Wednesday, January 04, 2012

CallidusCloud Buys LeadFormix Marketing Automation for $9 Million Cash

The list of independent marketing automation systems shrank by one yesterday when Leadformix  was purchased by sales enablement vendor CallidusCloud for $9 million.

The price is surprisingly low for an established marketing automation vendor. In my VEST report from last July, LeadFormix reported 210 clients, concentrated among mid-size firms, and 82 employees. This would translate to around $7 million revenue, for a price of just over 1x revenue, compared with 4 to 5x revenue in other recent acquisitions.  I suspect the actual LeadFormix revenue was considerably lower than $7 million, but, even so, the price may give pause to investors in other marketing automation firms who are hoping for a great payout.  But bear in mind that LeadFormix was largely self-financed, so they may have sold at a bargain price because they couldn’t afford to compete with better-funded competitors.

Or maybe these comparisons are irrelevant because LeadFormix was never a standard marketing automation system to begin with. While its feature list covers all the usual marketing automation categories, the company's real focus was always on providing the most useful information to sales people. In particular, LeadFormix infers visitors' “intent” (i.e., interests) and sales stage from the Web contents they choose to view. This is a clever and largely unique approach, although Right-On Interactive does something broadly similar.

LeadFormix combines its behavior analysis with anonymous visitor identification (inferring their company from the IP address), access to external prospect lists and enhancement data, and collaboration with partners and affiliates to share lead access. Indeed, the LeadFormix tag line is “aligning marketing with sales” – something that’s important to all marketing automation vendors, but never their primary benefit statement.

This is why Callidus is a good buyer. Callidus isn’t a sales automation system like, but it does provide a range of other systems that help sales departments. These include products for hiring, training, collaboration, content distribution, proposals, incentives, quota management, and analysis. LeadFormix will give Callidus another offering for its existing 900+ customers and access to 200 more companies now using LeadFormix.  I don’t know whether Callidus will also try to expand LeadFormix sales among "pure" marketers.  But even if they back away completely from “marketing automation”, the deal makes sense.

A bit of background on Callidus: it’s a public company with about $80 million annual revenue, no profits, and a $200 million market value. It made at least five acquisitions last year, all software-as-a-service companies selling some type of sales enablement. These include:
  • Salesforce Assessments (salesperson hiring /assessment) 03/28/11
  • Litmos (learning management) 06/10/2011
  • iCentera (on-demand portal software for sales enablement) 07/06/2011
  • Rapid Intake (collaborative rapid e-learning authoring) 09/08/2011
  • Webcom Inc. (product configuration, pricing, quoting, and proposals management) 10/04/2011

In short, LeadFormix fits nicely with Callidus from strategic, financial and operational perspectives.  Because this is such a unique match,  I don’t think the acquisition says much about larger trends in the marketing automation industry.  At most, it could be part of the long-expected shakeout as the industry consolidates around a small number of winners. But, while that consolidation is inevitable, it will take more than one deal to show it has started in earnest.

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