FICO Buys Entiera Marketing Automation: Another Independent Option Gone

Three weeks ago, Intuit shook up the low end of the marketing automation universe by purchasing small business marketing shooting star Demandforce. Last week the action shifted to the high end, where FICO announced its purchase of Entiera, one of the few remaining enterprise class products.

FICO, the company formerly known as Fair Isaac and originator of the influential FICO credit score, first dipped its toe into marketing automation services and software when it acquired DynaMark in 1992. Since then, the company has continued to grow its marketing offerings, through acquisition and internal development.  But it sell these largely as add-ons to its core predictive analytics products. FICO statements make clear that Entiera will continue this strategy, both by providing new capabilities for event-triggered to existing clients and by making the full set of FICO products available to smaller companies.

FICO’s backing will certainly allow Entiera to sell to more companies. But, in sharp contrast to the Intuit/Demandforce deal, I see this acquisition as shrinking rather than increasing competition in the relevant market segment. Entiera was one of the few independent vendors still chasing the business of mid-size and enterprise marketing automation buyers. This group had already been reduced with the acquisition of Alterian by SDL last December and of SmartFocus by eMailVision the previous April. Of the firms on my list of B2C options from last September, only a handful (Neolane, Decision Software Inc, RedPoint and ClickSquared are primarily selling marketing automation software. The others are either more oriented to email services (ExactTarget, and I should add Responsys and Silverpop) or have minimal industry presence (MarketingPilot, Pitney Bowes' Portrait Software, Conversen, SmartSource Online, etc.).

In theory, FICO could finance a significant expansion of Entiera’s independent business. With $620 million in 2011 revenue and over $100 million operating cash flow, the company could certainly afford it. But marketing services are clearly just a sideline for FICO. So it’s likely they’ll use Entiera’s technology to support sales of their core analytical products to current customers and perhaps to deliver them more cost-effectively to new customers. That’s great for FICO and for Entiera’s founders. But in a segment where most of the major products are already owned by giant corporations (IBM, Teradata, SAS), marketers now have one less young vendor hungry for their business.

Salesforce.com Announces Site.com Web Site Management: Will Marketing Automation Features Follow?

Salesforce.com yesterday announced the launch of Site.com, an enterprise-class Web site management system. The news didn’t seem to get much attention, perhaps because Salesforce.com itself pretty much buried it. But Salesforce.com VP of Product Management Anshu Sharma did post a detailed explanation of the rationale on a Salesforce.com blog.

My original reaction was “I told you so”, since I’ve been talking about the convergence of CRM and Web site management for years. (Here’s a piece from 2009.)  Sharma’s reaches a similar conclusion although he puts it in a larger context of social media (people expect to interact with a company Web site like they interact on social media), cloud,  and mobile computing (marketers need content that can be presented on all types of devices). So far so good, especially since multi-channel content is another trend I’ve been toying with for some time.  (Not that I'm bragging or anything.)

Just to clarify my argument, the case for convergence between CRM and Web site management boils down to the fact those are the two main systems that companies use to interact with consumers. The move closer as Web sites capture more individual-level information and present more personalized treatments. And, as the two giants converge, the marketing automation industry stands between them like a mushroom, waiting to be crushed or gobbled up (if giants eat mushrooms).

Some of that gobbling has already begun.  Web site management vendor SDL purchased Alterian last November and sales enablement vendor CallidusCloud bought LeadFormix in January. Ironically, speculation about Salesforce.com itself buying a marketing automation system had pretty much died down since last August’s Dreamforce conference, when the firm made it pretty clear they didn’t have plans in that direction (notwithstanding their earlier HubSpot investment).

That’s why I was greatly intrigued by Sharma’s statement that the transformations created by social, cloud and mobile technologies “can only bear long-term fruit and deliver on the full promise of a 'digital marketing platform' when marketing and IT are a true partners.”

