Acquisitions Reshape the Marketing Automation Industry: Growth at the Bottom, Room in the Middle, Fog at the Top

Raab Associates officially released the new edition of our B2B Marketing Automation Vendor Selection Tool (VEST) yesterday. This is our flagship report on the industry, with nearly 200 data points on 23 vendors and separate ratings for micro-business, small to mid-size companies, and enterprise marketing departments. There are quite a few vendor comparisons out there, but none come close to the level of detail in the VEST – and details are what you really need to select a system. I personally suggest that anyone interested in the industry buy a copy for themselves and another for someone they love. See www.raabguide.com/vest for details.

I genuinely enjoy catching up with the vendors while preparing the VEST, but must admit that my favorite part of the process is analyzing the data once it’s assembled. Sadly, the wave of acquisitions that swept the industry in the past year has made this harder: many major vendors are now part of a public company, which severely restricts the information they can share. We’ve probably passed a tipping point where so much information is hidden that I can’t draw a clear picture of industry growth rates or competitive positions.

The table below shows the data available and highlights the holes. I’ve grouped the vendors into three buckets based on the market sectors they serve: micro-business (under $5 million revenue), small to mid-size business ($5 to $500 million), and large enterprises (over $500 million).

You’ll immediately see that the “not reported” information is concentrated among companies serving mid-size and enterprise clients, which is where all the acquisitions to date have taken place. Neolane is an exception but only because they provided the VEST information just before Adobe acquired them in June. I doubt we’ll see new numbers from them in the future. Marketo was mostly missing until they provided key figures in their earnings call this afternoon. Thanks, guys.

I've summarize my thoughts on this data with three oh-so-catchy phrases: growth at the bottom, opportunity in the middle, and fog at the top.

Growth at the Bottom: the green shading in the client growth column highlights companies reporting a year-on-year increase of 60% or more. What jumps out is the concentration at the top of the chart, in the micro-business sector. Four of the five micro-business vendors grew more than 60% and the fifth (Venntive) grew at a far-from-shabby 54%. There’s too much missing data in the other sectors to say for certain that the micro-business vendors are growing the fastest, but it sure looks that way. My interpretation is that the micro-business sector is the least mature and still presents the greatest untapped opportunity – even if buyers are still limited to the small proportion of business owners who are “tech geeks”.

Room in the Middle: Marketo's client count increased just 36% from mid-2012 to mid-2013 (although they’re projecting 54% revenue growth for 2013 vs. 2012).  We can no longer see the growth rates for mid-market heavy weights Pardot and Eloqua, but I’d be surprised if they beat Marketo.  They're certainly not close to the 67% to 90% rates reported by LeadFormix, Act-On, and eTrigue. I suspect Pardot, Eloqua and Marketo will increasingly focus on selling to enterprises, and in Marketo’s case on expanding footprint within existing clients. If so, this might open the way to faster growth by the next tier of mid-market vendors, who are mostly still private.  (LeadFormix is the exception, but seems to be pretty much left alone by its corporate parent). The clear winner in this scenario is Act-On, which has ample venture funding and has indeed been growing very rapidly. They are already the first vendor since Pardot to break the 150-employee barrier (blue shading). Silverpop and HubSpot might also benefit but neither is fully focused on standard B2B marketing automation. Other vendors would need outside funding to squeeze through what will probably be a briefly open window.

Fog at the Top: My visibility into enterprise B2B marketing automation was always clouded because of cross-over by B2C vendors including IBM, SAS, Teradata, and Neolane. It is now completely obscured except for sporadic glimpses of details that vendors choose to reveal. But even if everyone shared all their data with me, the enterprise picture would remain foggy because enterprises are increasingly integrating marketing automation with advertising , sales, service, and Web management. This makes it increasingly meaningless to treat marketing automation as a distinct category. Of course, that integration is exactly why the enterprise vendors purchased all those marketing automation systems in the first place.

If integration really happens at the top then we'll end up with a bizarre symmetry, since the enterprise market will be mirroring the integrated sales / CRM / Web / ecommerce products already bought by micro-businesses.  This would leave stand-alone marketing automation as a niche product for mid-tier companies. It would be a very large niche, but squeezed between broader suites from above and below and, eventually, challenged from within by integrated suites built for mid-market companies. The obvious response from marketing automation vendors is to build those broad suites themselves or to create platforms that are the foundation of such suites. That’s exactly what the larger mid-tier companies are doing, but it’s an expensive proposition. Any small mid-market companies who want to play must grab whatever fleeting opportunity the market offers today for growth, before they are locked out for good.

