So, it turns out that while I’ve been obsessing over vendor selection workbooks, our friends at marketing automation vendor Alterian up and got bought last week by language technology vendor SDL for about $107 million. Why didn't somebody tell me?
I’m most familiar with SDL as a Web content management vendor, although their financial statements show that just over 75% of their revenue comes from manual and automated language translation. The company had more than $300 million revenue last year and is nicely profitable.
Alterian hasn’t been doing so well lately, with about $55 million revenue for the past year and cash-basis loss around $6 million. Management has also been in flux: CEO David Eldridge resigned in April, a new CEO Heath Davies was named in July, and president and co-founder Michael Talbot resigned in October. The company was nearing the end of a 100 day restructuring plan that dropped its headcount from 440 to 260. It had also taken several red-flag accounting actions including restating revenue, changing its revenue recognition policy, and taking large asset write-downs.
You math whizzes out there will have already noted that the purchase price is just under 2x revenue, compared with the 5x-ish prices paid a year ago for Unica and Aprimo. Whether this puts a damper on the prospective valuations of other marketing automation vendors is hard to say: Alterian was obviously struggling, and its main business model was to license its software to marketing service providers rather than selling it directly or via Software as a Service. On the other hand, Alterian did have some SaaS components to its business, notably SM2 social media monitoring (formerly Techrigy).
Alterian also had a bold vision of extending beyond traditional campaign management and analytics to include marketing resource management and web content management as well as social media. I’d still argue the strategy was correct, but that Alterian didn’t have the financial resources or market clout to execute it. Certainly its costs got ahead of its revenue: at 440 employees on $55 million revenue, it had just $125,000 revenue per employee, compared with the $200,000 I consider standard (see my post from last January on revenue ratios -- even at that time, when Alterian had just 370 employees, it was already below par.)
SDL’s chairman is quoted as saying that “The marketing analytics, campaign management and social media were the big attractions” of Alterian, so presumably the company will keep those businesses. The content management piece, about 27% of Alterian sales, will presumably be merged with SDL’s much larger Web content management business.
The big question for the marketing services providers who are Alterian’s primary customer base is how SDL will treat them, since they are not SDL’s current core clients. That’s more than a little scary, especially given the dearth of alternative mid-priced marketing automation systems for consumer marketers. (See my list of B2C vendors from September and my discussion of the differences between B2B and B2C marketing automation from October.)
On the brighter side, I can argue that the Alterian acquisition supports my long-standing contention that marketing automation and Web content management will eventually coalesce into a single system. Any gloating is restrained by the fact that Alterian had already combined the two and didn’t succeed. But this probably just shows that deep pockets will be needed to pull off the combination in a world where the competitors are heavyweights like IBM, Oracle, Adobe, SAS and Teradata.
Showing posts with label integrated systems. Show all posts
Showing posts with label integrated systems. Show all posts
Tuesday, December 06, 2011
Tuesday, August 16, 2011
Can CRM Add-Ons Replace Marketing Automation?
I’ve long believed that B2B marketing automation is just a passing phase: that, ultimately, B2B marketing automation systems will be absorbed into CRM systems instead of operating independently. It’s a view I discuss sparingly in public, since so many of my friends in the marketing automation industry have a vested interest to the contrary. But there are also a few vendors who have bet in favor of merged systems, so it wouldn’t be fair to ignore their view entirely.
Vendors have made the bet by building marketing automation add-ons to a CRM system instead of building a stand-alone marketing automation product.* I wrote in February about ClickDimensions, which adds advanced email campaigns and Web tracking to Microsoft Dynamics CRM. Of course, the jackpot here is Salesforce.com. At least two vendors have tried to hit it: Predictive Response and BizConnector, whose product is Lead Follow-Up.
Of the two, BizConnector’s Lead Follow-Up is more tightly focused, offering primarily a rules engine that allows lead nurturing and other workflows. It also provides real-time alerts and landing pages. Predictive Response has a broader range, with more advanced email features, including split tests, content templates, and branching campaigns, as well as Web visitor tracking, lead scoring, dashboards, and some data cleansing on form entries. Neither matches the scope of even a mid-tier marketing automation product, but many of the “missing” features would be available in other Salesforce add-ons. So the real question is whether the core campaign management features are adequate substitutes for a marketing automation product.