 That’s the first Salesforce.com reference I can find to a “digital marketing platform”.  It certainly implies something that includes marketing automation functionality. Maybe the reason Salesforce.com decided not to purchase marketing automation system because they figured same functions would evolve organically from a combination of CRM and Web site management. That’s probably correct, although it would take longer than adding those features directly.

In any event, the combination of CRM and Web site management gives Salesforce.com an integrated database containing all the information needed for effective marketing automation. Building marketing automation features to exploit that information then becomes a lot easier than building a complete marketing automation system.  This applies whether the system providing those features comes from Salesforce.com or an AppExchange partner, and it means the barrier to entry is lower than ever.  In short, the Site.com announcement is big news for the marketing automation industry, whether people recognize it or not.

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.

Doughnuts and Pizza Slices: Analyzing Consolidation and Competition Among Software Vendors

Summary: One way to understand consolidation and competitive trends affecting marketing software is to look at systems across several dimensions: how closely they relate to customers; whether they are operational or analytical; and whether they support online or offline activities. Combining these provides interesting insights into who competes with whom and what they're likely to do next.

On Wednesday, IBM announced formal completion of its acquisition of Unica. On Thursday, the New York Times reported speculation that Microsoft could buy Adobe.

Coincidence? Yeah, probably. And probably nonsense to boot.

But from my admittedly marketing-centric view of the world, Microsoft / Adobe makes more sense than one might think, as did IBM / Unica. Here’s how I think of things:

If you consider software applications from the view of customer relationships, they form a set of nested circles -- or perhaps a pile of doughnuts seen from above. At the center is the universe of potential buyers. The applications that reach these anonymous masses are applications that manage advertising.

The next circle holds marketing applications, which deal with both identified and unidentified prospects. The circle surrounding that holds CRM systems, which deal with identified customers as well as prospects. Surrounding that are ERM systems, which encompass both customer-facing and back-office applications. You can further extend the model by adding a circle for software platforms (operating systems and databases) and another for hardware.


Each larger circle can include the functions within the smaller circles. Thus, a marketing automation system like Unica or Aprimo includes advertising management; CRM systems like Salesforce.com provide marketing automation; and ERM suites like SAP and Oracle include CRM. Operating systems, databases and hardware support them all. In practice, the specialists in each field tend to be better than components of the larger surrounding suites: this is the essence of a “best of breed” strategy.

So far so good. But a system's relation to customers is just one dimension. Systems can also be classified functionally as operational or analytical, and as dealing with online or offline activities. If you combine those in a two by two matrix, this results in four classes of systems, which correspond nicely to real-world products: online operations (Web site management and ecommerce), online analysis (Web analytics), offline operations (traditional ERM systems) and offline analysis (business intelligence).


Things get really interesting (to me, at least) when you combine these two models. A complete solution for any application includes all four of the matrix quadrants: operations, analytics, online and offline components. So the application's "doughnut" extends through each quadrant.


The other way to look at this is to treat all systems within each quadrant as a unit. Keeping with our junk food theme, let's call those pizza slices.


I find the combination of doughnuts and pizza slices a useful way to think about the relationships among industry vendors. Functional systems tend to start out as pizza slices: general solutions that cut across all applications within their quadrant. Applications typically start out as doughnut quarters: that is, specialists within a single quadrant, usually operations. For example, CRM systems started out mostly as offline operational solutions for call centers and sales automation; marketing automation began largely as campaign management for offline contacts by direct mail and telemarketing.

Functional vendors expand first by thickening features within their original quadrant and then by spreading into adjacent quadrants. Thus, offline operational systems can grow either by adding offline analytics or by adding online operations; online analytical systems can grow by adding online operations or offline analytics; etc.

Applications vendors expand by first completing their own doughnut and then moving into adjacent doughnuts, typically inward: ERM vendors beef up their CRM capabilities (e.g., Oracle buys Siebel Systems); CRM vendors add marketing capabilities (Pegasystems purchases Portrait Software); and marketing automation vendors add advertising support such as planning and marketing resource management (Unica buys MarketingCentral). It’s harder to move in the other direction, since the vendors in the surrounding circles are typically larger.

