Teradata Buys Aprimo for $525 Million: More Marketing Automation Consolidation To Come

Summary: Teradata's acquisition of Aprimo takes the largest remaining independent marketing automation vendor off the market. The market will probably split between enterprise-wide suites and more limited marketing automation systems.

Teradata announced today that is acquiring marketing automation vendor Aprimo for a very hefty $525 million – even more than the $480 million that IBM paid for somewhat larger Unica in August.

Given the previous Unica deal. other recent marketing system acquisitions, and wide knowledge that Aprimo was eager to sell, no one is particularly surprised by this transaction. Teradata is a logical buyer, having a complementary campaign management system but lacking Aprimo’s marketing resource management, cloud-based technology and strong B2B client base (although Aprimo has stressed to me more than once that 60% of their revenue is from B2C clients).

This is obviously a huge decision for Teradata, a $1.7 billion company compared with IBM’s $100 billion in revenue. It stakes a claim to a piece of the emerging market for enterprise-wide marketing systems, the same turf targeted in recent deals by IBM, Oracle, Adobe and Infor (and SAS and SAP although they haven’t made major acquisitions).

This enterprise market is probably going to evolve into something distinct from traditional “marketing automation”. The difference: marketing automation is focused on batch and interactive campaign management but just touches slightly on advertising, marketing resource management and analytics. The enterprise market involves unified systems sold at the CEO, CFO, CIO and CMO levels, whereas marketing automation has been sold largely to email and Web marketers within marketing departments.

The existence of C-level buyers for marketing systems is not yet proven, and I remain a bit of a skeptic. But many smart people are betting a lot of money that it will appear, and will spend more money to make it happen. Aprimo is probably the vendor best positioned to benefit because its MRM systems inherently work across an entire marketing department (although I’m sure many Aprimo deployments are more limited). So, in that sense at least, Teradata has positioned itself particularly well to take advantage of the new trend. And if IBM and Oracle want to invest in developing that market so that Teradata can benefit, so much the better for Teradata.

That said, there's still some question whether Teradata can really benefit if this market takes off. Aprimo adds a great deal of capability, but the combined company still lacks the strong Web analytics and BI applications of its main competitors. A closer alliance with SAS might fill that gap nicely...and acquisition or merger between the two firms is perfectly conceivable, at least superficially. Lack of professional services is perhaps less an issue since it makes Teradata a more attractive partner to the large consulting firms (Accenture, CapGemini, etc.) who already use its tools and must be increasingly nervous about competition from IBM’s services group.

The other group closely watching these deals are the remaining marketing automation vendors themselves. Many would no doubt be delighted to sell at such prices. But, as Eloqua’s Joe Payne points out in his own comment on the Aprimo deal, the remaining vendors are all much smaller: while Unica and Aprimo each had around $100 million revenue, Eloqua and Alterian are around $50 million, Neolane and SmartFocus are $20-$30 million, and Marketo said recently it expects nearly $15 million in 2010. I doubt any of the others reach $10 million. (This excludes email companies like ExactTarget, Responsys and Silverpop [which does have a marketing automation component].) Moreoever, the existing firms skew heavily to B2B clients and smaller companies, which are not the primary clients targeted by big enterprise systems vendors.

That said, I do expect continued acquisitions within this space. I’d be surprised to see the 4-5x revenue price levels of the Unica and Aprimo deals, but even lower valuations would be attractive to owners and investors facing increasingly cut-throat competition. As I’ve written many times before, the long-term trend will be for larger CRM and Web marketing suites to incorporate marketing automation functions, making stand-alone marketing automation less competitive. Survivors will offer features for particular industries or specialized functions that justify purchase outside of the corporate standard. And the real money will be made by service vendors who can help marketers fully benefit from these systems.

Aprimo Marketing Studio Supports Sophisticated Business Marketers

Summary: Aprimo Marketing Studio offers powerful features in an on-demand system for sophisticated business and consumer marketers. You know who you are.

When I wrote about Aprimo Marketing Studio in a post last August, I was impressed by the scope of the product but reserved judgment because it hadn’t yet been launched. I took a look at the actual product last week. Bottom line: Aprimo delivered what they promised.

Like Aprimo itself, Marketing Studio is a bit of an oddity because it serves both business and consumer marketers. The needs of these two groups don’t necessarily conflict, but they do diverge. This means that a system for both will include several features needed by only one group or the other. Placing them all in the same product adds cost and complexity, which are not a software developer’s friends.

Aprimo has not found a magical solution to this dilemma. Rather, it has conceded the lower tiers of business marketing to simpler systems and aimed Marketing Studio at marketers who need greater sophistication and will accept higher cost and complexity to get it. (For more on vendor classifications, see my list of demand generation vendors from last November.)

In other words, Marketing Studio competes with high-end demand generation systems like Eloqua, Market2Lead and Neolane. Neolane may be the most similar, since it also straddles the business and consumer marketing worlds.

(Small digression: most business marketing systems are designed around data from a sales automation system such as Salesforce.com. But consumer marketers also need inputs from transaction systems. Marketing Studio and Neolane don't have a problem because they can support any data structure. Eloqua and Market2Lead are based on sales automation data, but can incorporate external tables. Other business marketing systems generally cannot.)

