Rokt Buys mParticle

 

mParticle announced yesterday it is being acquired by ecommerce offer personalization vendor Rokt for $300 million.  It’s the third acquisition of a leading CDP in a little over one month, following ActionIQ/Uniphore and Lytics/ContentStack. It’s also the first to announce the deal price.

I’ve already written in this blog about the other two deals and this one is similar enough that most of what I said before still applies. It’s clearly tough to be an independent CDP these days. ActionIQ, Lytics, and mParticle are all technically advanced products, with a particular stress on delivering real-time data – something that’s hard for cloud data warehouses like Snowflake and Google BigQuery. This is probably what made them attractive to their buyers, which are all in different businesses (conversation management, digital experience management, and ecommerce, respectively) but share the need to manage real-time customer interactions.

The buyers' businesses themselves increasingly overlap, so part of their motivation is likely to differentiate themselves from competitors.  Probably more compelling, a CDPlets them position their product as the foundation platform in their clients’ customer management architecture. The platform is a powerful position because it’s tough to change platforms; applications that read data from a platform are precarious because switching applications is relatively easy. (And I do mean relatively: it’s still a lot of work in most cases.) On a more practical level, adding a real-time CDP makes it easier to do personalization, which offers a concrete advantage to potential buyers of these products.  (And, yes, the data is essential for Artificial Intelligence as well.)

It’s interesting that all three buyers are relatively small firms (Uniphore has 851 employees, down 3% in the past two years; ContentStack has 609 employees, up 27% in the past two years; Rokt has 614 employees, up 21% in the past two years) and none are the biggest in their space. While they’re not struggling to survive, they do need a way to distinguish themselves from their many competitors. This is provided by the comprehensive data assembled by a CDP and the superior personalization it makes possible.

From the CDP vendors’ viewpoint, becoming part of a customer-facing system lets them reverse the trend of selling to IT and data departments and move back to the original CDP position of selling to business users. This is a more comfortable environment, since IT and data teams are much more likely than business users to want to build their own solution based on a cloud data warehouse. It also removes some competition from the giant enterprise cloud vendors like Salesforce, Adobe, and Oracle. Those companies are most appealing to central IT and data teams, although they certainly sell to business users as well.

There’s nothing radical about a CDP being embedded in a customer-facing system. In fact, statistics in our Industry Update report have long shown that what we call “campaign” and “delivery” CDPs comprise more than two-thirds of the industry. The truth is, the market long ago decided it preferred a CDP that was part of a larger product. So the latest round of acquisitions reflect a continuation of that situation, not a radical departure.

The obvious question is whether more acquisitions will follow. Likely candidates are firms that, like ActionQI, Lytics, and mParticle, have particularly advanced real-time technologies. This isn’t everyone, since many CDPs rely on standard database technology and differentiate in other ways such as industry expertise or regional presence. The biggest remaining independents (Tealium at 599 employees*, Optimove at 504 employees, and Treasure Data at 484 employees) might all be large enough to continue going it alone or at least might be too big for companies similar to Uniphore, ContentStack and Rokt to swallow. The next level down would be firms including Twilio Segment (a perpetual acquisition candidate as a spin-off from the rest of Twilio), Resulticks (293 employees), and Cordial (245 employees). Note they are still larger than mParticle (237 employees), ActionIQ (152 employees) and Lytics (49 employees).

More likely candidates are firms including BlueConic (177 employees), Redpoint Global (157 employees), and FirstHive (114 employees), as well as a variety of still-smaller firms including Blueshift, Simon Data, Lemnisk, Lexer, Commanders Act, Meiro, NGDATA, and Relay42. Several of this latter group are based outside the U.S., which may reduce their appeal, and of course every company has a unique situation.  So it’s not clear which would actually be open to being acquired or be technically interesting to a potential buyer. But it wouldn’t at all be surprising to see one or more of these join the list of CDPs embedded in customer-facing system.

________________________________________________________________________________________________________________________- *all data from LinkedIn, as captured in the CDP Institute’s latest Industry Update, available here.

CDP Lytics Bought By DXP Customerstack

 

Almost one month to the day since ActionIQ was bought by Uniphore, another first-generation CDP has been sold to a large customer experience vendor.  This time it's Lytics, founded in 2013, which announced this week that it had been purchased in December by composable CMS and digital experience platform Contentstack.

