Adobe's $4.75bn purchase of Marketo is unexpected but shouldn’t come as a surprise. The strategic logic behind the deal is compelling to both parties.
It’s been known for some time that Marketo was for sale to the right bidder at the right price. Rumours about the eventual ownership of the company have been circulating since the day Vista Equity Partners brought them back in 2016. Nevertheless, last week’s news that Adobe are buying Marketo in a $4.75bn deal was received with widespread surprise. What caught people out was the timing - no one saw a deal this soon. The belief was that Vista would sell out to a major industry player in 2019 or 2020, with SAP or Microsoft often assumed to be likely buyers. Both have substantial B2B CRM customer bases, but no marketing automation play. Adobe have been linked too but were often discounted due to their B2C focus or the overlap between Marketo and Adobe Campaign.
The logic behind this deal is obvious. Marketing Automation is the only part of the marketing technology stack where Adobe don’t already have an industry-leading solution. Marketo will now fill that gap, in what is an excellent deal for both parties.
Adobe’s Capability Gap
In the past, Adobe have tried to use Campaign to fill the B2B automation gap, but this hasn’t worked for customers. Campaign is an excellent platform for B2C, but B2B companies have often struggled with its quirky and somewhat limited capabilities on the lead management side. In the last year, Adobe have removed those capabilities, a long overdue move that focuses the product on its core functionality as a platform for B2C campaign orchestration.
In contrast, the rest of Adobe’s experience cloud portfolio has had significant success amongst B2B as well as B2C. Adobe Experience Manager is used by an increasing number of B2B brands as their CMS because it’s an incredibly flexible product that scales well to enterprise use cases. At the heart of AEM’s success is its tight integration with their Target personalisation tools, their Audience Manager DMP and Adobe Analytics, the leading competitor to the ubiquitous Google Analytics. This allows large scale websites to take advantage of the highly targeted web personalisation technology honed by Adobe’s core B2C customer base. Until now, Adobe have lacked the ability to extend these capabilities down the funnel. The Adobe Experience Cloud has no mechanism for managing lead generation or nurturing B2B audiences across outbound as well as inbound channels.
Marketo’s Inbound Strategy
Marketo is the perfect platform to fill this gap. They’ve been the thought leaders of the marketing automation market for years. Few products match their capabilities when it comes to outbound marketing or B2B automation. Furthermore, Marketo have long recognised that their future relies on inbound as much as it does on their outbound capabilities. They’ve had web personalisation capabilities since 2013, but adoption has been hampered by the preference for marketing departments to rely on the personalisation capabilities of their CMS or DMP rather than their MAP. To overcome this, Marketo developed Ad Bridge, which allows direct integration between Marketo and many leading DMPs. It’s a powerful feature, but one that few people are aware of.
Ultimately, Marketo have been unable to overcome the core weakness of marketing automation. MA is structured around interactions with known contacts. Its ability to track and target personalised content to known prospects and customers is unmatched. However, there are gaps when it comes to anonymous web activity and account-based marketing. Adobe are ideally placed to help with the former. As for the latter, there is a thriving marketplace of technologies to help with ABM, most of which deeply integrate with Marketo. In an industry which is trending towards ABM and inbound, this has led Marketers to look to other technologies to build out their marketing tech stack.
The result is the fragmentation of the B2B Marketing Technology landscape over the last few years. There are now over 7000 marketing technology products. Marketing Automation has gone from being the core platform for marketing departments to being one of the dozens of technologies that the typical marketing team uses to run their campaigns. It still has a privileged position in that stack as the central automation engine and pipeline to CRM, but it is less important than it used to be.
This position of Marketing Automation as the bridge to Sales is another reason why this deal is such a good fit for Marketo. Adobe are the only major player in marketing automation who don’t also develop a CRM system. Marketo have benefited substantially from being vendor neutral in the CRM space, allowing them to provide equal focus on both Salesforce and Microsoft Dynamics. Eloqua’s integrations with both systems have definitely suffered under Oracle’s ownership. Marketo have reaped the rewards, winning many deals from competitors to Oracle and Salesforce.
One of those wins was from Microsoft, who are now among Marketo’s largest customers. Microsoft also have a close strategic alliance with Adobe. There are various facets to this deal, but one of them is that Microsoft resell Adobe Campaign as part of their Dynamics 365 product family. As a result, they have developed several integrations between Campaign and Dynamics. If the same relationship is extended for B2B marketers to Marketo, then this will be a major benefit to the increasing number of companies who use both Marketo and Dynamics, without impacting the many Marketo customers who use Salesforce.
There are still risks associated with this acquisition, as there are with any deal. Adobe’s core focus is on B2C inbound after all, so they may take Marketo in the wrong direction. However, in a market where B2C and B2B technologies are beginning to diverge this risk is far outweighed by the potential benefits. The marketing technology sector is in desperate need of consolidation. Marketers are frequently bewildered by the sheer array of technology options. Consolidation would help the situation. Some deals have already happened, including Adobe’s purchase of the Magento ecommerce platform over the summer. Perhaps, this is the beginning of a trend.
Written by Alan Chatfield – Senior Digital Marketing Strategist, CRMT