Infusionsoft Bags $54 Million for Small Business Marketing Automation, Spends a Bunch on GroSocial

Infusionsoft today announced it has acquired social lead generation vendor GroSocial. This comes two weeks after Infusionsoft raised $54 million in new funding.

GroSocial is an interesting acquisition: about it three years old, it has about 20 employees and more than 25,000 customers.  Starting price is $30 per month after a 30 day free trial.  The system makes it easy for small business to generate leads through social marketing campaigns and track results.  It will continue to operate independently. The deal makes sense and will help Infusionsoft expand its social media capabilities, which have been limited. (TechCrunch reported rumors that the company paid $25-$30 million for GroSocial alone, but that seems high to me.)

Still, the $54 million investment is the more interesting story.  The sheer amount is impressive; previous funding for Infusionsoft totaled just $17 million. According to CEO Clate Mask, most of the money will be used for acquisitions, product development, and accelerated customer acquisition. He said that the new funds will let Infusionsoft grow at about the same 53% pace as last year, compared with the 45% or so they had planned to grow otherwise.

The investment can be read as validation of Infusionsoft’s strategy of offering unified marketing automation, CRM, and ecommerce exclusively for very small businesses. But that isn’t necessary: the strategy is already validated by Infusionsoft's continued growth, with 2012 revenues of $39 million and plans to triple its employee base to 1,000 in the next three years.

I think it's more useful to learn from Infusionsoft’s experiments with deployment models. The company has alternated between charging an implementation fee and not charging for it – and determined that a paid fee, and the more extensive hand-holding this permits, is more effective at building a long-term business. Implementation services go beyond training to actually setting up initial marketing programs. Naturally, Infusionsoft still strives to make its system as easy as possible to use, but its experience shows that new clients still need extensive help.

This conclusion may strike you as obvious. But there is, at least implicitly, a continued debate within the marketing automation industry between vendors who believe that they can make systems smart enough for new users to run without help, and those who believe human support remains essential. The “smart systems” group aims to build sophisticated technology that can automatically gather information, identify the best response, create the appropriate programs, and present them to marketer for approval. The “human support” group believes this level of automation isn’t practical or desirable, and instead focuses on building service organizations to train marketers and, when necessary, do the work for them. Both groups are rejecting the belief that marketing automation systems can be made simple enough for marketers to do the work themselves with either automated or human help.

That third theory – let’s call it the “ease of use” school – has been the dominant approach of the B2B marketing automation industry for the past few years. I’m tempted to say it has failed, and to cite the well-known statistics showing how few marketers use their systems fully.* But “failure” seems a harsh term for an industry growing at 50% per year. Still, there’s a shared sense among industry vendors that there’s a critical shortage of marketers able to use marketing automation tools effectively and that this is limiting industry growth. I increasingly see companies following the other two theories – smarter systems or greater human support – as a way to overcome this. Infusionsoft’s approach is part of this trend.

I myself have always been partial to the "smart systems" approach.  But that may be just because I like technology.  It's certainly true that more companies are following the human services strategy and reporting good success.  Of course, the services strategy is easier to execute: you just hire some sort people, who are admittedly rare but still easier to find the magical marketing robots.  This makes the strategy more appropriate for small marketing automation vendors who can't afford huge technology investments.  Bigger companies are attracted to the technology-based approach because it lets them limit their services staff, which makes them more attractive to investors.  The big companies can also hedge their bets by building up partner networks to provide services.

So the jury is still out on which approach will prevail -- but I do think that "ease of use" by itself is no longer in contention.


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*Actually, I have trouble laying my hands on the actual statistics. Only study I can find is from Loopfuse in 2011, which found just under 30% of marketing automation users do lead scoring. But I’m pretty sure there are others.