Intuit Buys Small Business Local Marketing Vendor Demandforce: There's a New Gorilla in Town

Intuit  last week announced an agreement to acquire local business marketing vendor Demandforce  for $423.5 million. That’s a hefty sum for a company with a reported revenue of $37.5 million, although it has been growing at a blistering pace – more than doubling last year – and now has over 35,000 customers. Still, the move makes perfect strategic sense, giving Intuit a stronger foothold in the marketing side of its small business customer base. (Intuit dominates the market for small business accounting with five million Quickbooks users.)

Demandforce focuses on local service businesses like dentists and auto body shops. It’s not a typical marketing automation vendor, since it provides appointment management, referrals, reviews, social campaigns, local advertising, post cards, and search marketing in addition to email. Its most direct competitors in the marketing automation world would be Infusionsoft and HubSpot, although neither has the same depth of appointment-related features. The price point of $200 to $300 per month is also similar to those systems.

Because the micro-business segment is pretty distinct from the rest of marketing automation, the impact of the Demandforce acquisition will initially be limited to its direct competitors. Within that group, Intuit’s penetration and clout should make it an immediate superpower – with the caveat that the accountants who are Intuit’s primary connection with its customers are not likely to sell them marketing services. Still, Intuit should be able to expand its network of channel partners fairly quickly. The local marketing business is a huge opportunity that hasn’t had a dominant player. I can claim some bragging rights for having suggested nearly two years ago that Intuit might take this role.


The more interesting question for the rest of the marketing automation industry is whether Intuit will move beyond Demandforce’s current target customers. In the short term, probably not: the opportunity is large enough to keep them busy for quite some time. But local marketing involves more than small businesses, so Demandforce has a natural growth path in that direction. A modest functional expansion could also make Demandforce competitive at the lower end of the standard B2B marketing automation world, where products like Act-On, Marketo Spark, and Genius contend. From there, it could creep upwards. Again, that’s down the road but it does put a ceiling on the pricing and growth prospects of companies currently serving those segments.

It's also worth considering the financial aspects of the deal. On the one hand, the $400+ million price – more than 10x revenue – has to be heartening for other marketing automation vendors contemplating an exit. But Demandforce is far from typical. It is already larger than all but a handful of marketing automation companies, is growing faster than anyone of similar size, and has made all this progress on a mere $11.8 million of investment. It also offers benefits that are more clearly defined and easier to deliver than marketing automation provides to larger companies. And the very fact that Intuit is now playing in the industry will make it harder for others to grow – especially if Demandforce moves quickly. Given all these advantages, it’s not clear other vendors will come close to duplicating the terms that Demandforce received.

Intuit / Salesforce.com Alliance Is No April Fool's Joke

Am I the only one who missed the April 1 announcement of a strategic alliance between Salesforce.com and Intuit? Given our industry's endless nattering about whether Salesforce.com will move into marketing automation, this should have attracted more attention (or, at least, enough attention that I would hear about it sooner than I did).

In case you too missed the news, it comes down to this: Salesforce.com will be available on Intuit’s App Center and be deployed so that the Intuit and Salesforce.com databases are synchronized. For those of us used to thinking of Salesforce.com as the 900 pound gorilla, it’s disorienting to see Salesforce on the Intuit App Center, rather than the other way around.

But it does make sense. Intuit has more than 4 million customers, compared with 90,000 for Salesforce.com. The revenue differential isn’t as large ($3.5 billion for Intuit vs. $1.7 billion for Salesforce) and Salesforce.com actually has a slightly higher market cap ($17.5 billion for Salesforce.com vs. $16.5 billion for Intuit). But Intuit represents a gateway to the small business market for Salesforce.com, so it’s clear who needs whom.

What has this to do with marketing automation? Pretty much everything, I’d argue, at least for companies like Infusionsoft, OfficeAutoPilot, and Genoo, who target “micro-businesses” at the lowest end of the market. Those vendors base much of their appeal on the convenience of using one system for marketing, Web pages, CRM, and even order processing. The one thing they don’t offer is accounting, in good part because Intuit’s QuickBooks has such a dominant position.

The lack of accounting data is an important gap, because the accounting system is the ultimate source for information on customer identities and transactions. That data is important for effective marketing. Having it automatically available to Salesforce.com makes Salesforce a much more attractive marketing option for small businesses.

I suppose I should backtrack a bit here and acknowledge that I’m talking about marketing to customers – that is, people who have already made a purchase – rather than marketing to prospects or leads. Business-to-consumer marketing automation systems manage relationships with both groups, while B2B marketing automation is concerned primarily with just prospects and leads. The “micro-business” marketing automation vendors are more like B2C systemsbecause they do deal with customers as well as leads and prospects.

In other words, the Intuit / Salesforce.com alliance poses a very large threat to the “micro-business” marketing automation vendors but doesn’t have much impact on the rest of the B2B marketing automation industry, which sells to larger companies. Indeed, those larger firms are typically not QuickBooks clients at all.

But here’s the thing: let’s say that Salesforce.com does succeed in selling to a lot of Intuit clients, and in the process adds marketing automation features to serve them better. Those marketing automation features will be available to all sizes of Salesforce.com clients, including the larger ones who currently purchase marketing automation systems. Even if those firms continue to use marketing automation just to target leads and prospects, they’ll suddenly have a stronger reason to adopt Salesforce.com as their marketing platform. So marketing automation vendors who thought the Salesforce.com / Intuit deal didn’t apply to them, might want to think again.