Adobe announced yesterday it entered into a definitive agreement to acquire Marketo, the market-leading cloud platform for B2B marketing engagement, for $4.75B. The company has around 5,000 customers and will become a key part of the overall Experience Cloud that Adobe sells to marketers. A lot of people though that Vista was silly buying the company for $1.8B roughly two years ago. Nathan Vardi at Forbes had a great writeup on the story and why they were not silly. Given a large focus of our firm is around the marketing technology stack combined with the fact that, since 2014, we have been putting out research on the rise of the marketing cloud as a “system of record” we wanted to put pen to paper with some quick thoughts on Adobe acquiring Marketo.
1. Adobe Has Now Spent The Most On Their Marketing Cloud. As we’ve talked about before in our Rise of the Digital Marketing Suite, since 2012-2013 several large vendors like Oracle, Salesforce, IBM, and Adobe have spent serious strategy time and dollars buying or building into the category of the marketer. With the acquisition of Marketo, Adobe effectively completes their marketing suite and has now spent about $9.5B on technologies that power the marketing business unit. They’ve spent more than Oracle ($8.8B) and Salesforce ($7.2B) at this point and with the addition of Magento earlier this year are now a force to be reckoned with in the category.
2. Post Acquisition Integration Will Be The Big Key. One of the main quick thoughts on Adobe acquiring Marketo is that a majority of these marketing cloud vendors have taken a fair amount of time to integrate companies into the broader landscape of products. For instance with the Salesforce marketing cloud, you had acquired companies staying virtually standalone with minimal cross-selling or up-selling for as much as two years post acquisition. Most interesting about this will be how quickly Adobe can integrate Marketo within their existing marketing cloud and probably most specifically the Omniture product. As we’ve mentioned in prior posts, this usually is the biggest challenge and causes a lot of channel and product conflict from the marketers we spend time with.
3. Will We See More Consolidation? For all the talk of consolidation we are in the camp that there will always be some long tail consolidation but there will not be any “martech armageddon” happening any time soon. Something to consider at this point in the cycle of the marketing technology landscape is you have three very large software companies (Oracle, Salesforce, Adobe) that have bought, on average, 10 private or public companies over about a 7 year period to build out their marketing technology stack. Analytics? They have it. eCommerce? They have it. Marketing Automation? They have it. The list goes on and on and in some channels these companies have acquired multiple vendors. It will be interesting to see where they make their next moves in and around this category of spend.
All in, today is a dynamic and exciting time to be investing in the category with many standalone public companies in the ecosystem sitting alongside these large systems of record. Combine that with the more than 7,500 private companies in the space and you get a healthy industry that continues to serve the customer in many innovative ways. Adobe acquiring Marketo only fuels the fire and will increase M&A, innovation, and excitement.
If you liked “Quick Thoughts On Adobe Acquiring Marketo” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog.