Marketo's Engagement Engine Simplifies Complex Marketing Automation Campaigns

I’ve long said that the best campaign design would be one circle: the system executes the best treatment for each customer, waits a day, and repeats. My point is that elaborate, branching flows are too complex for most marketers to build and maintain, and – because reality is infinitely messier than even the most sophisticated flow chart – will often give customers a sub-optimal treatment.


It’s probably just as well that no vendor has ever built a system based on my design. But the good folks at Marketo have taken a step in that direction with their latest enhancement, which they call an “engagement program”. It has more than one step but does get away from the idea of a rigid, branching campaign flow. Instead, it is organized in terms of “streams” that contain pools of content. Once a customer is added to a stream, the system will offer the next piece of content whenever a contact is due according to the campaign cadence. What’s next is set by the order of content within the stream: users just drag content into the container and put on top the ones they want sent first. The system will go through the content in this order during each execution (which Marketo calls a “cast”), and send each person the first item they have not already received. This avoids duplicate messages and lets the system deliver a defined series of messages without explicitly setting up a sequence. It also makes it almost effortless to insert a high priority message that goes to everyone or to swap out contents as new materials become available.

As you’ll immediately notice, sending the next thing isn’t quite the same as sending the best next thing.  In my ideal world, the content would be selected by calculating the value of each item for each individual and taking the highest. This would only take a small tweak in the current approach, which is one reason I like what Marketo has done. Marketo does in fact plan to apply predictive modeling to the system, although I think they're trying to find the most effective content sequence for all customers, rather than scoring content at the individual level.

There’s quite a bit more to the new Marketo feature than I’ve described so far. Content can actually be a multi-step program of its own, such as a sequence of messages to promote and manage a Webinar. Content can also have availability dates that are enforced automatically, so future messages can be added at any time and obsolete messages are automatically discontinued. One thing that’s missing is eligibility rules on content, to let users specify who is allowed to receive it. This is a key feature in traditional decision management systems, permitting customer-level customization within a fixed priority sequence. But Marketo users can achieve the same thing by embedding content within programs, which do have such rules, and adding the programs to the stream instead of the content itself. This is Marketo’s recommended approach because it also provides better data for reporting.

Users can further tailor treatments to customers by setting up multiple streams within one engagement program.  Each stream has “transition rules” that pull in qualified customers from other streams.  This is less rigid than having selection rules in one stream push customers to another stream.  It's not quite clear what happens if someone qualifies for more than one stream: Marketo's position is that would only happen if you make a mistake.  I think reality is not so tidy.  Marketo is considering letting marketers prioritize the transitions based on the position of the streams, just as they prioritize contents within a stream.

In any event, customers can only be in one stream at a time, so they won’t receive multiple messages from the same engagement program. Whether they receive messages from multiple programs is controlled by Marketo’s standard communication limit features, which can set a maximum number of messages per day and per week. Users can decide whether those limits apply to any particular program. The system also lets salespeople or other programs pause messages from an engagement program to an individual customer.

The new package includes a good set of reports that track content usage and results.  They also provide an “engagement score” that combines several success metrics into a single value. Other reports show how many people in the program have run out of content – a good way to ensure the company doesn’t lose touch with them. Surprisingly, there's no report on movement from one stream to the next. But Marketo says this can be set up using their revenue performance management module, which tracks movement of customers across other types of stages.

The engagement engine is included in all Marketo versions, although lower-level versions have some limits.  Adding a more powerful version to the Standard edition of Marketo starts at $295 per month.

Added Thought: Marketo engagement programs are a type of state-based system, an idea that has been tried from time to time in marketing systems and is currently the basis of Whatsnexx.   As the name implies, state-based systems assign customers to categories and then define treatment rules within each category.  Unlike the sequential flow of a traditional multi-step campaign, customers in a state-based system remain in the same category so long as they meet its membership conditions. State-based systems typically reclassify all members at the start of each cycle, which is different from Marketo's approach of relying on transition rules to pull customers from one stream to the next.  This means that someone could remain in a stream even though they no longer met its entry criteria.  This is something Marketo might want to reconsider.

Vocus Marketing Suite: Still Mostly Social But Marketing Automation is On the Way

If you’ve heard of Vocus at all, it’s probably as vendor serving public relations professionals. Its core offerings include a huge database of media contacts; media monitoring and social listening; and press release distribution. But since late 2011 the company has also offered a suite aimed at marketers, which now has more than 4,000 paid clients.

