Wednesday, January 05, 2011

How Big Is the B2B Marketing Automation Industry?

Summary: Here are my estimates for the size of the B2B marketing automation industry, broken down by customer segments. Enjoy.

I've been working madly on my new report on B2B marketing automation vendors. One of the things this has forced me to do is come up with an estimate of industry size that I'm willing to defend in print. I based my figures on several approaches: revenues for the few vendors who release their figures; the number of vendor-reported clients multiplied by an estimated revenue per client; and the number of vendor-reported employees multiplied by industry-average revenue per employee.

These methods all yield similar figures -- around a $200 million in revenue for 2010. Bear in mind that the industry nearly doubled last year, so the current run rate is much higher. Also remember that I've excluded:

- the big enterprise marketing automation vendors (Unica, SAS, Teradata), who sell primarily to B2C marketers;

- B2C portions of Aprimo and Neolane; and,

- vendors who work mostly through marketing service providers (Alterian and SmartFocus).

Including those vendors would at least double the total figure. Services are also excluded.

That said, here's an excerpt from the report:

Revenues for B2B marketing automation systems (excluding related services) were $200 million in 2010, according to Raab Associates estimates. The industry can be divided into three segments serving different types of clients:

Small business (under $20 million revenue). These are unsophisticated marketing departments whose primary interests are outbound email, landing pages, and simple lead nurturing through email autoresponders. Many are very small companies with just one or two marketing automation users. They often do not integrate with a separate sales automation system, either not using one at all or relying on a CRM option offered by the marketing automation vendor itself. The fastest growing industry segment, this group tripled to 12,000 clients and $60 million revenue in 2010. Many small business marketing departments use only email systems (which also provide landing pages and simple nurture campaigns) instead of marketing automation.

Mid-size business ($20 million to $500 million revenue). This segment covers a broad range of marketing users with widely varied needs. Most require the full range of marketing automation functions, but apply them in relatively simple ways. They have three to fifteen marketing automation users. This segment is the heart of the marketing automation industry, supporting the largest number of competitors and accounting for approximately $100 million in 2010 revenue across 3,000 clients.

Big business ($500 million revenue and higher). These are large marketing departments that may manage hundreds of campaigns for multiple products in different locations. They need special features for automated content selection, project management, complex lead scores, and tight limits on the rights granted to individual users. This group had about 500 clients generating $40 million revenue in 2010. Although it has been growing less quickly than other segments, adoption will accelerate as the value of B2B marketing automation is more widely recognized, existing B2B systems add more large-company features, and big software vendors enter the field.


boblondon said...

David, thanks for the post--very informative. Do you have any comment on the speed at which the market is growing or the adoption rates relative to other kinds of software/platforms?

Bob London
London, Ink

David Raab said...

The over-all market seems to have about doubled last year, with highest growth in the small business segment. I'd expect at least 50% growth this year across all segments and wouldn't be surprised if it were higher.

I don't have comparative figures for other markets but this is quick by any standard.

Adam Blitzer said...

Hi David. Great analysis. I would weight your first two criteria much more heavily than vendor employee count though. That works for profitable companies but the game changes when large infusions of VC are involved. There are plenty of software companies that have 50+ or 100+ employees without having substantial revenues. There isn't necessarily anything wrong with that (they are swinging for homeruns) it just means that employees only correlates to revenues for mature companies.

David Raab said...

Hi Adam. I fully agree. When I just use raw employee counts and the standard $200,000 per employee, I come up with about $260 million. (That's after I reduce the headcounts at firms with large non-B2B marketing automation businesses, like Aprimo and Silverpop). Another factor is that these are fast-growing companies, so the headcounts from September were hgher than the average for the year.

That said, only a few companies -- Marketo, HubSpot and maybe Infusionsoft -- are clearly using venture funds to boost headcount in advance of sales. Of the other vendors with substantial funding, Eloqua, Neolane and Aprimo are probably running around breakeven, while Genius and Marketbright have kept their headcount quite low.

I really would have liked to publish more of the details that went into my estimates but I've been trying to get the report itself completed. Only so many hours in the day...

Adam Blitzer said...

Thanks for the quick response. Definitely makes sense to me! We (everyone in the space) look forward to your findings!

David Raab said...

Actually, you got me to thinking a bit more deeply about this. I may revise that estimate downward a bit. Look for another post next week.

Anonymous said...

One other credible number I'm trying to dig up is the total addressable market.

Other analysts say the market is only 5-7% penetrated, but I struggle to figure out where they get that number. Hoover's says there are around 225K B2B companies in the U.S., but it's tough to find a methodology behind any numbers.

Looking forward to the final report!

David Raab said...

I've never taken a serious crack at the addressable market question, although it certain does come up. Big unknown is which industries beyond tech and business services will finally start to use this stuff.

Also, it's become increasingly clear to me that there's a big distinction between marketing automation for really small businesses (served by Infusionsoft, OfficeAutoPilot and to a large degree HubSpot) and the rest of the world (more traditionl organizations with full-time professional marketers). You have to size those segments separately.

Anonymous said...

Well, beyond tech and business services, we're seeing serious interest in some smaller verticals with big potential. Sports and entertainment, where season ticket and luxury box prospects and customers needs to be nurtured and developed is one obvious industry ripe for growth. Manufacturing, including medical devices, is an under-served industry.

But I haven't seen any credible numbers aside from SWAGs that the market is 18% penetrated for marketing automation, or 50% if you use email and landing page technology.

So the size of the market answer is great. It's wonderful to have a credible number, but the follow on question is ... so what's the potential? Are we $250MM out of $300? or quarter of a billion out of a fifty billion dollar industry?

That's a huge unanswered question.

Thanks for sharing all this data and hosting the conversation, David!