Adobe Buys B2C Marketing Automation Leader Neolane: One Gap Filled, But Where's CRM?

Adobe today announced plans to acquire Neolane, the largest remaining independent B2C marketing automation vendor (excluding email-focused providers like Responsys and Silverpop). Price was $600 million, which is roughly in line with the 8x revenue paid for ExactTarget and Eloqua recently.  (Neolane announced $58 million revenue in 2012 and has been growing around 40% per year, which would yield about $80 million 2013 revenue.)

The deal is not particularly surprising. Adobe was on everyone’s list of potential buyers, and Neolane was ripe for acquisition or an initial public offering. It reinforces suspicions that Adobe was the mystery bidder for ExactTarget mentioned last month by Salesforce.com.  Indeed, my take on the ExactTarget deal explicitly mentioned an Adobe/Neolane possibility. That frankly didn’t take much insight, but I’ll brag a bit more about having pegged Adobe as needing to add marketing automation as far back as this post in 2009 and again in 2010.

Neolane is more of a mid-tier solution than an enterprise product, which may be a slight mismatch with Adobe.  I’d say that reflects a lack of enterprise systems available for Adobe to purchase, more than any particular desire to target the mid-market.

Predictable or not, this deal does fill a gaping hole in Adobe’s marketing cloud. It still doesn’t put Adobe on equal footing with Oracle, Salesforce, SAP or Microsoft, since they all have major CRM platforms which Adobe does not. Adobe obviously has a leadership position in content creation, although I’ve never felt that does much good in selling customer management systems. (To be more precise, content creation COULD give Adobe an advantage if it very tightly coupled auto-personalized marketing treatments with content creation, but that doesn't seem to be happening.)

More important, Adobe also has an unmatched position in Web analytics, Web advertising, and Web content management. In fact, adding Neolane gives it a profile very similar to IBM, which also has strong Web and marketing automation products but not CRM (and which also shares Adobe’s digital-is-everything mono-vision).

Come to think of it, the contrast still comes down to the dueling strategies I described in 2011: Web-plus-marketing automation (Adobe and IBM) vs. CRM-plus-marketing automation (Oracle, Salesforce, SAP, Microsoft). Everything will eventually converge Web-plus-CRM, with marketing automation baked in so deep you can't see it.  But that’s still some way off, except arguably for Oracle, which has all the pieces but hasn’t fully integrated them. In the meantime, we’ll see which approach is more popular – and what becomes of the stand-alone marketing automation vendors who are caught in between.

Neolane Interaction Tightly Integrates Real-Time and Outbound Marketing Campaigns

As I mentioned last week, there haven’t been many new B2C marketing automation products in recent years. But this doesn’t mean the industry has been stagnant. New developments have come from established vendors who are steadily expanding their products.

Neolane has been one of these, growing from its roots in email to encompass other outbound and inbound channels, and more recently with a slew of social and mobile marketing features. One of its offerings, originally launched in 2009, is its real-time interaction manager, Neolane Interaction.

Interaction performs the same basic functions as other interaction managers: it receives a request from an external touchpoint that is engaged with a customer, selects the best treatment, and returns the recommendation to the touchpoint.  However, it differs in several key details:

- it supports both batch (outbound) and real time interactions. This is unusual, because efficient processing usually takes different data structures and methods for batch vs. real time. But Neolane cites one customer delivering 10,000 Web recommendations per minute and another sending ten million customized emails per week, so it has apparently found a way to handle both. Supported channels include email, Web, social, mobile, call center, point of sale, and SMS.

- it uses the same offer library for real-time and outbound campaigns. This means that offers can be used interchangeably in both types of campaigns – something that considerably simplifies program design and analysis. Each offer can include separate content for the different channel formats. Users specify which offers are available in which channels, to ensure an offer isn't recommended where it shouldn't be.

- it draws data from the Neolane marketing database as part of its offer selection rules. This is different from most interaction managers, which query external systems rather than maintaining their own persistent customer database. (Neolane could also do external queries.)  Again, this approach raises a technical eyebrow, since traditional marketing databases are not structured for real-time interactions. But Neolane seems to pull it off.  I suppose it helps that Neolane can attach to any data structure, so clients who want real-time interactions presumably build a real-time-friendly database.

- it supports both anonymous and identified customer interactions. Most real-time interaction managers make customer-specific recommendations, although Web recommendation engines are often designed for anonymous visitors. It makes sense for Neolane to support both, again serving the greater goal of providing one marketing system to meet as many needs as possible.

These items all grow out of the fundamental fact that Interaction is a module within the larger Neolane system, rather than a separate product. Other features of the system are more typical of dedicated interaction managers:

- eligibility rules for each offer. There are also eligibility rules for offer categories, which save effort by applying the same rule to multiple offers.

- offer arbitration (i.e., choosing which of several eligible offers to return). Offers can be ranked using fixed weights assigned to each offer; by calculating weights with a formula that draws on customer data; or with an unusual “autolearn” function that adjusts the weights to ensure that the offer will be seen. The system does not incorporate any of predictive modeling, although model scores built elsewhere could be used in weighting formulas.