That question has no simple answer. Lead Follow-Up would probably suffice for small organizations, although it’s targeted more at individual salespeople than marketing departments. Predictive Response (which I have not examined in depth) might serve small and mid-tier marketing groups but probably not large enterprises.
Beyond these particular products lies the larger question of whether their CRM-based approach makes more sense than the separate-but-synchronized platforms offered by most marketing automation vendors. Each method has advantages:
- separate systems can present specialized marketing functions without getting in the way of sales activities.
- separate systems can use database designs optimized to process the entire database at once, instead of the one-record-at-a-time transactional processing needed for sales and service interactions.
- separate systems give each department complete control over its own system, something both groups often prefer.
On the other hand….
- unified systems avoid the need for data synchronization, which reduces complexity, eases cross-department coordination, and eliminates most risk of inconsistency.
- unified systems simplify deployment and support, especially from the perspective of the IT group (although this should be a minor factor in Software-as-a-Service systems, since most work is handled by the vendor).
- unified systems should save money, although it's not clear they do in practice.
The main technical issue here is whether marketing and CRM systems need different database structures. But even if that’s true, one vendor can provide and synchronize both structures at least as easily as separate vendors. Similarly, if separate user interfaces are really necessary, one system can offer both. So the technical differences are largely irrelevant.
Instead, the argument for separate systems really comes down the political desire of each department to have its own system, and a somewhat related expectation that a vendor focused exclusively on marketing automation will build a better system than a small division within a CRM company.
I actually accept those arguments. Vendors serving either marketing or sales will probably do a better job than vendors trying to serve both. But I don’t think this will matter in the long run. As marketing automation requirements become better understood, the CRM-based products will come closer to meeting marketers’ needs. As the functional gap narrows between the two sets of products, the convenience and cost advantages of a unified system will swing the balance in their direction. This will be reinforced by the business need for tighter coordination between sales and marketing, as well as the larger role played by corporate IT groups in selecting customer-related systems. Only marketing departments with very sophisticated needs will be able to justify buying a specialized marketing automation product.
In short, the merger between B2B marketing automation and CRM seems inevitable. In the B2B world, where sales is generally the dominant department, this means that CRM will encompass marketing automation rather than vice versa. The mechanics of the process are less predictable: CRM vendors might expand their features incrementally, acquire add-on systems, or buy a marketing automation product and integrate it. Different vendors may take different paths and move at different rates. But however they get there, I think the destination is clear.
_________________________________________________________
* For very small companies, vendors including Infusionsoft and OfficeAutoPilot have made the bet by offering their own CRM / marketing automation combination.
Vendors have made the bet by building marketing automation add-ons to a CRM system instead of building a stand-alone marketing automation product.* I wrote in February about ClickDimensions, which adds advanced email campaigns and Web tracking to Microsoft Dynamics CRM. Of course, the jackpot here is Salesforce.com. At least two vendors have tried to hit it: Predictive Response and BizConnector, whose product is Lead Follow-Up.
Of the two, BizConnector’s Lead Follow-Up is more tightly focused, offering primarily a rules engine that allows lead nurturing and other workflows. It also provides real-time alerts and landing pages. Predictive Response has a broader range, with more advanced email features, including split tests, content templates, and branching campaigns, as well as Web visitor tracking, lead scoring, dashboards, and some data cleansing on form entries. Neither matches the scope of even a mid-tier marketing automation product, but many of the “missing” features would be available in other Salesforce add-ons. So the real question is whether the core campaign management features are adequate substitutes for a marketing automation product.
That question has no simple answer. Lead Follow-Up would probably suffice for small organizations, although it’s targeted more at individual salespeople than marketing departments. Predictive Response (which I have not examined in depth) might serve small and mid-tier marketing groups but probably not large enterprises.
Beyond these particular products lies the larger question of whether their CRM-based approach makes more sense than the separate-but-synchronized platforms offered by most marketing automation vendors. Each method has advantages:
- separate systems can present specialized marketing functions without getting in the way of sales activities.
- separate systems can use database designs optimized to process the entire database at once, instead of the one-record-at-a-time transactional processing needed for sales and service interactions.
- separate systems give each department complete control over its own system, something both groups often prefer.
On the other hand….
