Interview: Marketo CEO Phil Fernandez flags acquisitions and global marketing education

Marketing technology business Marketo expects to acquire companies every six to nine months as it builds out its platform, CEO Phil Fernandez told Which-50 in an interview this week.

Fernandez was in town as part of a swing through the region — a reflection of the company’s growing regard for its international operations, which are expected to deliver half of its revenue by 2018 (the figure is currently just 15 per cent).

He also flagged a significant thought leadership initiative, which he said would be formally launched shortly. Which-50 spoke to the Marketo chief about the next set of problems the company wants to solve for marketers, and about the increasingly blending worlds of B2B and B2C marketing.

Until 2012, Marketo relied upon organic growth and the contributions of its partner network to develop and deliver its solutions. However, that year it executed its first of two acquisitions: Crowd Factory (acquired in April 2012) operated in the social marketing automation space while Insightera (acquired in December 2013) provided real-time personalisation. Both were venture-backed businesses that needed to scale up sales and marketing quickly, says Fernandez.

He described both acquisitions as wildly successful. “Crowd Factory added a whole set of social marketing capabilities that are a fundamental part of the product today, while Insightera became the basis for our real-time personalisation product that helps to extend our capabilities into creating dynamic web and mobile experiences.

Some description

Fernandez said the market should expect to see deals of this nature on a fairly regular basis as part of the company strategy.

He contrasted the Marketo approach — which involves buying smaller and functionality discrete businesses — to the headline-grabbing consolidation happening at the top of the market. “It’s very different to an Oracle buying a Responsys to sit beside an Eloqua, where there is a tremendous duplication of capabilities that don’t really forward the function of the joint solution. When we do an acquisition we are really thinking about moving the platform footprint forward.

Ultimately we don’t think of this as a portfolio of tools. Instead it’s a deeply integrated unified platform, developed both organically and via M&A, and what we really are trying to do is build a holistic platform.

He also stressed the importance of the company’s partners. “Of course we are not trying to do it all. We have 380 vendors in our ecosystem that integrate with Marketo and fill in the offering. That’s the other piece of the puzzle.

Of that ecosystem, he said, “We see as our foundation that we own the data, we own the orchestration engine and the strategic UI, and then we plug in a variety of different capabilities that come from our partners.

The Marketo question

Marketo is one of the few remaining genuinely independent marketing automation providers to have already achieved scale, and as such its name is frequently mentioned as a potential target itself — a point we put to Fernandez.

We are obviously a company that has been wildly successful. We have a lot of value and some real leadership presence in the market. And in world where the big companies are hoping to have a piece of an obviously emerging market, we are an obvious acquisition candidate.

However, he stressed that in general the company’s view is that its brightest days are ahead of it. “Our preference is to continue to be an innovator, where every last person in Marketo wakes up every day thinking about the marketer and the CMO and how to solve their problems. It’s flattering to be named as an acquisition candidate but we just don’t think the ride is over yet.

According to Fernandez, it is likely that two to four platforms will emerge as leaders — in much the same way that ERP markets consolidated around SAP and Oracle, and sales automation around Salesforce and Microsoft. “I think we will be one of those. Then there will be constant innovation that plugs into one or more of the platforms in a healthy ecosystem.

Saleforce’s acquisition of Exact Target for $US2.1 billion and Oracle’s billion-dollar purchase of Responsys focused the attention of many on the opportunity for consolidation at the top of the market. But these deals also obscured a key point about the marketing tech industry: despite the ever-growing price tags, these are still early days.

Fernandez makes the point that “this really is a whole new generation of software that is being built. These platforms are able to deliver sustained customer engagements and relationships over time, they are data-driven, with microsecond response times. As a result there is no workforce in place anywhere in the world that has any accumulated experience using these kinds of technologies.

In other words, companies are still developing an understanding of how to design their organisations, how to put the software to good use and get the most out it, or even which metrics to track.

That is why Fernandez identified thought leadership as a critical success factor in Marketo’s most recent earnings call with the financial analysts following its quarterly results. “Thought leadership and innovation is such an important part of what we do, and it’s an important element of how we are growing in this space. The world is hungry for information, and in the end that breaks in our favour as we continue to build the product,” he said.

We will soon announce an initiative to drive a new category of thought leadership, and we will do it together with a set of our industry partners such as the big systems integrators, and including 17 universities around the world who are helping to develop an outstanding thought leadership curriculum in this space. It is a big initiative for us.

Product priorities

Which-50 asked Fernandez to identify the next big problems that Marketo wants to solve, and he nominated four areas.

Mobile: “In mobile marketing, we are in the very early days of people learning to use mobile apps in consumer and corporate. How do you build and deliver them, how do they become marketing tools.

Predictive analytics: “We have hundreds of billions of data points about individual customers and buyer behaviour. The ability to extract things like next best offer, most likely to churn, most likely to buy, or which piece of content is most appropriate for a given customer are very important. So there is a lot of activity around machine learning and predictive analytics.

Content: “Automated tools are needed to drive customer engagement, and the medium of that exchange is content. We are not going to do content management in a storage sense or content creation in a journalism sense, but our role is helping marketers to manage their content flow and their understanding of it.

Marketing management: “The truth is that when companies get good at this and start to use it at scale they will likely have a thousand different assets and a huge number of moving parts — so we are doing a lot of work on marketing management in areas such as calendaring and planning.

B2B v B2C

Marketo began in the lower end of the B2B space, but found itself increasingly pulled into the enterprise as clients discovered a requirement for its solutions. Now it is just as likely to operate in the B2C world as in B2B.

We asked Fernandez about the current discussion around the blending of these approaches. “There are still some distinctions. There is the distinction of whether you are focused on customer acquisition, or on the lifetime value of the customer. Are you focused on a complex considered purchase more than what might be considered transactional purchases. And these distinctions are not clear cut. Automotive is B2C but it’s certainly a considered purchase, for instance.

But what I do see is that B2B marketers are becoming far more digitally savvy. They are looking at things like programmatic display advertising and other kinds of ad technologies which have now achieved a level of sophistication where targeting and segmentation can take place. That means the B2B marketers can narrowcast the use of technology that was once almost exclusively B2C,” he said.

We just had a CMO lunch in Sydney — we had the CMO of LendLease and the CMO of Yum Brands, along with Woolworths and a big pharmacy company, and across those B2B and B2C customers they were all using exactly the same language.

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