Even in the small business sector, that count would make Vocus one of the largest marketing automation systems.  But Vocus doesn’t quite match the profile of standard marketing automation products.  It lacks the Salesforce.com integration of B2B systems (due early next year), the lightweight CRM of micro-business systems, and the lead scoring and distribution of both. On the other hand, it does offer email and landing pages, two marketing automation basics, as well as several features borrowed from Vocus PR software.  So it's best to treat Vocus Marketing Suite as a class unto itself.

The product's two most intriguing features draw on Vocus’ monitoring of social media and news outlets. “Recommendations” finds conversations on client-specified topics across 130,000 online outlets, 10,000 print outlets, 35 million blogs, and posts on Twitter, Facebook, and other social sites. It presents these to Vocus clients with an interface that suggests a reaction but lets users decide how to reply or repost across several social channels. Clients can have Vocus add new topics, a process that takes a couple of weeks to allow testing and fine-tuning of the selection mechanism. “Recommendations” will also identify influencers for a selected topic, based on actual influence (number of reposts or references) rather than the number of followers.

“Buying Signals” draws on Twitter only. It identifies Tweets with a dozen or so purposes related to a client’s product, such as fact checking, asking for recommendations, shopping, or reporting that something has been lost or broken. As with Recommendations, users are presented with a list of messages they can review and reply to individually as appropriate.

Other features include press release posting via Vocus’ PRWeb subsidiary; Facebook promotions such as sign-up pages, sweepstakes, and fan offers; a central image library; and management of local directory listings. I’ve already mentioned email, which is reasonably powerful, and landing pages. The email engine will be enhanced with multi-step campaigns by the end of this year. Other traditional marketing automation features will be added as well.

User rights are organized around “profiles”, which might relate to a company, brand, or product line. Users are either assigned to a profile or not; there are no finer divisions of rights for specific features. This approach makes sense for small businesses – the bulk of the system's current client base – and for marketing agencies who manage separate profiles for each client.

Pricing is defined in tiers ranging from $3,000 to $30,000 per year, based on the number of profiles, amount of content monitoring, email volume, press release formats, and other variables.

As both the pricing variables and features suggest, Marketing Suite is still mostly a social media monitoring and public relations tool. This will change as Vocus adds conventional marketing automation features. But until those features mature, companies who want to do much beyond email will find they need a separate marketing automation product as well.

Optify Lets Agencies Provide Small Business with Marketing Automation, Distributed Marketing, and Sales Enablement

In case you were wondering, I see four themes emerging today in B2B marketing automation:

• services: vendors are bundling their systems with services to help marketers use them, either by offering the services themselves (LeadLife, MakesBridge, Ontraport (formerly OfficeAutoPilot), RightWave, SalesEngineInternational) or by creating versions that agencies resell to their clients (Optify, MindFireInc, many others).

• sales enablement: systems to share marketing information with sales (Genius, SalesFusion, LeadFormix, RightOn Interactive, Optify)

• distributed marketing: systems shared between central marketing organizations and local branches, dealers, distributors, sales agents, etc. (NitroMojo, Marketing Advocate, OptifiNow, Optify, Balihoo)

• new options for small business: systems targeted at very small businesses (Venntive, Optify, Vocus)

The first three trends strike me as defensive: small vendors need niches to compete against the huge resources of the big general purpose marketing automation products, who are all now part of larger companies (Eloqua, Pardot/ExactTarget), public (Marketo) or heavily funded (Act-On, HubSpot). By contrast, the fourth trend seems to be driven by recognition that small business presents a huge opportunity.

I only mention this because I’ve recently been looking at a lot of new (to me) vendors and haven’t been able to write about many of them. Placing them in the larger industry perspective gives me a chance to at least drop all their names and makes it easier to decide which to profile next. I’ll use the extremely scientific approach of selecting Optify, since it appears in all four categories.

Optify was founded in 2008 and launched its original product, a search engine optimization (SEO) tool, about a year later. Its primary clients were then, and still remain, digital marketing agencies. Both the agencies and their clients have been mostly small businesses – in the survey for our soon-to-be-published VEST report, Optify reports that 60% of its clients have under $5 million revenue. This makes it a system for both small business and service vendors: two of my four themes. Its distributed marketing capabilities stem from its agency roots, since the fine-grained, hierarchical permissions needed to let one agency manage installations for multiple clients are similar to the permissions needed to distribute permissions between central marketers and local affiliates. That's theme number three.

Finally, Optify has expanded into conventional marketing automation over the past 18 months and most recently added basic contact management and distribution of lead information, scores, and alerts to sales people. This is enough sales enablement to complete its sweep of the four themes.  I guess I should send them a t-shirt or something.