  

Like ActionIQ, Lytics is a technically advanced product that has kept up with industry trends, making its features available as components, stressing real-time capabilities, and offering a broad range of campaign management and personalization features.  In fact, just last October, Lytics announced integrations with major content management systems and a free self-service offering that built customer profiles and used them to make personalization recommendations available within any content management system.  

But Lytics never achieved the scale needed to support its vision.  The company raised a relatively meager $58 million, with its last round in 2019.  (By contrast, ActionIQ raised $145 million including a $77 million round in 2021.)  Headcount (per LinkedIn) fell from a peak of just over 200 in 2020 to 49 this January.  

The Contentstack combination will provide the resources needed to continue developing Lytics’ vision.  Contentstack has nearly 600 employees, up 24% in the past two years, and $169 million in funding, with their last raise of $80 million in 2022.  They also claim over 500 customers, many of whom can be expected to adopt Lytics technology. 

Indeed, the architectural fit between Lytics and Contentstack appears to be excellent.  Both offer composable products, which should make it easy to integrate Lytics profiles with Contentstack’s personalization engine.  This is exactly the ability that the company touts in its announcement of the acquisition.  While I can’t speak to the technical compatibility between the two systems, the fact that Lytics already had integrations with Drupal and Wordpress suggests exposing Lytics data to Contentstack will be fairly easy.

And what does the deal say about the larger CDP industry?

One observation is that the adoption of a composable approach was not enough to preserve the independence of either Lytics or ActionIQ.  Both those firms were early leaders in offering their systems as components.  Maybe this generated some revenue but it was clearly not enough to turn around their businesses.   I’d guess the price tags for components are too small to really help much, especially compared with the much larger fees these companies were charging for their integrated products.  

The large number of competitors in the component marketplace probably ensures that prices will stay low, which is good for buyers but not so good for vendors.  This doesn’t bode well for “composable CDP” vendors who only sell components, although presumably they have geared their organizations to be profitable while selling relatively low-ticket items.  Note that “composable CDP” vendors like Hightouch and Census have all added multiple components, enabling them to earn more money from each client.  But so long as competition keeps down the price of individual components, the revenue per client will remain low even from clients who buy all the components those vendors have to sell.

It’s likely that the investments that Lytics and ActionIQ made in “componentizing” their products made them more attractive to their ultimate buyers.  But, otherwise, those investments may have harmed their business by consuming resources that could otherwise have been spent on improving their core products. 

A second question is whether these transactions mark the start of the industry consolidation that analysts have been predicting pretty much forever. 

I think not.  Actual consolidation would involve mergers between competing CDP vendors, something that has almost never happened.  (Exceptions have been in Europe, where Spotler combined Datatrics and Squeezley, Splio acquired Tinyclues, and Easyence merged with mediarithmics .  You’ll note these are not exactly household names.)  What we have seen over the years is deals like Lytics/Contentstack, where a larger customer experience vendor buys a CDP to add profile building, and sometimes campaign management, capabilities.  I do expect these sorts of acquisitions to continue, as the growth of personalization and AI makes the need for unified data more pressing.  We’ll also presumably see a few of the small independent CDPs vanish entirely, although this too has been unusual: enough companies need profile-building technology that the intellectual property of even a struggling CDP can usually find a buyer.  In this regard, it’s probably not coincidental that both Lytics and ActionIQ were quite advanced technically, making them particularly appealing.

So, while I don’t see a literal consolidation in the sense of CDP vendors merging with each other, I do expect to see a continued drop in the number of independent CDP vendors.  These will be replaced by customer experience vendors who include a CDP inside their products, the better to support personalization.  To be clear, what will qualify these firms to be considered CDPs is the ability to work with external systems as data sources for unified profiles and as consumers of those profiles.  This data-sharing ability will become more important as the number of customer-facing channels continues to increase and as customers expect consistent, personalized treatments across all of those channels.  Since no single system can expect to manage all channels by itself, it becomes essential even for customer experience products to capture data from external systems and to support personalization across those systems.  That was, and remains, the defining feature of a CDP.