- each recommendation is independent of a larger dialogue flow. At best, marketers wishing to deliver a sequence of treatments could create eligibility rules that check for previous treatments. This limitation is typical of real-time interaction managers.

- a simulation function that estimates how often each offer would be presented to an audience with specified characteristics. This helps marketers see the results of different eligibility rules and offer weights, which can be difficult to estimate in advance. It’s found in some but not all interaction managers.

The downside of Neolane’s approach is that customers who only want an interaction manager must still purchase the full Neolane system. This isn’t necessarily cost-prohibitive: the company says its average deal for the base system plus Interaction is around $350,000. Actual fees depend on the number of interactions processed. The system is available for on-premise, hosted, or “hybrid” deployment (on-premise installation with Neolane-hosted email delivery). Neolane says about 60% of its clients choose an on-premise option.

To end on a positive note: Neolane sold 22 new Interaction installations in 2012, up from 17 the year before. This makes it one of the company’s fastest-growing products.

The Seven Deadly Sins of Marketing Automation System Selection

I’ll be giving a Webinar this Thursday on evaluating marketing automation software, sponsored by Neolane. Part of the content will be a list of Seven Deadly Sins of Marketing System Selection.  I thought that was worth a blog post of its own. So here goes.

1. Ignoring Users. Selection teams often don’t take the the time to understand how future users of the system do their jobs today. The justification may be that everything will change anyway, or that every marketing department has similar needs, or that the users themselves don’t know what they need. The cost of skipping this step is that you don’t learn about existing business processes and user skills. This means you don’t identify what processes need to be changed and what training your users will need.  The immediate result is you can’t factor those items into your vendor evaluation. Longer term, your deployment will take longer since you’ll have to stop to gather this information before you can proceed.

2. Lack of Purpose. It’s frightening how often I ask someone how they expect to use their new marketing automation system and am told they don’t know. Buyers who don’t set business objectives have no way to judge what the system should do or to measure its success after the fact. Ideally you’ll have specific, quantifiable goals in terms of numbers of qualified leads, costs, and revenue created. But even general goals like supporting Webinars or running nurture campaigns are enough to give useful direction. Remember the old saying: “When you don’t know where you’re going, any road will take you there.”

3. No Requirements. Even marketers who know what they want often don’t translate those desires in specific system requirements. This is probably the most common sin of all. Formal, written requirements provide a framework to prioritize your needs, explore them with vendors, and make a complete, consistent assessment of what you learn. Without written requirements as a reference, your project can easily descend into chaos: something that made for great medieval artwork, but in real life is no fun at all.

4. Talk Only to Leaders.  Buyers often limit their consideration to a handful of vendors who are anointed as industry leaders by analysts or simply gain the most attention in social media. The theory seems to be that the most popular products do the best job of meeting a broad spectrum of needs, and are thus most likely to suit the buyer.  It’s an argument that only makes sense to people who don’t know their actual requirements. Think of it this way: would you only consider three best-selling automobiles (Ford F-150 pickup, Chevy Silverado pickup, and Toyota Camry)? Of course not, because you have specific requirements that those products probably don’t meet. Chances are you also have a few marketing automation needs that less popular systems actually perform best. You won’t know unless you look.

5. Let the Vendor Drive. Marketers who don’t know what they want often rely on the vendors to tell them what’s important. At best, the salesperson takes the time to understand your business and demonstrates how her system can best meet your needs. But that’s not the same as defining the best solution. More likely, the salesperson will hand you a list of what her system does best and hope you evaluate everyone else against it. It’s true that some salespeople will walk away from a deal if it’s a poor fit, but now you’re relying on the kindness of strangers – and you remember how that worked out for Blanche DuBois. (Poorly.)

6. Focus on Functions. We all love our bells and whistles, and salespeople love to show them. But functionality isn’t the only thing you need to consider in a vendor.  In fact, given that most systems can meet your basic needs, functions may not be the most important differentiator. You also need to consider how well the vendor will train and support you, whether their underlying technology can meet your present and future needs (there’s those pesky requirements again!), their familiarity with your industry, and how likely they are to remain in business. It's harder to answer these questions than sit through a demo, but they’re critical to your project’s success.

7. Work Without Experts. This is the Original Sin from which all others flow. It takes expertise to define objectives, gather requirements, screen the vendors, and run a smooth process. Marketers, like B2B buyers everyewhere, are increasingly trying to do it all without help – and most of them don’t have the time or skills to succeed. If you’re among the have-nots, see whether your IT department or procurement team have the skills to help. If not, find an external expert who specializes in marketing automation systems (for example, Raab Associates). Chances are, their fee will be less than the value of the time you’d spend doing the work for yourself. More important, you’ll end up with a better decision sooner, greatly increasing the final return on your marketing automation investment.