5 ms·

Here's some perspective from someone deep within the Salesforce ecosystem: Salesforce has very concretely and deliberately pursued the "imperial" approach in th

by Jd 13y ago

Here's some perspective from someone deep within the Salesforce ecosystem: Salesforce has very concretely and deliberately pursued the "imperial" approach in the B2B/Enterprise market, which is to do a careful survey of existing products in a particular space, the potential revenue to be gained from expanding into that space, and what is needed to get a heads up on existing products. As is generally the case in the enterprise space, this means providing more features than the competitors. There is also a network effect in that the more features and integration points a particular platform has, the more valuable it is. Salesforce has done this extremely effectively, from salesforce automation, to customer relations management, to customer service, etc. In many cases now it is virtually unimaginable not to use Salesforce, since the feature set is so extensive. One note here is that although the UI has had its warts, Salesforce is actually has a much better UI experience compared to most other enterprise apps (lightweight competitors tend to be better, but not deliver the feature set). In any case, marketing is a natural extension for Salesforce at this point and I have ever reason to expect they will be successful at dominating this market segment just as they have in other sectors and points on the value chain. If they have to pay a bit of a stock price premium in order to do so that's not a lot of sweat off Benioff's brow.

at-fates-hands 13y ago
I completely agree. SFDC is really looking for a quick toe hold to get into the market and Exact Target gives them a ready made product and a solid base to integrate with their existing platforms. From there, it's a simple up sell to existing SFDC clients.
inthewoods 13y ago
"Salesforce has done this extremely effectively, from salesforce automation, to customer relations management, to customer service, etc. In many cases now it is virtually unimaginable not to use Salesforce, since the feature set is so extensive." This is the same strategy that Microsoft has pursued for years - and it sometimes works and sometimes doesn't - MSFT going after Intuit comes to mind, as does their own Salesforce.com competitor. ExactTarget is a good large-scale email tool, but it is a very below average marketing automation tool. Now, they purchased Pardot, which is a decent, if basic marketing automation tool - good for small business but nowhere near an Eloqua or a Marketo - more comparable to Hubspot. So the question is how integrated they can make all these various tools. To date the Pardot/ExactTarget integration was rather weak - probably more to come on that front. I could see a world where they use Pardot's front end and ExactTarget just for scale email sending but the existing user base won't appreciate that move. Now, I look at the integration (or lack thereof) with existing Salesforce acquisitions, and I have little confidence that Salesforce will be able to build a world-class, fully integrated product. For reference, look at the integration of Buddy Media or Radian6. So Salesforce may have all the tools, but true integration between the tools has been historically lacking. Now they're adding a company that is strong in B2C email and has a small B2B marketing automation tool that they themselves are trying to integrate. Sounds very complex and difficult - and sounds like something that would take a number of years to get right. The real question for me is what now happens to Marketo and Hubspot - Hubspot, for example, has an investment from Salesforce, but was probably unavailable for acquisition as they want to spin public. Now that Marketo is public, and it looks like their business is not very sustainable (based on my read of the S-1), they'll likely see their stock price dip to the point where they look more interesting as an acquisition to someone. They're valued at around $800m right now - so if they show poor financial metrics, I'd expect that to dip. If they get cut in half, then a pick-up in the $600-800m range becomes viable - about the same price as Eloqua - but I'm not sure who would be the buyer at this point. I think Salesforce did the right thing in terms of topline revenue (ExactTarget does around $300m vs. $65m for Marketo) and customers (ExactTarget has large B2C brands, Marketo mainly B2B), but they bought a far inferior product. Maybe they pickup another company in the space for the product?
- mikecuesta 13y ago
  Not sure I agree that Marketo's business is unsustainable - clearly they want to make more headway in the B2C space; the B2B Marketing Automation market would seem to be saturated, but I would argue that there's still plenty of growth for them for the next 3-5 years, at a minimum. As far as I can tell, ExactTarget's marketing automation capabilities vastly pale in comparison to Marketo or Eloqua, I could be wrong though.
  - inthewoods 13y ago
    Spending 75% of revenue on marketing costs isn't sustainable. Losing $35m a year on $60m in total revenue isn't sustainable.
  - tpiddy 13y ago
    something like 90%+ of Marketo's customers integrate it with Salesforce. Of course Salesforce won't just cut them off if they have a competitor tool, due to anti-trust issues, but it doesn't necessarily bode well for Marketo now that Salesforce owns a competitor. Pardot is a fairly small piece of Exacttarget though so potentially Marketo could still be a target at some point. Larger scale B2C marketing automation is generally much more complex than b2b. Ecommerce databases are generally less normalized across businesses, aren't hosted by an intermediary like salesforce and contain more data. Cross-channel retailers with physical stores track a ton of transactions and customers. I really don't think that any b2b marketing automation platform will make much headway trying to go b2c. Hubspot has some success only because they focus on local and small businesses.
    - dshah 13y ago
      As founder/CTO of HubSpot: We don't really sell much to local businesses. We're in the SMB space but with an emphasis on B2B companies.
- adventured 13y ago
  It works exceptionally well if you can lean into a market fully. Microsoft was heavily constrained by anti-trust issues. Oracle is perhaps a better example of how well it can work than Microsoft. Ellison has openly admitted his strategy was acquired from the Office approach that Microsoft leveraged. Oracle has spent a huge pile of money, far more than Microsoft, in consolidating their space, and all without having a monopoly to lean on.