You can also think of Optify as having worked its way down from the top of the funnel (SEO) to the middle (marketing automation) and towards the bottom (CRM). This will remind marketing automation aficionados of HubSpot, which has made a similar journey. The biggest obvious difference (if you ignore HubSpot’s $100 million or so in venture capital funding) is that HubSpot offers its own blogging and Web content management, while Optify provides WordPress and Drupal plug-ins for visitor tracking and landing pages.  This is the standard approach among marketing automation products – as Optify says on its Web site, “We know you already have a website and a favorite marketing CMS.” The system can also create Facebook landing pages and track visitors to them.

What Optify does offer inbound marketers is extensive support for search engine optimization.  This includes detailed research into keyword rankings for the client and competitors, analysis of Web pages for features that improve search ranks, an inbound link manager, and a Twitter client to publish posts and embed trackable URLs that measure campaign results.

Moving towards the middle of the funnel, Optify offers reasonably powerful email and landing page builders, based on templates or HTML. Landing pages can be attached to an auto-responder email, while standard fields on forms are automatically mapped to Salesforce.com. Emails are delivered through ExactTarget. Users can create lists and segments based on all contact properties, activities, email history, and custom fields. There are no real multi-step campaigns, however.

Sales enablement includes lead scoring, with multiple scores per lead; alerts based on search keywords and lead scores; a live ticker showing current Web site visitors with companies identified via reverse IP lookup; and appending of company data from Dunn & Bradstreet. The system can send each salesperson a daily email of newly qualified leads, selected with shared rules or separate rules for each salesperson.. Salespeople can view their contact list, drill down to individual profiles, aand drill further to see behavior details – even as far as each page viewed during a Web site visit. Users can send the contact a system email or add it to a list.

CRM integration is currently limited to sending data to Salesforce.com. A proper API for bi-directional integration with any CRM system is under development.

Reporting is a particular strength.  Optify can build a unified contact profile by connecting names, email addresses, social accounts, and multiple cookies for the same person, using site log-ins, email clicks, and form submits on different devices. This lets reports show Web visits, conversions and other subsequent activity from search, social, and email campaigns.  A dashboard lets users pick widgets to display selected information.  Data can be exported to Excel, which is what many of Optify's agency clients prefer.  The company is planning an API to let clients export data directly.

 All told, this is a pretty reasonable package for a small business marketing system. It’s broadly similar to the scope of small business leaders Infusionsoft and Ontraport, although those products offer more elaborate campaigns and process flows. Pricing is also competitive with other small business systems if not especially cheap: company marketers pay based on page views and emails sent; starting at $350 per month for 10,000 views and 25,000 emails, . Agency pricing is based on the number of Web sites and email volume. Distributed marketing also has its own pricing.

Optify has more than 400 agency clients and many more individual sites using the system.

Venntive Adds Communities to Small Business Marketing Automation and CRM

It has taken me some time to form a clear picture of Venntive. It is clearly “all-in-one” sales and marketing software for small business, combining marketing automation, CRM, and ecommerce along the lines of Infusionsoft and Ontraport (formerly OfficeAutoPilot). It also includes full Web site management and social media monitoring and posting, but those are natural extensions for sales and marketing.  More puzzling was Venntive’s decision to include a full accounting system and a community management features such as private discussion forums, Wikis, events, and custom fields for groups within its database. The other micro-business systems have avoided accounting, presumably because they saw little value in trying to displace Intuit QuickBooks. And community management – well, that just doesn’t have much to do with how most small businesses operate.

The hint at an answer – a giant flashing neon sign, actually – was in Venntive CEO Lydia Sugarman’s description of its client base, which my notes recorded as “chambers of commerce, schools, Boy Scout troops, coaches, law firms, financial advisors and associations”.

You can be certain that this is the first time “Boy Scout troops” has come up as a category of marketing automation users. But Venntive makes perfect sense once you consider their needs.  A scout troop has many subgroups that need to communicate among themselves: how better to manage that field trip to the National Duck Stamp Museum?  They also have simple finances and simple Web sites. Venntive’s pricing model – starting at $25 per month for up to 1,000 contacts, with unlimited email – also fits a small organization without a big prospect list, since it would pay about that amount for basic email and Web hosting.

In fact, Sugarman said the custom fields for groups were originally added to track Boy Scout merit badges – although they’re now used more often for things like dealer certifications.

