Adobe's acquisition of Marketo: new evolutions in sight for service providers
When the leader of digital customer experience software buys the most promising company in marketing automation, what does that mean? It means that IT services providers must become serious contenders in marketing expertise and in the marketing office transformation. And they must do it quick, as Adobe confirmed the rumors: it agreed to buy Marketo, for $4.75 billion.
Adobe has undergone a major transformation itself these last few years. Starting as a company selling boxes to creative designers, Adobe has gone on to become a subscription champion, a major cloud player, and a leader in the digital marketing area (see our detailed profile here). And although much of its software still requires installation on client PCs, Adobe shows insolent growth, stronger than that of salesforce.com. Its revenue grew 25% in FY17 to $7.3 billion (€6.5 billion), making it the sixth-biggest player in the software business, according to our worldwide estimates.
Although the Experience Cloud business and all digital marketing related activity still represents less than a third of its revenue, there's a huge opportunity to grow here: the total digital customer experience market for software and related services worldwide should experience a 13% CAGR through 2017 to 2021, according to our estimates. Adobe is already very well positioned to capture a large part of this growth, thanks to an impressive mix of acquisitions and in-house developments. The vendor has built a platform for marketing specialists, sales people, advertising department, etc. to share content, data and insights to enhance the customer experience and drive more sales. The integrated machine learning features (Adobe Sensei artificial intelligence) and the recently acquired e-commerce platform Magento added strong capabilities to the picture, especially when compared to Salesforce.com whose platform doesn't cover e-commerce.
The Marketo acquisition gives another shot to Salesforce.com, as Marketo directly competes with Salesforce.com's Pardot B2B marketing solution. Marketo is one of the most impressive SaaS companies on the market, along with such vendors like Workday and ServiceNow. We dedicated last year one of our "short profiles" to highlight Marketo's accomplishments so far. The biggest being its role in the marketing office transformation.
Here's what we wrote: Marketo is a typical SaaS player that has built its success by targeting specific business challenges, providing a tool not only to automate processes but also to implement best practices. Marketo started out as a marketing automation tool and is now a complete platform aimed at optimizing the role of marketing departments within business development. By providing a process framework, along with an automation platform and KPIs, Marketo allows CMOs to gain in efficiency as well as to prove their contribution to the overall business. A CMO testimonial during a user conference we attended made it very clear: “Yesterday, our department was all about goodies and canapés. Now, we’re the digitization service, we handle the content and generate leads. Marketo meant much more than an automating tool, it meant a transformation of the marketing department.”
By acquiring Marketo (and its 5,000 customers, as Adobe EVP and general manager, Digital Experience, Brad Rencher says), Adobe instantly becomes a major force in the B2B digital marketing market. To Adobe's partners, this also represents a huge opportunity. But they must acknowledge the specificity of Marketo's positioning. It's really more about empowering the marketing office than implementing an IT solution. IT services vendors have evolved on the digital customer experience and are now able to help companies building innovative experience with Adobe's and other's solutions. They must now evolve to get management consulting capabilities in B2B marketing automation. Possibly by making acquisitions themselves!