Monday, February 24, 2014

Oracle Buys BlueKai and Puts Marketing Databases In the Spotlight

Oracle announced this morning  that it is buying BlueKai, a leading Data Management Platform (DMP) technology vendor and operator of one of the largest data marketplaces. Since I just wrote last Friday about how DMPs integrate with marketing automation to unify customer treatments in Web advertising and direct channels, I’m tempted to just point you to that post for an explanation of how this works and why it matters. I’m also tempted to remind you that I predicted this convergence as an industry trend back in December.  But instead I’ll expand a bit on the fundamental significance of this deal – which is that it promises a serious step toward solving the fundamental problem that increasingly hobbles advanced marketing technology: lack of a solid underlying customer database.

If you look at Oracle’s diagram of their newly expanded Marketing Cloud, you’ll see BlueKai sitting beneath Responsys and Eloqua, providing a “universal customer profile” that allows them to act as “marketing orchestration” systems which, in turn, support programs across all channels – social, search, email, display, mobile, web, commerce, direct sales, and channel sales.

“Marketing orchestration” is a considerable jump beyond the traditional role of “marketing automation”, but I’ll save that analysis for another day. What matters right now is that Oracle places BlueKai exactly where I’ve been placing the Customer Data Platform: as a multi-source database that feeds unified customer data to marketing applications.

This is the first time we’ve seen a major enterprise software vendor draw that picture quite so clearly. More typically, they just do some hand waving around the customer database without explaining how it magically appears. Deep in their hearts, what they really hope is that the database for their core application – CRM, email, Web site management, whatever – will be that central, shared database.  They hope this even though their application doesn’t really provide the database management tools needed to make it happen, and their database itself is often tailored too narrowly to the specific application to support the full range of other uses.

BlueKai, on the other hand, is all about the data. Like other DMPs, it is still mostly organized around cookies and advertising audiences, but it does offer the ability to import other types of data and can certainly track identified individuals if the user wants. The fact that it can combine anonymous and identified profiles is extremely important if marketers are to build a single unified customer data repository and use it to support all contact channels, including Web advertising. The fact that it’s a distinct, named product gives that central customer database the prominence that it deserves.

In short – and I don’t use this term loosely – the BlueKai acquisition could truly be a “game changer” that forces other enterprise software vendors to also give marketers the CDP-style database building tools they’ve needed so desperately. As of this morning, Oracle’s competitors have a new gap in their product lines. It will be interesting to see how they fill it.

Friday, February 21, 2014

Bizo and DemandBase Lead B2B Marketing Automation to Web Advertising and Beyond

I had a fascinating chat earlier this week with a client who described his vision for using DemandBase to tailor messages to Web site visitors from target accounts, using Bizo to further tailor messages to individuals by title, using all this data to synch inbound and outbound campaigns in Eloqua, and eventually driving everything with predictive model scores from a tool like Lattice Engines. That could serve as a pretty complete summary of the state of the art for B2B marketing today, especially if you consider “content marketing” as implicitly included. Equally helpful to me personally, it reinforced my intention to write about Bizo and DemandBase, both of which have recently briefed me on their latest product extensions.

Let’s start with DemandBase. Astonishingly, four years have passed since I last wrote about them. In that time, they’ve continued to build applications that exploit their core technology for identifying Web site visitors by company based on their IP address. This started by providing visitor lists and real-time alerts to sales people who were interested in specific accounts. It later extended to returning visitor attributes in real time so companies could pre-fill forms and personalize Web pages to match visitor interests.  The most recent expansion went beyond a company’s own Web site to the much larger world of online advertising.

To reach that market, the company had to build its own version of “data management platform” (DMP) systems that manage lists of known entities, recognizes them when they appear on an external Web site, and delivers them an appropriate advertisement. The big difference is that DemandBase entities are companies identified by IP address, while traditional DMP entities are cookies attached to browsers (and assumed to relate to individual human beings). DemandBase had to build its own engines for real time bidding (RTB) and ad serving (Demand Side Platform or DSP) to support its approach. These can integrate with Demandbase’s own network of Web publishers that will accept its ads and with other ad exchanges that connect to their own, larger publisher networks.

