The recent acquisition of IBM‘s SilverPop for an undisclosed sum highlights the intense activity within the Mastering Marketing Automation: Your Strategic Imperative“> marketing automation sector. With SilverPop’s annual revenues nearing $100M in 2014, the sector’s projected 40% annual growth over the next five years suggests significant M&A potential. This article forecasts where M&A activity is likely to occur over the next 12 months.
Act-On Nears IPO Status Amidst Funding Boom
The marketing automation space continues to attract substantial investment. Act-On recently secured an additional $42M in its fifth funding round, boosting its valuation significantly beyond $100M, with total funding now exceeding $74M. This valuation positions Act-On firmly in IPO territory.
While the funding will primarily fuel sales and marketing expansion to compete with cloud leaders like Oracle, Adobe, and SalesForce, Act-On’s strategic focus on the middle market remains its sweet spot.
Marketing Automation Segment Poised for $20 Billion Growth
Executive boardrooms are increasingly prioritizing M&A within cloud-based marketing, particularly in deployment models such as Email Service Providers (ESPs) and Marketing Automation Platforms (MACs). A recent Barron’s article projected that the MACs segment alone will evolve into a $20 billion market. Historical trends suggest that maturing ESPs and MACs will drive further industry expansion as more SMBs adopt marketing automation, a key target market for companies like Act-On.
The Evolution of Marketing Automation into Specialized Verticals
The cloud deployment model is projected to reach $30 billion by 2016, spurred by the introduction of new verticals like healthcare and manufacturing. By 2017, or even sooner, the marketing automation industry is expected to morph into highly specialized, industry-specific verticals. This shift will enable richer data mining and granular automated workflows. For verticalization to be truly effective, industry-specific experts will be crucial in engineering these workflows, building deeper data sets, and delivering extreme behavioral insights. Today’s specialists are likely to become tomorrow’s account managers for ESPs/MACs.
Leading ESPs in Play for Mergers and Acquisitions
Following IBM‘s acquisition of SilverPop, several ESPs/MACs are now considered prime acquisition targets. Companies such as NetSuite, SAP, Microsoft, and HP are actively seeking to enter the cloud computing race, specifically the marketing automation deployment model, for long-term revenue growth. This mirrors trends seen in 2013, with Adobe acquiring Neolane and Oracle integrating both Eloqua and Responsys.
Potential acquirers must prioritize targets that complement their existing portfolios and strategic market segments. A balanced portfolio of B2B and B2C clients, reflecting segment dependency, is critical for sustainable growth. Buyers should assess how a target’s portfolio aligns with their long-term objectives.
For companies like SAP, the cloud deployment model promises a predictable earnings stream through subscription-based services. SAP‘s ambition to achieve $3B in cloud services revenue by 2017 is unlikely without a significant acquisition of a mature ESP/MAC, as organic growth alone may not suffice. A strategy could involve acquiring multiple ESPs/MACs with diverse characteristics to strengthen market position and minimize competition.
Here’s an overview of key companies positioned for potential acquisition or significant market shifts:
SailThru
SailThru, based in NYC, recently secured $20M in Series C funding. With a significant media-focused (B2C) client base, including prominent names like Mashable, Huffington Post, and Business Insider, SailThru represents an attractive target for companies like SAP or HP looking to enhance their cloud SaaS infrastructure. Given NetSuite‘s primary focus on small to medium-sized businesses, a deal between NetSuite and SailThru appears less probable. SailThru is experiencing high growth and is projected to reach revenues of $50M within 18-24 months.
LiveIntent
LiveIntent also recently raised $20M in Series C funding. The company distinguishes itself by merging programmatic ad buying and selling with email messaging, emphasizing that the email address “unlocks the internet for customers.” LiveIntent currently serves billions of real-time ads monthly and integrates with over 3000 email newsletters, creating a comprehensive data continuum. With over 400 publishers and 500 advertisers utilizing its technology, LiveIntent is a highly appealing target due to its non-competitive positioning with existing platforms. Potential suitors include Oracle, SAP, Adobe, EBay, Amazon, SalesForce, and Workday.
Act-On
Act-On was recognized as a leader in automation platforms for both small marketing teams and large enterprises in the ForresterWave™ Lead-to-Revenue report. With a $100M valuation and a recent $42M funding infusion, the company’s primary objective is sales growth. While its customer base is predominantly B2B, Act-On is expected to capitalize on its current momentum, particularly as ESPs and MACs target SMBs and mid-sized companies. Delivering approximately 500M emails per month, Act-On‘s products and pricing models are well-suited for these markets. Its 2,200 customers span various sizes and verticals. While an IPO is a possibility, a merger with another ESP/MAC is considered more likely than a singular buyout by one of the major suitors. There’s also potential for Act-On to pursue acquisitions of smaller ESPs and MACs in the near future.
Marketo
Marketo is a highly sought-after entity in the marketing automation landscape, with persistent buyout rumors. The company recently showcased groundbreaking tools at its summit, poised to reshape the automation space for mid-market companies. Marketo‘s strength lies in serving SMBs across both B2B and B2C sectors, with estimated revenues nearing $150M in 2014. The company has also established itself as a leader in the crucial healthcare vertical, a significant asset given the industry’s size. For this reason, NetSuite, which also focuses on the SMB space, emerges as a logical choice to acquire Marketo, benefiting from its strong position in healthcare.
Infusionsoft
Approximately a year ago, Infusionsoft raised an additional $54M in funding from Goldman Sachs, bringing its total funding to $71M. Infusionsoft‘s long-term goal is to sustain its growth and potentially pursue an IPO, rather than being acquired. The company specializes in the SMB market, targeting businesses with fewer than 25 employees. Its SaaS platform automates marketing tasks, including SMS lead capture and scheduled email campaigns, similar to other MACs. Growing at 25-30% annually, Infusionsoft is an ideal partner for NetSuite, given their shared focus on the SMB market. By consolidating platforms like ESPs and CRM systems into an all-in-one solution, Infusionsoft offers significant value to SMBs that often lack the resources to manage disparate systems.
SalesFusion
SalesFusion recently acquired LoopFuse in an undisclosed deal, likely utilizing part of its recent $8.25M funding round. While LoopFuse offers a simpler version of cloud-based marketing automation, it includes valuable social listening and publishing tools. This acquisition positions SalesFusion as a potential target for Microsoft, which has expressed interest in the marketing automation space. SalesFusion‘s deep CRM integration with Microsoft Dynamics further strengthens this possibility. The company’s core focus on providing “all-in-one” services for SMBs seeking to consolidate automation tasks aligns with market demand. Post-LoopFuse acquisition, SalesFusion could be a buyout target for Microsoft or SAP. However, these larger buyers are currently seeking more mature companies. SalesFusion may need to secure additional financing, significantly grow its core business, or consider an acquisition by a larger ESP or MAC to become a prime target.
HubSpot (Honorable Mention)
Founded in 2006 by Brian Halligan and Dharmesh Shah, HubSpot has grown from three customers to over 9,000 clients, achieving a run rate of $60M or more. The company has raised over $130M in VC funding, a testament to its exceptional ability to retain customers, a key driver of its growth. HubSpot is currently focused on international expansion, having opened its first Dublin offices. The company’s primary objective appears to be evolving from private financing to a public offering in the near future, rather than pursuing an acquisition. An IPO for HubSpot is anticipated in 2015 or 2016.