June 4, 2013
This morning, salesforce.com announced plans to acquire marketing technology ExactTarget for $2.5 billion, a 53% premium over ExactTarget's (ET) closing price on . My colleague Rob Brosnan and I put our heads together to think about the ramifications of this deal for the marketer clients we work with.
We think the deal is a win for salesforce.com (SFDC). It brings SFDC market-leading campaign execution capabilities to round out SFDC access to customers (and their data) across the decision cycle. For B2B marketers, especially those already using ET’s Pardot, the deal brings good integration and development possibilities. But the deal goes much further than B2B, and it isn't so rosy for ET’s B2C customers. We expect:
· A clash of cultures. Both SFDC and ET are ambitious and innovative firms. But we think ET clients used to the warm, Midwestern nature of their account teams might find the aggressive, Silicon Valley nature of SFDC a jarring influence. Culture matters and ET knows it. We'd definitely rather work with a firm that cares about client and employee smiles as well as success than one proud to poke fingers in its competitors' eyes.
· A decline in email excellence. ET clients told us that service quality waned when ET staffers were "distracted" prepping for the company's IPO in early 2012. We expect an even more pronounced dip now as ET works through terms of the acquisition instead of innovating around its messaging platforms and services. Of course, with SFDC at the helm, ET strategy will also have new influencers. And the ET business will only be one of several for SFDC to prioritize. Past experiences prove that this often leads to employee turnover, priority reallocation, and sometimes diminishing emphasis on formerly core competencies. All of which spell disappointment for ET clients.
· Limited advantage gained by traditional ET B2C customers. Salesforce's sales and service products do not extend ET's core offering. Indeed, the acquisition likely will slow down the already much-needed unification of the disparate technologies and data structures underlying ET's Email, Audience Builder, Automation Studio, Social Engage, and Mobile products. Integration with salesforce.com is likely to take precedence over unification in the near term.
This acquisition will also change the dynamics of the broader marketing technology market. Specifically, this deal:
· Clouds the prospects of unifying anonymous and known customer interactions. The rise of addressable media and ubiquitous connectivity demand that vendors move to a new technology foundation. Big data technologies like Cassandra, HBase, and MongoDB promise to stitch together the disparate methods of engaging customers across paid, owned, and earned media, many of which take place without traditional customer identifiers. Salesforce's heritage of focusing on defined sales opportunities and service cases will likely shield ET from pressure to provide a common solution for known and anonymous interactions.
· Raises the specter of further market consolidation by large players. By making a bold move into not just automation, but digital media, salesforce.com will raise pressure on Adobe, IBM, Microsoft, SAP, and other traditional enterprise application providers to make similar moves, raising the valuations of Responsys, Neolane, and Silverpop. Salesforce can now monetize both seat licenses and media CPMs and clearly wants to create a billion-dollar business line in the marketing cloud. We are likely to see further consolidation this year in response, meaning that marketers will have fewer choices overall, and fewer choices in marketing-technology specific providers.
· Creates a yin-and-yang pricing dynamic that damages innovation. As a large, established vendor, salesforce.com will make it easier for marketing departments to convince their IT and procurement peers of adopting ET. If salesforce.com chooses to suppress digital media CPM rates, existing ET customers benefit, but salesforce.com would make it difficult for (now much) smaller vendors, like Responsys and Silverpop, to compete. In that scenario, all marketers would suffer, as fewer competitors would mean less innovation at exactly the time marketers need more choice.