Data in the DemandBase DMP comes from both DemandBase and clients. The DemandBase data are the company-level attributes that DemandBase has long assembled: company name, industry, revenue, employees, technologies used, etc. Some of this, such as DUNS Number, is purchased from external sources and requires extra payment. The client data, which of course is available only to the client who provided it, could be anything but is usually attributes such as account type, buying stage, and sales territory. The system doesn’t store any information about individuals. Marketing automation, Web analytics, and Web content management systems can all access this data via API calls for analytics and as inputs to their own selection and treatment rules. Outside the DMP itself, DemandBase can store content and decision rules to guide bidding and select which ad is displayed to each account.

So much for the mechanics. The business value is that DemandBase is allowing marketers to tailor messages to target accounts even before they engage directly with the company, thereby (hopefully) luring new prospects into the top of the funnel and engaging them if they don’t respond. This is a major extension beyond traditional marketing automation, which works mostly through email to known prospects.  It also goes beyond Web site personalization, which requires people to at least visit your Web site and in most cases actively provide information about themselves. As you might imagine, DemandBase offers many case studies to show how much this improves performance.

Bizo comes at Web advertising from the traditional route of building a pool of cookies and assembling them into audiences based on the attributes of the individuals they represent.  The pool was originally used to target display advertising and retarget site visitors by sending them ads on other sites. The company says it has pulled data from 4,200 publishers and other sources to identify about 120 million individuals worldwide, including 85 million within the U.S. The number of actual cookies is higher still.* Profiles contain titles and business demographics such as industry, but no personally identifiable information such as names or addresses.

Like DemandBase, Bizo has found many applications for its core data asset. These now extend beyond display ads to social media advertising through Facebook and LinkedIn, Web site personalization through Adobe, Web analytics through Google Analytics and Adobe, and integration with CRM, BlueKai DMP, and Eloqua marketing automation. Other partners will be added over time.

I’ll assume the Eloqua integration is most interesting to readers of this blog. Basically, it lets Bizo read audience segments created by Eloqua.  Bizo then matches segment members to Bizo identities and delivers Web site, advertising or social messages tailored to each segment. Because Eloqua captures such detailed information about prospect behaviors, this allows highly tailored advertising that is tightly synchronized with prospects’ progress through buying stages and marketing automation campaigns. Since it’s driven by cookies, it can send messages to anonymous as well as identified prospects – a huge expansion in marketing automation’s reach. Bizo can even allocate advertising spend across the different media to achieve reach and frequency targets as efficiently as possible. To encourage this approach, its pricing is based on the number of unique individuals that marketers manage in its system, rather than impressions or ad budget.

The business value offered by Bizo is similar to DemandBase: reaching prospects that haven’t yet engaged with a company directly or retargeting them when they don’t respond. The different technical approaches have their own strengths and weaknesses: IP-based identification is relatively stable but works only at the company level and doesn’t identify small businesses that lack their own stable IP address; cookies identify individuals but are often deleted, miss some people, and result in multiple, fragmented identities for others. Like the client I mentioned at the start of this article, you can probably think of them as complementary rather than competing components of a complete B2B marketing solution.

* Given that the total employed U.S. workforce is about 145 million, I suspect that 85 million contains quite a few duplicates, meaning any one profile captures just a fragment of an individual’s activity. But that’s the nature of this sort of thing; the business question is how well the data works even in its imperfect state.

Thursday, February 13, 2014

Marketing Automation 2014 Industry Overview: What the Surveys Tell Us

The Interwebs have delivered an unusually rich trove of data about the marketing automation industry in the past few weeks. Other than Raab Associates’ own VEST report, we’ve seen surveys of active buyers from Software Advice, usage figures based on direct observation from Mintigo  and Venture Beat (using Datanyze), and another broad-based survey from Pepper Global and Holger Shulze. Taken together, these provide a clearer picture than usual of the state of marketing automation. Here’s how I see things.

Strong Growth Continues

As I reported last week, I expect industry revenue to grow 60% in 2014, accelerating from the already-impressive 50% per year we saw in 2012 and 2013.

The main basis for my prediction is high growth that vendors reported in 2013, and in particular a trend towards higher revenue per client among the vendors who share that information with me.

