The battle for the marketing cloud
The tide can turn quickly in Silicon Valley. The hot, consumer startups of 18 months ago are now yesterday’s news, replaced in the public eye by a new generation of enterprise-focused startups attempting to disrupt the $304 billion that businesses are expected to spend this year on software.
Historically, selling to enterprise has mostly meant selling to, or at least through, IT. But this is changing quickly. The increasingly cloud-based delivery of software is democratizing the technology spend, allowing employees and managers to whip out their credit cards and sample from the emerging class of SaaS startups, without going through IT.
And no corner of the enterprise organization has been busier buying software than marketing.
As a testament to this, in the last two months alone, ExactTarget was snapped up by Salesforce for $2.3 billion, Eloqua acquired by Oracle, Neolane bought by Adobe for $600M, Marketo and Tableau went public, and Hootsuite raised a monstrous $165 million Series B. Each has a well-defined solution aimed squarely at the chief marketing officer. Not IT, not business division heads, the CMO.
It’s not just the established enterprise software companies that are chasing marketing dollars. Earlier stage companies like Influitive, Optimizely, Datasift, Monetate, Bizo, Dynamic Signal and more are all trying to carve out space within the marketing cloud. They’re each targeting specific slices of the CMO’s budget, even those that don’t historically lend themselves to cloud services or even technology.
In terms of understanding how things might play out, it’s useful to start with the CMO budget. How exactly are CMOs spending their money? There are, as you might suspect, spending in a great many ways depending on the individual company, but this graphic, taken from study by industry analyst firm IDC, shows the biggest chunks of the marketing spend.
Every slice of this budget, including direct marketing and, in the wake of mobile devices, even events, are applying cloud-based services to make marketing’s efforts more predictable, measurable and productive. And unlike many IT-based technology trends, marketing applications are drawing from multiple other significant technology trends (like Big Data and mobile) in order to drive innovation.
Let’s use the companies we listed earlier as an example. ExactTarget is clearly focused on email marketing, while Eloqua and Marketo are both focused on automating marketing in general. Neolane and Tableau bring different functions to the digital marketing category (campaign management and data visualization to be specific) and Hootsuite most definitely falls into the social media marketing category. And this is just the tip of the iceberg - every aspect of marketing is now being targeted with cloud services or some other software-based approach, including those not typically thought of being appropriate, such as print advertising or tradeshow and event marketing.
There are three primary characteristics that make CMOs attractive as targets. First and foremost is the almighty dollar - marketing spend is definitely on the rise. Gartner has famously predicted that CMOs will spend more on technology than CIOs by 2017. This is NOT to say that CMOs increased budget will come at the expense of the CIO – as it turns out, CMOs already have their own, larger budgets and an can easily purchase technology with little to no impact on IT departments. Rather, CMOs are going to be allocating more of their existing budgets to cloud services, and enterprise goliaths and startups alike are racing to get in front of this spend.
The second reason CMOs are being targeted is business’ increasing reliance on quantitative, data-driven conclusions when making important organization-wide decisions. Today’s CMO-oriented solutions deliver much more accurate, predictable and concrete analytics that businesses can use to truly grow their businesses, as opposed to some of the softer, anecdotal and qualitative information that has historically driven allocation and messaging. More accurate data means better conclusions and that means better business outcomes. Every CMO wants to understand what they are getting for their spend, and these tools help.
At a causal level, however, the real driver is the reduction of friction in the acquisition and deployment processes. Marketers can now pay with their company credit card and try out any service they want without involving IT. Critically for startups, they can try out many new services and test them against each other. And with user-based pricing, spending can scale up once the software has proven itself to be effective.
So, saying that the “enterprise” is hot right now is a little like saying that “mobile / social” was hot in 2010. You’re right, but it’s time to get more granular.
Marketing’s might is growing within companies, and the landscape of software vendors – both big and small – is evolving to reflect this shift.