And Our Forecast of B2B Marketing Automation Revenue for 2013 is....

I’ve just finished the latest update of our B2B Marketing Automation Vendor Selection Tool (VEST), available on the raabguide.com Web site. The VEST is our evaluation of industry vendors, aimed primarily at companies choosing a marketing automation system.

The VEST contains a great deal of information that provides interesting (to me, at least) insights into industry trends. But by far the most quoted piece of content is our estimate of industry size, which we put at $525 million for 2012. I’ll get to the 2013 estimate in a bit.

First, I thought I’d explain where the figures come from. We use two methods:

• Vendor revenues. This starts with revenue figures provided by major vendors, supplemented with estimates for the smaller ones. The estimates are based on client counts and estimated revenue per client, and cross-checked with estimates using employee counts and estimated revenue per employee. 

• Sector revenues: We aggregate the vendor-provided client counts by industry segment (micro business, small business, mid-size business, and large business), which we multiply by the estimated average selling price in each segment.

Both methods give similar results.

If you’ll pardon a bit of whining, I’ll point out that the estimates are getting harder to build because several vendors no longer provide much information. Some are now part of public companies, which don’t break out revenue or clients for a particular product. Others are still privately held but have stopped releasing precise figures for competitive reasons or to help manage expectations. I can only say this makes me doubly appreciate the vendors who do provide firm data.

Anyway, back to the estimates. Information dribbling in over the past few months has shown a downward trend: Eloqua reported its income for the 2013 would be up 34%, compared with 39% growth the year before;  figures released when ExactTarget bought Pardot suggested Pardot’s 2012 revenue would grow no more than 50%, compared with more than 100% in 2011; Neolane just yesterday reported 40% growth in 2012 vs. 47% the year before.  Only Infusionsoft kept up its 50% rate in both years. Of the other major vendors, Marketo and HubSpot have both been quiet recently.

All told, then, I was expecting the industry growth rate to fall compared with last year’s estimated 62%, which itself was probably a bit high.  Let's say the 2012 base was really $500 million, which gives a 54% growth over 2011.

When I finally assembled the new VEST data, things did indeed look a bit slower.  I won’t go into the gruesome details of my adjustments for incomplete information. But the result was that sector estimates showed a six month growth of 22% in total clients and 26% in revenue run rate. The revenue figure is more meaningful because it adjusts for the size of clients, which the raw client count does not. Doubling that to a twelve-month rate would yield expectation of 52% revenue increase.  That seemed about right, and better than I had feared.

My estimates for the major firms also came up with 52% revenue growth for 2013.  I'll be tad conservative and go with 50%. How scientific can you get?

Bottom line, then: Raab Associates official estimate of B2B marketing automation vendor revenues for 2013 is 50% growth from $500 million in 2012, which yields $750 million.

(Note: this is an updated version of the original post.  Some details have changed slightly but the forecast remains the same.)