Venntive's scouting heritage notwithstanding, I want to make clear that it is suited for much larger organizations.  Venntive offers the full set of “all-in-one” system features, meaning it can serve the full set of “all-in-one” clients: those coaches, law firms, financial advisors, and others that Sugarman mentioned, plus online retailers, service companies, and small manufacturers. In fact, Sugarman said most of the company’s clients are B2B not B2C marketers.

One problem with writing about a system like Venntive is evaluating its huge number of features.  In some alternate universe where sleep is optional, I would have explored each function in depth before writing about it. But things don’t work that way on my little corner of planet Earth.  The best I could do was take a whirlwind tour of the system and capture some screenshots. Based on that limited research, I came away impressed with the sophistication of the features as well as their scope.

Let’s start with the group functions, since groups are such a key component of Venntive. At the simplest level, a group is just a list. People enter groups in the usual ways: email or form response, user-defined filters, conversion events, list import, or manual assignment. Entry can trigger an email, assignment to a drip campaign, or sales agent notification. So far pretty normal. But groups also support those community and collaboration features.  Members can share discussion forums and Wikis and be assigned rights such as access to specified information about each other. Each group can also have a parent organization, member log-in, physical location, custom fields, and its own settings for email, event, and drip campaign practices. Beyond membership organizations, those group functions could support all sorts of peer-to-peer communications, arguably making Venntive just the thing for cutting-edge, community-driven marketing.

Looking at the other functions:

- emails can be built on user-customizable system-provided templates, on imported templates, or from scratch.  They can include social sharing buttons, surveys, event links, contact data, or dynamic content selected by embedded if-then rules. Completed email can be previewed and spam scored. The system can automatically assign recipients to different groups based on their response (read, click, forward, or take a survey).

- surveys are built from a list of independent questions.  This means all answers to the same question are automatically placed in the same data field, regardless of where the question is asked. That’s the right way to do it, at least in my opinion.

- events can be either physical or on-line. The system stores details about the location, captures registrations, collects fees, offers multiple options for reminder emails and text messages, and reports on actual attendance after the fact.

- CRM goes beyond the basics (contact attributes, activity history, calendar reminders) to track opportunities and sales quotes, allow searchable tags for segmentation, and store files associated with a contact. Standard integration with RapLeaf let users add demographic, interest, and purchase data from external sources by matching on email address.

- lead scores are created in two ways: conventional user-created scoring rules, and automated predictive modeling. There are two conventional scores, one for activities and one for demographics.  The demographic score is based on contact attributes, while the activity score incorporates contact activities (email, Web, event, survey, purchase, and social behaviors) plus salesperson activities (sent an email, left a messages, etc.).  Activity values can be set to decay as time passes, which is one hallmarks of advanced lead scoring. While there's just one pair of conventional lead scores, users can have as many predictive model scores as they want.  Each score predicts visits to a different Web page, typically representing a stage in the purchase process. The system automatically looks at the demographic, activity, and CRM data to build a model formula and score the contact records.

- campaign features in Venntive are uncharacteristically limited.  Users can set up a sequence of emails, but there is no branching based on response and emails are the only action a campaign can control directly.  Users gain a bit more power from the ability of email response rules to assign contacts to different categories.  But this is still far from the process automation that adds great value to other micro-business systems. 

- Social media support includes keyword searches and alerts; real-time or scheduled posting to multiple Twitter, LinkedIn and Facebook accounts; and detailed tracking of results. This is a reasonable set of features for a small business system.

- The Web site builder is much more robust.  It supports pages, blogs, member sign-in, stores, coupons, advertising, support tickets, and tracking via Google Analytics. Users can assign point values to specific pages for use in lead scoring and can see a list of who visited each page. Venntive hosts the Web site for its clients, but clients can assign their own Web address to hide this.

- Financials include account tracking, journal entries, receivables management, and reporting. Invoices are automatically added from CRM and Web orders and funds can be collected via PayPal. The system can also integrate with QuickBooks.

- There’s also project management, a media library, SMS messaging, and print integration. And probably other things I haven’t mentioned.

Given the depth of its features, Venntive’s interface is reasonably straightforward. But there's a lot to learn and users will need help.  Each screen include buttons for on-demand videos explaining individual functions. There are also video tutorials and non-video explanations (using a technology called "text") for users over age 30.

Pricing of Venntive is based primarily on the number of contacts in the system, starting at $25 per month for 1,000 contacts. A system with up to 25,000 contacts would be $200 per month. There are some additional fees for extra users, Web analytics, SMS messaging, and external data. Users can send unlimited emails.

Venntive was launched in 2006 and is nearing its 1,000th client.