It’s a fun time of year for MarTech.
And, who doesn’t love a little MarTech M&A, like we saw last week with Marketo’s acquisition of ToutApp?
The acquisition was greeted with a lot of press release repackaging – and that’s it – so here we’ll provide the first real analysis of this big industry news.
There are things we know, and things we don’t know. Some questions we’ll get some insight at Marketing Nation this week, but most of the answers that matter will take longer to develop.
Here’s what we know and don’t know, and the biggest looming question, about Marketo buying ToutApp:
#1 – Marketo is ALL IN on Engagement
Since the arrival of Steve Lucas as CEO last October and the promotion of Chandar Pattabhiram to CMO two months prior, Marketo has put its bet on positioning itself as the “Engagement Platform.”
As part of its seemingly continuous push to move upmarket to the enterprise, the pitch goes something like this:
In today’s dynamic and diverse media landscape, marketers must effectively engage their buyers, across all marketing channels and all stages of the buying process. Great storytelling is the key to effective engagement. Marketo is the platform to deliver those stories – and engage – across the buying process.
We heard a lot of this earlier last week, before the acquisition news hit, in AdAge’s profile of Pattabhiram’s self-described “brand transformation” of Marketo.
Which gets us to the ToutApp news.
The ToutApp news was literally all about engagement.
Of the 304 words in the press release, more than 3% were that word ‘engagement’ – 10 in the body copy, plus one in the headline and two in the boilerplate. ‘Engagement’ trailed only the word ‘Marketo’ which had just 2 more mentions.
Marketo, the Engagement Platform, acquired ToutApp, the Sales Engagement Platform.
#2 – A prominent voice from Marketo’s past isn’t buying in
Jon Miller matters to Marketo.
Miller co-founded Marketo, contributed hugely to inventing the product and their go-to-market, and was the top non-executive officer shareholder with 527,871 shares of stock when Marketo went public in May, 2013. Miller is now founder and CEO of Engagio.
So it caught my eye last Monday, two days before the ToutApp news, when Miller came out with a blog post on Engagio’s blog titled “What’s the Difference Between “Engagement” and Account Based Everything?”
I asked myself, “Why is Jon coming directly at Marketo’s messaging, so strongly?”
Even the touch of putting the word Engagement in quotes in the title, it was clear this was a Marketo takedown point of view.
Miller went on to point out that first of all, engagement is in the lineage of Engagio’s name -- something I’m sure Lucas and Pattabhiram considered, and, ultimately fueled them to double down on Marketo owning that term.
A couple of the key points from Miller are:
“A sequence of automated interactions is not engagement.”
“Sales spam is NOT engagement.”
The first comment above is a shot at how most Marketo customers use Marketo – as a drip email tool. Miller knows this all too well.
The second comment was a lean-in against ToutApp – if ToutApp is used for low quality sales touches, that’s not engagement, that’s just spam.
Of course the truth lies somewhere in between.
What’s most interesting to me about this exchange is there has been a lot of “frenemy” language used by Marketo and Engagio over the past couple years, but with this latest run directly against Marketo’s positioning, the “fr” in that phrase should be dropped.
#3 – Marketo will put more $ around the strategic bet / opportunity cost / integration than the acquisition cost
ToutApp touts (I had to do it) 400 customers, but it’s in a competitive space with SalesLoft, Outreach and others. ToutApp trails both in its G2 Crowd ranking.
There apparently was some dancing between Marketo and ToutApp a couple years back, - when the offer didn’t make sense, but the timing is right for ToutApp now.
My spider sense says this acquisition is an eight-figure deal; where in that range, I’m not certain.
What I do know is that this being Lucas’ first deal since joining Marketo, and it representing a big step forward for Marketo into sales products – the real cost here to Marketo is not the acquisition $, it’s the need to make this a success.
The marketing automation space is getting more and more crowded with HubSpot, Pardot, Eloqua (now Oracle Marketing Cloud) and Act-on all going strong, plus new entrants such as Mautic and SharpSpring. Most significant to Marketo is their focal point for so many years has been Salesforce customers, where Pardot continues to go aggressively after that base leading with extremely aggressive bundled pricing.