- unified systems avoid the need for data synchronization, which reduces complexity, eases cross-department coordination, and eliminates most risk of inconsistency.
- unified systems simplify deployment and support, especially from the perspective of the IT group (although this should be a minor factor in Software-as-a-Service systems, since most work is handled by the vendor).
- unified systems should save money, although it's not clear they do in practice.
The main technical issue here is whether marketing and CRM systems need different database structures. But even if that’s true, one vendor can provide and synchronize both structures at least as easily as separate vendors. Similarly, if separate user interfaces are really necessary, one system can offer both. So the technical differences are largely irrelevant.
Instead, the argument for separate systems really comes down the political desire of each department to have its own system, and a somewhat related expectation that a vendor focused exclusively on marketing automation will build a better system than a small division within a CRM company.
I actually accept those arguments. Vendors serving either marketing or sales will probably do a better job than vendors trying to serve both. But I don’t think this will matter in the long run. As marketing automation requirements become better understood, the CRM-based products will come closer to meeting marketers’ needs. As the functional gap narrows between the two sets of products, the convenience and cost advantages of a unified system will swing the balance in their direction. This will be reinforced by the business need for tighter coordination between sales and marketing, as well as the larger role played by corporate IT groups in selecting customer-related systems. Only marketing departments with very sophisticated needs will be able to justify buying a specialized marketing automation product.
In short, the merger between B2B marketing automation and CRM seems inevitable. In the B2B world, where sales is generally the dominant department, this means that CRM will encompass marketing automation rather than vice versa. The mechanics of the process are less predictable: CRM vendors might expand their features incrementally, acquire add-on systems, or buy a marketing automation product and integrate it. Different vendors may take different paths and move at different rates. But however they get there, I think the destination is clear.
_________________________________________________________
* For very small companies, vendors including Infusionsoft and OfficeAutoPilot have made the bet by offering their own CRM / marketing automation combination.
Thursday, September 23, 2010
Do Small Businesses Need Marketing Automation?
Summary: Vendors who target small businesses include provide functions beyond traditional marketing automation. This helps business owners who need to generate revenue as efficiently as possible. But larger firms need to be efficient too: so expect all marketing automation systems to eventually expand in similar ways.
The replies are rolling in from the survey of vendor features that I mentioned last week. (Reminder: you can upload the 150+ questions for your own RFP from www.raabguide.com.)
One interesting reaction has come from vendors serving the smallest companies (I’m talking really small here -- under 10 employees). These include Genoo, Hubspot, Infusionsoft and OfficeAutoPilot. A couple have noted that my questions only cover standard marketing automation functions (email, landing pages, nurture campaigns, lead scoring, CRM integration and reporting), while their products offer additional functions. The most common added function is sales force automation, but some also offer different combinations of e-commerce, order processing, customer support, blogging, Web site optimization and paid search.
On one level, this broader scope makes perfect sense. Small companies don’t have the money to pay for multiple systems and, probably more important, lack the technical resources to integrate them. In addition, most small firms have pretty basic needs, so even the “light” editions of full-featured products like Salesforce.com can be overkill.
But if small companies really want a single system, why hasn’t one grown to dominate the marketplace? Vendors like NetSuite do offer such products, but they’re not targeted at very small businesses. Rather, the most successful small business systems tend to do one thing: think accounting (Intuit Quickbooks), Web hosting (Godaddy), email services (Constant Contact) or CRM (Salesforce.com).
Some of these vendors have tried to poach on other territories, but without much success. I think that’s because there is relatively little interaction between the different systems. As a result, small businesses haven’t felt much pain from keeping them separate.
Marketing among very small businesses is often limited to a bit of local advertising and a Web site. Among those who use actual marketing systems, the most common are simple outbound email. More aggressive businesses might add auto-responders such as Aweber, with pricing as low as $19 per month for 500 subscribers. From there, it's a logical progression to the small business marketing automation vendors I mentioned earlier, although the big jump in prices poses a hurdle: costs start upwards of $200 per month.
The progression from outbound email to auto-responder to nurture campaigns and the rest of marketing automation makes perfect sense, corresponding to new marketing efforts as a business grows more sophisticated. But broader scope inevitably encroaches on other existing systems.