These include:
  • HubSpot (50% revenue growth on 25% client growth)
  • Act-On (115% revenue growth on 59% client growth)
  • SalesFUSION (100% revenue growth on 47% client growth)
  • Marketo (64% revenue growth on 30% client growth)
Lots of Opportunity Remains

My VEST data suggests that maybe 3% of micro-businesses (under $5 million revenue) now use a marketing automation system, and under 10% of larger firms do.

This varies hugely from the usual survey results, which often show something like 50% penetration.  The reason is selection bias: most surveys are answered by people who are actively engaged in marketing automation.  They are vastly more likely than average to have a system in place.

The Mintigo results confirm this.  Mintigo’s technology scans the Internet for things like job listings and Javascript tags and infers from those which products are used at every company it finds. There’s still a bit of selection bias – it won’t work if a company isn’t on the Internet – but the impact is obviously much less. Mintigo’s conclusion across 186,500 B2B companies was that just three percent were using the most common marketing automation systems: Oracle Eloqua, Marketo, HubSpot, and Pardot. Penetration reached eight percent among larger firms and varied substantially by industry.

Mintigo sagely warns that industry penetration rates are not the same as share of marketing automation customers, since some industries are bigger than others. Software Advice does show the number of prospective buyers by industry: not surprisingly, tech is still the most common industry among new buyers.  But more interesting is that 77% come from somewhere else. I don’t have any historical data available but strongly suspect it would confirm that the industry is increasingly selling outside its original base of tech clients.

Users Want Core Marketing Automation Features

Both Software Advice and Pepper Global asked what features marketing automation buyers want. This is a pretty common question so the answers were not very surprising.  In fact, what was most impressive was the relative consistency of the rankings, with ead nurturing, analytics, and lead scoring at the top in both surveys, email and campaign management in the middle, and list segmentation is at the bottom.

Those top three are the key improvements that marketing automation provides over simple email or CRM systems, so this prioritization makes sense. It was intriguing to see inbound marketing and social media marketing ranked so low on the Software Advice data – I read this to mean that marketers already get them from systems outside of marketing automation and don't see much need for a change.  Similarly, the Pepper Global data’s low ratings for lead activity tracking, lead capture, and Website visitor tracking reflect that marketers have systems in place for those.

Features Don't Drive Decisions ...or Create Success

Pepper Global also asked some interesting questions about evaluation criteria and obstacles. Again, there were no particular surprises in the answers – marketers care more about cost, integration, and ease of use than vendor or technical details. (I guess meeting functional requirements is assumed.) Similarly, it’s no surprise to see the biggest obstacles are budget, employee skills, data quality and content.  The two sets of answers do correlate (budget relates to cost; employee skills relates to ease of use), which is reassuring.

But take a closer look.  Did you notice how few of these obstacles can actually be addressed by marketing automation functions?  The real issues are budgetary (budgets and content), organizational (skills, data quality, sales feedback, sales integration, and performance standards), and technical (data collection and compatibility). This has practical implications for how marketing automation vendors should position themselves, invest in product development, and supplement their products with services.

Pepper Global also makes some intriguing observations about differences in responses from small businesses vs. mid to large businesses: cost and budget are the biggest issues for small business, while integration and analytics matter more to bigger companies. Sadly, they didn't publish additional details. Still, it’s worth being reminded that these differences exist and should be considered by vendors in their planning and by marketers in their system selection.

The Real Competition Isn't Other Vendors

As the industry penetration figures indicate, the real competition in most marketing automation purchases is a different technology, not another marketing automation vendor. Software Advice drives this point home by showing how prospective buyers are currently managing marketing activities: nearly half are relying on a CRM. A surprisingly small fraction cite email, although presumably they all have email capabilities.  I'd guess this is because they are answering specifically about marketing management.  If I were an email vendor, I'd think about that one.

Given the industry's low over-all penetration rate, it's interesting that nine percent of prospective buyers are looking to replace an existing system.  This suggests they like the idea of marketing automation but aren't happy with their particular product.  Sure enough, just over ten percent of the buyers say they're evaluating a new system for exactly that reason.  But the much more common reasons apply to people with no marketing automation in place: improve lead management, automate processes, and get more/better features than current [non-marketing automation] tools.