What makes IBM / Unica so interesting is that IBM has been buying pizza slices (CoreMetrics, Sterling Commerce, Cognos, SPSS) while Unica is a doughnut. The combination is tough to digest. Do you slice up Unica’s various components and reassign them to the Web operations, Web analytics and business intelligence units? Or do you keep the doughnut together and enrich it with parts of the other products? What happens to that little offline operations slice (direct mail, call center, etc.)? And do you fill in the center (advertising support) with something more substantial?

Adobe started as a specialized application for offline operations (printing), which would make it a thin pizza slice. It has grown by thickening its offline features and, more recently, by expanding into adjacent slices: online operations and, with the Omniture acquisition, online analytics. It has also narrowed its focus towards the center of the pizza, on the marketing and advertising doughnuts.

This narrowed focus is what makes Adobe an interesting partner for Microsoft. Microsoft doesn’t have much of the Web analytics slice and would like to strengthen its position in the marketing and advertising doughnuts. The blogger who called the Microsoft rumor “nonsense” suggested that Google is a more likely partner, basically as an anti-Apple move. That makes some sense, but Google already lives in the online marketing and advertising slice, so Adobe would just thicken their presence. Google would like to complete the offline portions of its marketing and advertising doughnuts, but Adobe doesn’t help much there. And I don’t think Google has much interest in moving into Adobe’s other slices.

The "junk food chart" offers quite a few other insights. One is the opportunity for many marketing automation vendors to grow by adding more advertising support -- a major weakness in most products. Another is the likelihood that Web site vendors and Web analytics vendors will themselves push more actively into marketing automation. A third would be the challenge that big online vendors will face in growing if they don't more into offline operations like CRM. You can also plot individual companies on the chart to see how they stack up against competitors both within and outside their existing markets. It's interesting stuff and a great way to work up an appetite.

IBM Buys Unica: Will Acquisitions Now Shift to B2B Marketing Automation?

IBM announced this morning that it was purchasing enterprise marketing automation leader Unica for $480 million, more than double the company’s current stock market valuation. This is wholly unsurprising: as the last and only big independent left in its space, Unica was obvious acquisition bait. It was also a motivated seller, since it faced an increasingly impossible struggle to fund the product enhancements necessary to compete with the likes of SAS, Teradata and Siebel / Oracle. Conversely, IBM is on a customer intelligence acquisition spree that has already included Coremetrics Web analytics, Sterling Commerce B2B integration and Cognos and SPSS business analytics.

There’s been some comment (I’m looking at you, Jonathan Block of SiriusDecisions) relating the IBM/Unica deal to consolidation with the B2B marketing automation industry. Sorry, but I don’t see a connection. As I discussed in my own post on industry consolidation, Unica belongs to the class of marketing systems that serve consumer marketers. Its acquisition is basically the completion of the consolidation of that space, not the start of consolidation among B2B marketing automation vendors. (I’m overstating a bit: there are a couple of B2C vendors left including Neolane, Alterian and SmartFocus, although the latter two use proprietary database engines that would make them difficult to integrate into a larger enterprise suite. Probably the most prominent survivor is Aprimo, but they’re more B2B.)

If there’s any connection at all, it’s that this acquisition may spur Web content management vendors to accelerate their own acquisition of marketing automation capabilities. I discussed this a bit in my post on Adobe’s acquisition of Day Software and in the industry consolidation post. Given that there are so few B2C marketing automation vendors left, the Web content management players are almost forced to consider buying a B2B marketing automation system. (The other option would be email vendors like ExactTarget and Responsys.)

This isn’t really a bad thing: the B2B marketing automation products have pretty much all the capabilities of the B2C systems and then some. On the other hand, most B2B systems are designed for smaller data volumes and have less flexible data structures.

The bottom line is probably that the upper tier B2B marketing automation vendors (Eloqua, Silverpop, Aprimo, possibly Marketbright) are next in line to be bought. But you already knew that.