As I mentioned earlier, what originally most impressed me about Aprimo Marketing Studio was its scope. This starts with the core functions of any business marketing system: outbound and multi-step email campaigns, landing pages, Web behavior tracking , lead scoring, Salesforce.com integration, reporting and content management.

The system then draws on Aprimo’s heritage in marketing management to add detailed cost tracking, project management, asset workflow including annotation and commenting on PDFs, and a flexible campaign calendar. These are handled crudely, or not at all, in many business marketing products. In Marketing Studio, they are well-implemented with advanced features and an attractive, intuitive interface.

Project management is especially powerful. Project plans include specific tasks assigned to individuals and linked with dependencies. Plans can automatically modify themselves in response to events: for example, if a piece of copy is rejected, the system can add a new set of review and revision steps. This is done by creating the project as a branching flow chart, with rules to determine what takes place at junction. These rules can insert a predefined subflow, such as the review and revision process, which itself is shared across multiple projects. Good stuff.

System scope also extends to inbound marketing. Marketing Studio offers a blog engine tailored to corporate needs: managers can review and approve posts; the system can automatically notify Twitter, LinkedIn and Facebook of new post; and each blog topic is assigned a different URL, which helps with search engine rank. Another module lets marketers create Adobe Flash-based Web ads, while an offer manager module tracks the user of offers across promotions. Paid search campaigns are supported through integration with Omniture SearchCenter.

Of course, the bells and whistles wouldn’t matter if the core features were poor. But Marketing Studio handles these quite nicely as well.

Email campaigns can execute as batch projects or trigger dialogs. The system treats these separately, although they are built with the same drag-and-drop flowchart interface. Batch campaigns include powerful segmentation supported by a sophisticated query builder, splits and merges. Batch flows can also update data attributes, calculate lead scores, create personalized URLs, add and remove names from groups, send email and generate output lists for other media.

Trigger dialogs have most of the same capabilities except for the advanced segmentation. In addition, they support wait periods and can send leads and alerts to the sales system. Unlike many demand generation products, Marketing Studio supports circular and merging flows, which can simplify design of complicated programs.

People enter a campaign by being added to a group. This can happen when a list is imported from an external file or the sales automation system, when people submit a Web form or click on an email or page link, or as a step within a campaign flow. External systems can also add names through the Marketing Studio API. Because either type of campaign flow can itself add a name to a group, the possibilities for controlling campaign entry and movement across campaigns are basically unlimited. Trigger campaigns execute immediately when a new lead is added to their group, allowing real-time interactions.

Other core features are similarly powerful. Users can build HTML emails, Web pages and multi-page microsites. Emails and Web pages can dynamically select content blocks based on rules that read the attributes of each recipient. Web forms and surveys are also content blocks, so the same rule-based selections can manage branching surveys and progressive profiling (i.e., asking different questions based on what is already known about an individual). The same rule-building interface is used for content selection rules, segmentation queries, and lead scoring. This reduces the amount of user training.

Lead scoring supports multiple scores per person, which is typical in high-end demand generation systems. More impressively, Marketing Studio can also apply multiple rule-sets to the same score calculation. For example, it could use different rules for leads from different geographic regions.

The system can capture Web visitor behavior directly or integrate with Omniture SiteCatalyst. One advantage of using Aprimo’s own Web tracking is that results are available in immediately, compared to nightly with Omniture. Marketing Studio can identify the company of anonymous visitors based on their IP address and retain the history of anonymous visitors when they identify themselves by filling out a form.

Salespeole working with Salesforce.com can see a list of their leads with priority ratings. They can then click on a name to see a digital activity profile (emails sent, links clicked, forms completed, Web site visits). This profile can include activity captured within Marketing Studio or imported to the Marketing Studio database from other systems. Users can drill further into each profile to see the underlying details of each activity. Still within the Salesforce.com interface, salespeople can send an email through Marketing Studio, add a lead to a Marketing Studio campaign, and edit, convert, clone, dedupe or remove the lead record. If the administrator chooses, Salesforce.com users can also open a Marketing Studio portal to see the marketing calendar, assets, lead lists, activity requests, content reviews, project tasks and reports.

Speaking of reports: the system includes 150 standard reports, which users can customize or supplement by creating their own with a basic report writer.

Pricing of Marketing Studio is competitive with other high-end business marketing systems. Fees are based on a combination of database size, email activity, number of users and modules deployed. The starting level is about $4,000 per month, which includes the core marketing features for ten users and up to 100,000 contacts or 250,000 emails. Fees including hosting and email execution. The marketing operations module adds $2,500 per month and other modules such as social media, banner ads, Web analytics and Web alerts add $1,500 each.

Aprimo was founded in 1998 and has more than 200 clients on its original marketing system, which offers modules for marketing automation and marketing resource management. Marketing Studio was launched in September 2009 and at this writing has 22 clients, including a mix of business and consumer marketers.