In the case of marketing automation, landing pages encroach on Web hosting and search engine optimization vendors while marketing databases encroach on CRM and social media management. As the elephants in those fields begin to notice flea bites from marketing automation systems, they’ll eventually consider extending their own systems in return. We’ve already seen this with Oracle’s purchase of Market2Lead (now apparently embedded in the Oracle OnDemand CRM system) and, depending on how you look at it, in IBM’s purchase of Unica. We’ve also seen various Web content management vendors (Marqui, SiteCore) add marketing functionality.
Generally speaking, nipping the ankles of elephants is more likely to get you crushed than make you rich. But the case may be different for marketing automation vendors. This will depend on showing that they’re replacing a cost center (e.g. Web hosting, customer service) with a revenue generator, or that their integrated approach yields more revenue than the current isolated systems (e.g. sales automation, search engine marketing, outbound email).
This means that the small business vendors who feel my survey is too narrow are right. Their buyers need more than traditional marketing automation features. I expect vendors in that space will continue to expand their scope accordingly, even as vendors in other spaces add marketing automation features for the same reason. And I expect this broader scope will eventually percolate upwards to larger companies, although this will happen more slowly because of organizational barriers to cooperation.
The replies are rolling in from the survey of vendor features that I mentioned last week. (Reminder: you can upload the 150+ questions for your own RFP from www.raabguide.com.)
One interesting reaction has come from vendors serving the smallest companies (I’m talking really small here -- under 10 employees). These include Genoo, Hubspot, Infusionsoft and OfficeAutoPilot. A couple have noted that my questions only cover standard marketing automation functions (email, landing pages, nurture campaigns, lead scoring, CRM integration and reporting), while their products offer additional functions. The most common added function is sales force automation, but some also offer different combinations of e-commerce, order processing, customer support, blogging, Web site optimization and paid search.
On one level, this broader scope makes perfect sense. Small companies don’t have the money to pay for multiple systems and, probably more important, lack the technical resources to integrate them. In addition, most small firms have pretty basic needs, so even the “light” editions of full-featured products like Salesforce.com can be overkill.
But if small companies really want a single system, why hasn’t one grown to dominate the marketplace? Vendors like NetSuite do offer such products, but they’re not targeted at very small businesses. Rather, the most successful small business systems tend to do one thing: think accounting (Intuit Quickbooks), Web hosting (Godaddy), email services (Constant Contact) or CRM (Salesforce.com).
Some of these vendors have tried to poach on other territories, but without much success. I think that’s because there is relatively little interaction between the different systems. As a result, small businesses haven’t felt much pain from keeping them separate.
Marketing among very small businesses is often limited to a bit of local advertising and a Web site. Among those who use actual marketing systems, the most common are simple outbound email. More aggressive businesses might add auto-responders such as Aweber, with pricing as low as $19 per month for 500 subscribers. From there, it's a logical progression to the small business marketing automation vendors I mentioned earlier, although the big jump in prices poses a hurdle: costs start upwards of $200 per month.
The progression from outbound email to auto-responder to nurture campaigns and the rest of marketing automation makes perfect sense, corresponding to new marketing efforts as a business grows more sophisticated. But broader scope inevitably encroaches on other existing systems.
In the case of marketing automation, landing pages encroach on Web hosting and search engine optimization vendors while marketing databases encroach on CRM and social media management. As the elephants in those fields begin to notice flea bites from marketing automation systems, they’ll eventually consider extending their own systems in return. We’ve already seen this with Oracle’s purchase of Market2Lead (now apparently embedded in the Oracle OnDemand CRM system) and, depending on how you look at it, in IBM’s purchase of Unica. We’ve also seen various Web content management vendors (Marqui, SiteCore) add marketing functionality.
Generally speaking, nipping the ankles of elephants is more likely to get you crushed than make you rich. But the case may be different for marketing automation vendors. This will depend on showing that they’re replacing a cost center (e.g. Web hosting, customer service) with a revenue generator, or that their integrated approach yields more revenue than the current isolated systems (e.g. sales automation, search engine marketing, outbound email).
This means that the small business vendors who feel my survey is too narrow are right. Their buyers need more than traditional marketing automation features. I expect vendors in that space will continue to expand their scope accordingly, even as vendors in other spaces add marketing automation features for the same reason. And I expect this broader scope will eventually percolate upwards to larger companies, although this will happen more slowly because of organizational barriers to cooperation.
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