s App Exchange is only the beginning. the” burgeoning saas app store era>.
Of the 20 biggesting public SaaS companies, 70% of them have an “app store” of some kind offering third-party solutions on top of their platforms.
I’ll note that HubSpot is one of the companies that Clement identifies with this model, and indeed, the reason I joined them as HubSpot%E2%80%99s” own platform ecosystem has more than doubled>:
Just as the iPhone and Android inspired millions of apps (or micro-apps), the consolidation of major platforms within the martech space could enable an incredible wave of app and micro-app innovation in marketing and customer experience.
The martech landscape is going to go through some big changes in the next couple of years. (Which is why there’s so much opportunity for marketing leaders to design for change and harness MarTech” conference in boston october>