On May 31, 2016 – Marketo, Inc. (NASDAQ: MKTO), a leading provider of engagement marketing software and solutions, announced that it has entered into a definitive agreement to be acquired by Vista Equity Partners (“Vista”), a leading private equity firm focused on investments in software, data and technology-enabled businesses.
I have to admit, I was a little surprised by this acquisition announcement. I had expected a pure play technology company to be strong suitor for Marketo to round out their Marketing Cloud offerings with a strong Marketing Automation solution. My bets were on SAP or perhaps Microsoft, if they had any hopes of strengthening their position in the Marketing Cloud arena. I had also hoped that Adobe would consider Marketo for acquisition to fill the marketing automation gap in their Marketing Cloud offering. Adobe acquired NeoLane in 2013 which had some Marketing Automation capabilities but was mostly acquired for their cross-channel campaign management capabilities added to the Adobe Marketing Cloud” now marketed as Adobe Campaign.
Marketo agreed to be bought by private equity firm Vista Equity Partners, in a cash deal valued at about $1.79 billion. Vista Equity will pay $35.25 per share for Marketo.
What Does This Mean For The Future Of Marketo?
According to the Marketo CEO:
“After careful consideration and deliberation, our Board of Directors unanimously concluded that the sale of Marketo to Vista Equity Partners was in the best interest of Marketo and its shareholders,” said Phil Fernandez, chairman and CEO of Marketo. “The acquisition will allow Marketo to continue to focus on customer success and to remain the independent category leader, continuing to set the agenda for product innovation and thought leadership for the entire digital marketing industry. It will also enable us to successfully deliver on the bold vision we recently set forth – to give tomorrow’s marketers and the C-suite an ultra-high-scale enterprise platform for customer engagement.”
According to Vista:
“Marketo is the clear leader in the marketing automation space and has consistently delivered innovative mission critical products to its more than 4,600 customers,” said Brian Sheth, co-founder and president of Vista. “Given our proven track record and focus on investing in high-growth SaaS platforms, we are thrilled to partner with Phil and the broader Marketo team to help the company accelerate innovation, growth, and excellence.”
Looking at the Vista Equity Partners portfolio of companies it is apparent they they have an appetite for SaaS based companies that specialize in vertical markets such as Financial Services, Sports, HR , Agriculture and Oil and Gas. They have some strategic acquisitions in some more horizontally focused companies as well such as Main Street Hub, Return Path and Social solutions and advertising management tools which makes me think that perhaps their plan may be to combine the value of their related acquisitions into their own Customer Engagement Platform or Marketing Cloud offering at some point in the future. The enterprise competitive landscape for Marketing Cloud services is being dominated by the M&A activities of the giants of the industry such as the following:
Oracle acquired a highly target list of companies in the marketing automation space to make up their Oracle Marketing Cloud including two Markeing Automation companies; Eloqua (focused on B2B clients) and Responsys ( focused on B2C clients) combined with the re-targeting capabilities of BlueKai plus the marketing analytics of Datalogix and the content marketing capabilities from the Compendium acquisition combined with Collective Intellect for Social marketing and intelligence. They also acquired ATG giving Oracle a solid position in the Sales, Marketing, Service and Commerce Cloud spaces. Oracle has also been very busy building out a middleware layer to develop integrations and SaaS delivery options for their key cloud based offerings.
SalesForce has also been hot on acquisitions in recent years building out their broad range of Sales Marketing, Service and as of this month Commerce Cloud solutions with their acquisition of Demandware. Specifically competing with Marketo is their Salesforce Marketing Cloud offerings comprised of company acquisitions including ExactTarget, Pardot, Buddy Media, Radian6 ,HeroKu and Jigsaw, along with their organic developments positioning Salesforce a strong player in the Marketing Cloud competitive landscape.
Adobe has also done a formidable job of acquiring and integrating a number of leading edge marketing tools to build out the Adobe Marketing Cloud such as Omniture (now Adobe Analytics), Day Software (now Adobe Experience Manager), Neolane ( now Adobe Campaign), Efficient Frontier Technology ( Online Search/Social Advertising Campaign Management) providing Adobe with a solid Marketing Cloud offering. Adobe is positioned very well to sell to the CMO and Marketing ranks since it has a long history of selling to this side of the enterprise as apposed to an Oracle or IBM who traditionally sold to the CTO/CIO’s within an large enterprise.
IBM has also been acquiring aggressively to build out their marketing platform prowess with acquisitions including Unica, Neteza, Core Metrics and Silverpop that highlight Big Blue’s capabilities in the marketing platform arena.
As you can see, Marketo has some pretty top notch competition in the big enterprise marketplace. It may make sense for Marketo to combine forces with some of the key Vista portfolio companies to address the Mid Tier and SMB (small /medium business) marketplace that is currently underserved by the enterprise companies such as Adobe, Oracle, IBM and Salesforce. Their biggest competition at the lower tiered price points would come from companies like Hubspot that have done a great job of offering a set of SaaS based marketing services targeted specifically to the Mid Tier & SMB marketplaces.
We will have to wait and see how Marketo is impacted and potentially re-engineered in it’s new found home at Vista. For existing customers of Marketo, I would say that they still offer a solid point solution for Marketing Automation for up to a mid tier company size. But the increasing competitive landscape is going to be keeping the narrative focused on selecting a “one stop shop ” for Marketing Cloud solutions that offer a client easy expansion to a host of marketing solutions from a single vendor.
For information on this announcement, please refer to this FAQ document.
Posted by Warren Raisch – June 13, 2016