Aprimo Marketing Studio Expands the Scope of Marketing Automation

Summary: Aprimo Marketing Studio includes traffic generation features missing from nearly all existing marketing automation products. This broader scope should become standard as marketers try to truly integrate their programs.

Aprimo is in the early stages of launching Aprimo Marketing Studio, a new Software-as-a-Service marketing automation suite that is separate from the existing Aprimo product.* The new offering is designed to support all stages of interactive marketing, starting with traffic generation from paid search, Web banner ads and blogging, and continuing with visitor behavior tracking, landing pages and forms, interactive dialogs, multi-step email campaigns, lead scoring and CRM integration. These are supported with Web analytics and extensive marketing operations features including workflow, digital asset management and financial analysis.

If you read that list quickly, it sounds pretty much like every other marketing automation vendor. But in fact it’s a substantially broader scope than I’ve seen in other products.

- Consumer-oriented systems generally limit themselves to outbound email and multi-step campaigns, and sometimes provide real-time recommendations to call centers and Web sites.

- Business-oriented (demand generation) vendors add some Web support through visitor tracking, landing pages and forms, but even they rarely do much with other “inbound marketing” channels including paid search, banner ads, search engine optimization and blogging.

- Both sets of vendors generally do a decent job with asset management, Web analytics and other reporting, although only the consumer-oriented systems tend to offer serious support for planning, workflow and detailed financial analysis.

- Neither group provides tools to build and manage a major corporate Web site (generally called "Web content management", although I've labeled it "Web site management" in the following table). The landing pages, forms and related content management that these systems do provide are only designed to let marketers supplement an existing site. I'm increasingly convinced that effective interactive marketing will eventually require the marketing system to run the Web site.

- Neither group has meaningfully integrated social media monitoring and interactions beyond making it easy to share posts to Twitter and Facebook, although Alterian’s Techrigy acquisition (see my related blog post) and Pedowitz Group’s Sweet Suite (see yesterday's post) are steps in that direction.

I've summarized this in the following table. Of course, I’m generalizing about sets of vendors so there will be individual exceptions.

functionality provided:	consumer marketing automation	business marketing automation (demand generation)
traffic generation:
- paid search management
- banner ad management
- search engine optimization
- blogging
- outbound email	x	x
- social media monitoring, intervention and analysis
relationship management
- Web landing pages and forms		x
- multi-step campaign flows (including trigger, event-driven)	x	x
- real time recommendations to external systems	x
- lead scoring		x
- sales automation integration		x
analytics
- Web visitor tracking (individuals)		x
- Web analytics (aggregate behaviors)	x	x
- general campaign reporting	x	x
- predictive modeling and advanced statistics	x
operations
- marketing planning	x
- content and digital asset management	x	x
- Web site management
- workflow	x
- detailed cost analysis	x

In short: both groups are quite weak when it comes to inbound marketing and social media, and the consumer marketers fall glaringly short when it comes to integrating with Web sites.

The business marketing systems have their own weaknesses, particularly in operational support. But given the obvious and growing need to integrate Web marketing with everything else, the consumer systems’ gap strikes me as more important.

I’m even more concerned because there has been relatively little innovation among the consumer marketing automation vendors in recent years. They have competed mostly by extending and refining existing features than by moving into major new areas. The demand generation vendors have been much more dynamic.

There are good business reasons, or at least explanations, for the consumer marketing vendors' strategy. Number one is probably that their clients haven’t been pushing them to do more. But these gaps in their capabilities ultimately make them vulnerable to new, more comprehensive competitors.

This brings us back to Aprimo Marketing Studio. The new Aprimo product would fill every box on my table except social media, predictive modeling and Web site management. This scope makes it truly different.

Now, promising these features and implementing them effectively are very different things. I can't judge the new Aprimo system because I haven't had a detailed demonstration and the system won't start serving live customer until next month. (The official launch will be in November at the Salesforce.com Dreamforce conference.) But what matters for now is the vision. Even if Aprimo doesn’t execute it immediately, someone else eventually will.

I already mentioned that Marketing Studio is designed as a true Software-as-a-Service system. As discussed in an earlier post, this is unusual for a consumer marketing system – Entiera and Neolane are the only other pure SaaS products I can think of – although it’s standard for demand generation products. Aprimo already serves both types of marketers, so it's a logical candidate to bring SaaS to consumer marketing systems. But other consumer-oriented vendors are also moving in this direction. When you're evaluating those products, the question to ask is whether the vendor has truly reengineered the system to take advantage of SaaS economies, or is simply running its existing software in a hosted mode and sending a monthly bill.

Aprimo Marketing Studio is aimed at mid-size and larger companies. Pricing begins at $4,000 per month for the base version with up to 10 users and 250,000 emails. The marketing operations module adds another $2,500 per month and other modules are priced at $1,500 each. There will also be fees as clients add users and email volume. At the end of the day, Aprimo is expecting the average client to pay $50,000 to $75,000 per year. This is pretty standard territory for consumer marketing systems, but well above the median for demand generation vendors.

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* The new product has its own Web site, which you can reach here. The site offers a free copy of an excellent Forrester Research report on interactive marketing, which is well worth the inevitable Aprimo sales call that will follow.