Market Share Varies by Sector

Narrowing the focus to existing users, Venture Beat and Pepper Global both have some data, as does the VEST. Remember that these come from different sources:

Venture Beat uses Datanyze to read the actual systems that are embedded in marketers’ web sites.

Pepper Global is based on a survey of the B2B Technology Marketing Community on LinkedIn.

VEST data is self-reported by the vendors.

Mintigo’s technique would also reveal market share but they have diplomatically chosen not to share.

The results are broadly consistent once you take into account that Pepper Global’s sample has many fewer small companies than Venture Beat, and thus understates clients for vendors like HubSpot and Infusionsoft. One extremely important caveat is that these figures are counting clients, not revenue: HubSpot has three times as many clients than Marketo but 10% less 2013 revenue. (The revenue figures aren't on the chart but are public: $77.6 million for HubSpot and $85.1 million for Marketo.)  As the Pepper Global slide suggests, different vendors are strongest in different customer segments.

Lots of Choices

There are plenty of vendors beyond the handful of industry leaders. The Venture Beat slide lists some; we report on a good number of them in the VEST; and I've written about others on this blog. Here’s a list I recently pulled together, along with client self-reported counts. It still leaves many out.

Why would anyone pick a vendor other than the leaders? One answer is, because they don’t know anyone else: some vendors still tell me more than half their deals are uncontested, meaning they are selling against doing nothing or an incumbent CRM or email system. Presumably this will become less common as more marketers realize that marketing automation systems are a category with lots of options.

Another, better answer is that the systems really are different. Sure, all marketing automation products share the same core features: email, landing pages and forms, web behavior tracking, nurture campaigns, lead scoring, CRM integration, and reporting. But there are still significant differentiators.  In fact, I'd argue these are becoming increasingly important as ways for new and smaller companies to find niches where they can compete. Here’s a list of some of the approaches and a sample of vendors who have taken them. (Many vendors would fit into multiple categories; pardon the oversimplification.)

Note that just about everyone cites low cost and ease of use, as they should: they're what buyers say are most important.  But this means those claims pretty much cancel each other out, regardless of the underlying system's actual merits. This leaves more concrete differences, some based on features and others based on service or distribution models. Even the surveys showed that features alone will rarely drive a decision, the exceptions are features that are absolute requirements and hard to find, such as integration with a particular CRM system or support for channel partners.  So far, every differentiator on this list can point to at least some measure of success.

So there you have it, folks: my current snapshot of our rapidly changing industry.  Thanks to Mintigo, Software Advice, Venture Beat, Pepper Global, and all the other people who publish such great data.

Thursday, February 06, 2014

Genius and LoopFuse Are Acquired; Leadsius Picks Up the Freemium Banner

The past week has seen two acquisition announcements in the B2B marketing automation space: LoopFuse by SalesFUSION  and LeadRocket/Genius by CallidusCloud, which owns LeadFormix. Both of the acquired vendors had bright prospects at one time but fell by the wayside. Interestingly, both pursued a “freemium” strategy of offering their system for free to users with small databases. The goal is to build a big base of users, some of whom will eventually pay real money for a larger installation. Since both vendors ultimately failed to survive, it might seem reasonable to conclude that freemium doesn’t work for B2B marketing automation, despite its successes elsewhere.

But this week also saw the start of a big freemium push by Leadsius, a new small business marketing automation vendor I wrote about two weeks ago. Leadsius reports more than 1,200 freemium accounts since they started offering them a bit over a year ago. Can they succeed where Genius and LoopFuse did not?

Obviously I don’t know, but it’s fair to say that the odds are against them. Genius and LoopFuse were both good products run by smart people backed by venture funding (a lot for Genius, a little for LoopFuse). Each reported thousands of freemium sign-ups that converted to paid accounts at a reasonable rate – “reasonable” being defined as an acceptable cost per new customer when the cost of the freemium accounts was included. The problem seemed to be that the absolute number of converted accounts wasn’t high enough to sustain the business, and neither vendor had enough business coming in from other sources. I’d also guess that freemium appealed most to small companies which didn’t generate much revenue even after they started to pay.  (Even though many freemium users are departments within large companies, I'd suspect those firms buy different, enterprise-level systems when they decide to make a real commitment.)

