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I'm curious about that retention rate - most companies that I know that have gone with Marketo have made a long term beat - not just the software but in terms o

I'm curious about that retention rate - most companies that I know that have gone with Marketo have made a long term beat - not just the software but in terms of implementation, training, data, et al. I'd be surprised if Marketo has a 75% retention rate - I'd expect it to be much higher. Now, they also sell at both the SMB and the Enterprise level, so his numbers maybe right on average. Now that being said, I do think Marketo's business model seems to be upside down - and I'm a Marketo customer. What I expect to happen: crappy number over a number of quarter drive the price of the stock down to where they are worth about $500-600m (vs. about $1b now) - then someone buys them for $800m (about the same price as Eloqua went to Oracle). $800m would be close to what Eloqua went for (multiple-wise).

patio11 13y ago
I would have guessed closer to Jason's number, but they quote a retention rate close to 100% in SEC filings. http://investors.marketo.com/secfiling.cfm?filingID=1047469-13-6257&CIK=1490660 http://investors.marketo.com/secfiling.cfm?filingID=1047469-... Subscription Dollar Retention Rate. We believe that our subscription dollar retention rate provides insight into our ability to retain and grow revenue from our customers, as well as their potential long-term value to us. Accordingly, we compare the aggregate monthly subscription revenue of our customer base in the last month of the prior year fiscal quarter, which we refer to as Retention Base Revenue, to aggregate monthly subscription revenue generated from the same group in the last month of the current quarter, which we refer to as Retained Subscription Revenue. Our Subscription Dollar Retention Rate is calculated on an annual basis by first dividing Retained Subscription Revenue by Retention Base Revenue, and then using the weighted average Subscription Dollar Retention Rate of the four fiscal quarters within the year. Our Subscription Dollar Retention Rate was approximately 100% for each of 2011 and 2012. Or, if you're wondering how that accounting maps to operationas, "Marketo's upsells to customers in year N+1 almost exactly cancel churn in yearly subscriptions since year N, when aggregated." [Edit: Whoops, now that I think about it, they're sort of juicing that metric by construction. In a growing company with 1 to 3 year payment terms, quarter-to-quarter churn could be very close to zero even without churn being near-zero.]
- hncommenter13 13y ago
  As a public market investor, this sort of thing drives me batty. Many companies won't release an actual churn rate, but only a "dollar retention rate," as above. Yelp is one of them. While the dollar retention rate is certainly nice to know, knowing the actual customer (logo) churn is critical to evaluating the cost of acquisition and overall profitability. As Jason points out, if it costs too much up-front to acquire each customer, you can still go broke even with a nice-looking dollar retention rate--you still have to pay to acquire the customers you lose.
CBC440 13y ago
Marketo's costs for enterprise level service requires a long term bet. The company I work for has invested millions in Salesforce integration but 8 months later I've received 1 lead which was dead wrong. Our industry doesn't lend itself well to social marketing so that may be part of it, but I wonder how many businesses will actually see a return from using Marketo. Executives stuck in the sunk cost fallacy will keep them going for a few years even in their worst accounts. Their market presence is so recent that their retention rate has nowhere to go but down.
- inthewoods 13y ago
  I have to ask: what did they spend millions of dollar on in terms of Salesforce integration? The software is integrated with SFDC right out of the box (it is, as they say, a native SFDC app - whatever that means). It took us a total of 6 weeks to launch and about 1-2 weeks of work on the SFDC side. Are you counting just their services, or other things? Just my opinion, but if your company spent that much money on integrating Marketo with Salesforce, something is deeply, deeply wrong.

patio11 13y ago

I would have guessed closer to Jason's number, but they quote a retention rate close to 100% in SEC filings. http://investors.marketo.com/secfiling.cfm?filingID=1047469-13-6257&CIK=1490660 http://investors.marketo.com/secfiling.cfm?filingID=1047469-... Subscription Dollar Retention Rate. We believe that our subscription dollar retention rate provides insight into our ability to retain and grow revenue from our customers, as well as their potential long-term value to us. Accordingly, we compare the aggregate monthly subscription revenue of our customer base in the last month of the prior year fiscal quarter, which we refer to as Retention Base Revenue, to aggregate monthly subscription revenue generated from the same group in the last month of the current quarter, which we refer to as Retained Subscription Revenue. Our Subscription Dollar Retention Rate is calculated on an annual basis by first dividing Retained Subscription Revenue by Retention Base Revenue, and then using the weighted average Subscription Dollar Retention Rate of the four fiscal quarters within the year. Our Subscription Dollar Retention Rate was approximately 100% for each of 2011 and 2012. Or, if you're wondering how that accounting maps to operationas, "Marketo's upsells to customers in year N+1 almost exactly cancel churn in yearly subscriptions since year N, when aggregated." [Edit: Whoops, now that I think about it, they're sort of juicing that metric by construction. In a growing company with 1 to 3 year payment terms, quarter-to-quarter churn could be very close to zero even without churn being near-zero.]

hncommenter13 13y ago
As a public market investor, this sort of thing drives me batty. Many companies won't release an actual churn rate, but only a "dollar retention rate," as above. Yelp is one of them. While the dollar retention rate is certainly nice to know, knowing the actual customer (logo) churn is critical to evaluating the cost of acquisition and overall profitability. As Jason points out, if it costs too much up-front to acquire each customer, you can still go broke even with a nice-looking dollar retention rate--you still have to pay to acquire the customers you lose.

CBC440 13y ago

Marketo's costs for enterprise level service requires a long term bet. The company I work for has invested millions in Salesforce integration but 8 months later I've received 1 lead which was dead wrong. Our industry doesn't lend itself well to social marketing so that may be part of it, but I wonder how many businesses will actually see a return from using Marketo. Executives stuck in the sunk cost fallacy will keep them going for a few years even in their worst accounts. Their market presence is so recent that their retention rate has nowhere to go but down.

inthewoods 13y ago
I have to ask: what did they spend millions of dollar on in terms of Salesforce integration? The software is integrated with SFDC right out of the box (it is, as they say, a native SFDC app - whatever that means). It took us a total of 6 weeks to launch and about 1-2 weeks of work on the SFDC side. Are you counting just their services, or other things? Just my opinion, but if your company spent that much money on integrating Marketo with Salesforce, something is deeply, deeply wrong.