by Jd 13y ago

at-fates-hands 13y ago

I completely agree. SFDC is really looking for a quick toe hold to get into the market and Exact Target gives them a ready made product and a solid base to integrate with their existing platforms. From there, it's a simple up sell to existing SFDC clients.

inthewoods 13y ago

"Salesforce has done this extremely effectively, from salesforce automation, to customer relations management, to customer service, etc. In many cases now it is virtually unimaginable not to use Salesforce, since the feature set is so extensive." This is the same strategy that Microsoft has pursued for years - and it sometimes works and sometimes doesn't - MSFT going after Intuit comes to mind, as does their own Salesforce.com competitor. ExactTarget is a good large-scale email tool, but it is a very below average marketing automation tool. Now, they purchased Pardot, which is a decent, if basic marketing automation tool - good for small business but nowhere near an Eloqua or a Marketo - more comparable to Hubspot. So the question is how integrated they can make all these various tools. To date the Pardot/ExactTarget integration was rather weak - probably more to come on that front. I could see a world where they use Pardot's front end and ExactTarget just for scale email sending but the existing user base won't appreciate that move. Now, I look at the integration (or lack thereof) with existing Salesforce acquisitions, and I have little confidence that Salesforce will be able to build a world-class, fully integrated product. For reference, look at the integration of Buddy Media or Radian6. So Salesforce may have all the tools, but true integration between the tools has been historically lacking. Now they're adding a company that is strong in B2C email and has a small B2B marketing automation tool that they themselves are trying to integrate. Sounds very complex and difficult - and sounds like something that would take a number of years to get right. The real question for me is what now happens to Marketo and Hubspot - Hubspot, for example, has an investment from Salesforce, but was probably unavailable for acquisition as they want to spin public. Now that Marketo is public, and it looks like their business is not very sustainable (based on my read of the S-1), they'll likely see their stock price dip to the point where they look more interesting as an acquisition to someone. They're valued at around $800m right now - so if they show poor financial metrics, I'd expect that to dip. If they get cut in half, then a pick-up in the $600-800m range becomes viable - about the same price as Eloqua - but I'm not sure who would be the buyer at this point. I think Salesforce did the right thing in terms of topline revenue (ExactTarget does around $300m vs. $65m for Marketo) and customers (ExactTarget has large B2C brands, Marketo mainly B2B), but they bought a far inferior product. Maybe they pickup another company in the space for the product?

mikecuesta 13y ago
Not sure I agree that Marketo's business is unsustainable - clearly they want to make more headway in the B2C space; the B2B Marketing Automation market would seem to be saturated, but I would argue that there's still plenty of growth for them for the next 3-5 years, at a minimum. As far as I can tell, ExactTarget's marketing automation capabilities vastly pale in comparison to Marketo or Eloqua, I could be wrong though.
- inthewoods 13y ago
  Spending 75% of revenue on marketing costs isn't sustainable. Losing $35m a year on $60m in total revenue isn't sustainable.
- tpiddy 13y ago
  something like 90%+ of Marketo's customers integrate it with Salesforce. Of course Salesforce won't just cut them off if they have a competitor tool, due to anti-trust issues, but it doesn't necessarily bode well for Marketo now that Salesforce owns a competitor. Pardot is a fairly small piece of Exacttarget though so potentially Marketo could still be a target at some point. Larger scale B2C marketing automation is generally much more complex than b2b. Ecommerce databases are generally less normalized across businesses, aren't hosted by an intermediary like salesforce and contain more data. Cross-channel retailers with physical stores track a ton of transactions and customers. I really don't think that any b2b marketing automation platform will make much headway trying to go b2c. Hubspot has some success only because they focus on local and small businesses.
  - dshah 13y ago
    As founder/CTO of HubSpot: We don't really sell much to local businesses. We're in the SMB space but with an emphasis on B2B companies.
adventured 13y ago
It works exceptionally well if you can lean into a market fully. Microsoft was heavily constrained by anti-trust issues. Oracle is perhaps a better example of how well it can work than Microsoft. Ellison has openly admitted his strategy was acquired from the Office approach that Microsoft leveraged. Oracle has spent a huge pile of money, far more than Microsoft, in consolidating their space, and all without having a monopoly to lean on.