The point is – at a time of crossroads for Marketo, this is a key bet Lucas is making to drive Marketo forward, and he needs to make it a success. There’s going to be a lot of wood behind this arrow. The cost of the acquisition is just the beginning.
#4 – Marketo doesn’t have a good track record for integrating acquisitions… but there’s a new management team in place
There’s no existing internal blueprint for acquisition success at Marketo. The blueprint will come from Lucas’s SAP experience in dealing with multi-product enterprise software portfolios.
There are two acquisitions on Marketo’s books – social media marketing company Crowd Factory in 2012 and website personalization engine Insightera in 2013.
The positives of those acquisitions were incoming talent, including Crowd Factory CEO Sanjay Dholakia who was Marketo’s CMO prior to Pattabhiram. There were many challenges, however. The challenges highlight areas that need to be better addressed by the Lucas regime this time around, including product packaging, product integration, impact on the sales organization, and ability to upsell existing customers.
#5 – The ToutApp acquisition closed a gap between Marketo & HubSpot… but there’s still a ways to go when it come to Marketo’s breadth
I bring this up because it’s noteworthy that for the first time Marketo is dipping its toe into sales solutions. Marketo’s Sales Insight is used by sales but has always been sold as an extension of the marketing automation product.
HubSpot is well ahead of Marketo in the sales department as they have built and market their own CRM product as well as sales suite. On the other side of breadth – digital – HubSpot also has its own website content management platform which Marketo does not have a parallel tool.
Marketo still has a ways to go in terms of getting to the full breadth of HubSpot. And given the enterprise / upmarket focus, this may not even be a goal of theirs if they see their current functionality set as the sweet spot they want to focus on and build around.
#6 – There are many questions around what comes next…
I posed the question on LinkedIn to Marketo users on their sentiments around the acquisition. I heard from several Marketo power users including Pierce Ujjainwalla, Dan Radu, Gregoire Michel, and Tim Cerato – and the consensus was positive, with questions on how this would impact the Marketo Sales Insight product, the interface Marketo provides today to salespeople who use Salesforce or Microsoft Dynamics.
These are the questions that will need to be answered in the coming days and months:
- Will ToutApp continue as a separate brand or fold into the Marketo brand?
- Since it’s the first acquisition under the Lucas regime, it will set a precedent… Does Marketo plan to operate as a “branded house” or a “house of brands” ?
- How much further integrated will they make the two products? (There is already an integration in place today)
- Will this and other factors such as Pardot’s Salesforce focus cause Marketo to target growth across a wider range of CRM systems?
- Will Marketo phase out the existing Marketo Sales Insight product?
- Will both the marketing and sales products be sold by the same sales team?
#7 – … Plus this, the biggest question
There’s one more question, the biggest question resulting from all of this, in my eyes.
What’s next for Lucas?
There are two possible paths.
Path #1 is: We’re still going through a major management transition following the Vista buy-out. We’re playing catch up to ensure the Marketo platform has the right technical foundation and Project Orion is implemented and proven at scale amongst our customers. And now we have the ToutApp acquisition. We don’t have a proven track record of acquisitions at this company, so we’re going to spend the time to do this right, and make it successful. That’s the focus for the next 12 months.
Path #2 is: This is just the beginning. We bought ToutApp because we saw it as an underperforming asset and a complimentary product. We’re going to opportunistically add MarTech products under the Marketo house of brands. The LaunchPoint ecosystems gives us a bevy of companies to consider. We see Marketo as a holding company of sorts to acquire, develop and co-market a range of MarTech products.
Lucas gave us a clue into the strategy earlier in the year. In this Silicon Angle interview, he stated “massive consolidation is coming to MarTech.”
Re-reading that article now, Lucas told us this was coming! He said we’d see “significant growth in M&A.” Three months later we get Marketo’s first acquisition. I think we’ll find there’s more to come.
What do you think? Have I captured the key considerations around the acquisition? Which of these seven points do you find most interesting? How do you rate the move? And what do you see coming next? Please share your thoughts below.