Freemium is a much-discussed topic in tech circles, and there are many people who have thought more deeply about it than I have. My casual impression is it probably makes the most sense when there’s a network effect, meaning you need to attract lots of users quickly to succeed. Obviously it needs to be a product that’s easy to learn and use, so training and support costs are kept at a minimum.

My take is that freemium doesn’t fit well with marketing automation because marketing automation takes a lot of work to use effectively. Compare this with email and Web site hosting, where freemium has worked well: casual users can be quite successful with those products. In fact, the trend in the marketing automation industry has generally been to increase rather than remove barriers to getting started, by doing away with options such as 30 day free trials or free implementation support. Vendors like HubSpot and Infusionsoft have tried many approaches but ended up requiring significant up-front investment from new clients, specifically to screen out buyers who won’t put in enough work to succeed. That’s about as far from the freemium approach as you can get.

None of this means that Leadsius is set to fail. They might find a way to make freemium work or they might abandon freemium and succeed doing things the old fashioned way. From a prospective buyer’s perspective, what really matters are the quality of the system and the pricing, which are quite competitive. So long as they’re willing to learn from experience – and abandon freemium if that is what experience teaches – their prospects are bright.

Tuesday, February 04, 2014

New Raab VEST Report: B2B Marketing Automation Will Reach $1.2 Billion in 2014

I’ve just published the latest edition of our B2B Marketing Automation Vendor Selection Tool (VEST), with updated entries on all your favorites and several new entries to boot. This is always a fun project because it gives me an overview of what all the vendors have been up to for the past six months. A few interesting trends stood out:

  • revenue growth is accelerating. My data are a little less comprehensive than previously because several of the big vendors are now part of public companies and don’t share detailed information. Those that did provide information showed great growth in 2013, in most cases over the 50% I had predicted for the industry as a whole. Even more interesting, nearly everyone reported faster growth in revenue than in clients: to take one vendor that does provide statistics, HubSpot recently reported  50% revenue growth vs. 25% growth in number of clients. In their case and others, the reason seems to be a combination of larger size deals on new customers and growth in billing to existing customers. Based on this data, I’m projecting a 60% increase in industry revenue for 2014, to $1.2 billion. You heard it here first.
  • the hot new feature is…SEO content rating. Yes, there’s continued growth in various aspects of social media marketing and in mobile-friendly content creation.  That’s old news. What I hadn’t realized before is that at least a half dozen vendors had added or improved features to help marketers build content that attracts search engine hits on selected keywords or concepts. I suppose that’s become increasingly important as marketing automation moves beyond its original role in lead management to help attract new leads at the top of the funnel. (Do I get SEO credit for using “top of the funnel”?)
  • lots of new vendors. I added four new vendors to the report, all of which have just begun to market their products aggressively. None is very large yet, except for SimplyCast, which won’t release precise data but did say it has 3,000 to 5,000 customers for its multi-channel customer management system (you may recall that I reviewed them briefly last week.) The new systems offer a broad range of configurations, from ultra-simple interfaces with limited functions to elaborate multi-channel workflows that are correspondingly complex.
  • agency systems are big. Two of the four new vendors are agency system specialists, and several other vendors have also launched special agency editions. This creates some weird feature combinations, since agencies to serve small businesses need administrative features, such as precise user rights management, that are otherwise only used by big enterprises, . Of course, the reliance on agencies is more evidence that many marketing departments still lack the skills needed to do advanced marketing automation on their own – but you knew that.
  • mid-market leadership may be up for grabs. Small but established mid-market firms including SalesFusion and eTrigue have been growing particularly quickly, as has Act-On. This may be because the current mid-market leaders, Marketo and Pardot in particular, have been focusing more on enterprise sales. I had thought that heavy funding would be necessary become a new market leader, which is the way Marketo, Act-On and HubSpot did it. SalesFusion did just take an $8.25 million investment but their revenue doubled last year without it. So perhaps having a good product and being focused will enough for someone new to elbow into a top-three position.  We'll see.
I could go on, but why should David Raab have all the fun? You, too, can uncover exciting industry trends and share them with the world. Just click here to purchase your very own copy of the VEST and analyze to your heart’s content.