We have rounded the final corner and are nearing the finish! In Part I of our series on the rise of the digital marketing suite we laid the foundation for the categories that the CMO buys within. For Part II we moved on to talk about the broad landscape of who is currently operating in the space today and selling into the CMO suite. In Part III we continued to understand how all the major players got to where they are, covering the largest players in the space like Adobe Systems, Salesforce, Oracle, IBM and Microsoft. As we know that is not the full picture of who is operating in the space so for Part IV we moved outside of the Big 5 to see who the major independent companies are that talk to CMOs. As we conclude this series there were a few interesting points to take away and learn throughout the history of the CMO buying IT. As a start-up operating in the space these are good things to think about.
Buying Isn’t As Hard As Integrating – Throughout the history of M&A in the space the largest problems end up coming from the vacuum created with incoming sales teams having to sell a broader suite of marketing products. We don’t think this go-around is going to be much different and there is an enormous opportunity for start-ups to step in as the big companies like Salesforce, Oracle, etc deal with integrating solutions and selling a more unified suite of services (versus the singular product that sales person used to sell).
Building a Standalone Company Is Near Impossible – In our research we could only find roughly 5-8 companies that remain standalone businesses and operating in the market today. Sure we probably missed some, but the scale necessary to achieve this is incredibly difficult. While fairly obvious. we also noticed that to really grow quickly you ultimately need an outside source of financing (i.e. a VC) or a really long time. There are only two companies in the space that have been bootstrapped from the beginning, never taking on any outside financing: SAS Institute and Mailchimp. Ultimately we’re not sure exactly why this happens but you don’t tend to see a lot of businesses in the CMO IT category that are able to really stay independent and/or private forever.
This Space Is Not A Zero Sum Game – In looking at any of the data in Part IV one can easily see that these spaces are huge and able to withstand multiple competitors operating with significant businesses. As start-ups think about entering the space we wouldn’t encourage them to believe that every segment within these sector is completely crowded out. There are tons of examples of companies building huge scale not being the first to market and with more and more white-space opening up all the time there are more than enough opportunities out there.
M&A Tells Two Distinct Stories – If you look at the M&A in space thus-far from the Big 5 you will notice one thing. Most of the Big 5 have done a fair amount of M&A and the individual visions of the “Marketing Cloud” have already started to play out. From our research, we can’t find any compelling reason that other than a few pockets where they lack serious presence (eCommerce for one) the M&A cycle will continue at the pace it did. That said, we have seen a number of emerging start-up companies completely dominate in new spaces like predictive analytics, content marketing, mobile, video, and other areas where we envision another cycle not too far off from this one.
That’s it for our Rise Of The Digital Marketing Suite series. We hope you enjoyed reading and will be following up with a full pdf of the entire series tomorrow here on our blog.