Marketo CEO - marketing cloud wars for years as CMOs build relationships with CIOs
- Summary:
- Marketing cloud platforms will become a norm alongside CRM, ERP and HCM, but not for a few years yet, argues Phil Fernandez.
There was some serious stealth marketing going on with Marketo at this year's Dreamforce conference in San Francisco earlier in the month.
Usually a prime sponsor of the jamboree, the increasing high stakes in the marketing cloud wars seem to have taken their toll and Marketo found itself exiled, popping up in smaller venues hired around the main Dreamforce playground. Turn a corner and who knew when you might see the familiar logo pop up next.
Away from such competitive hi-jinks, the firm – which owns the TM on Marketing Cloud incidentally, which could lead to some interesting conversations at some point! – just turned in its latest set of numbers, reporting a net loss of $12.8 million compared to $10.0 million year on year, on revenues up to $39.3 million from $25.5 million last year.
As CEO of probably the highest profile of the pureplay marketing cloud vendors left, Phil Fernandez remains convinced that the firm is in the right place at the right time and with the right independent, best-of-breed status:
I believe that marketing is not sales, marketing is not any other part of the company. Marketing is an absolutely first-class discipline to itself. A lot of dollars are spent on marketing, a lot of unique business processes take place in marketing.
The business processes that take place in marketing are absolutely not second class to anything, and the scope and importance of the job is not second class to anything.
Best-of-breed that actually helps marketing fulfil their mission, wins out over integration...I think we really offer both extraordinary integration into the enterprise and into the CRM system like a Salesforce or a Microsoft Dynamic CRM or SAP or others, and we offer the best product to help marketing fulfil their mission. I just think that's the winning strategy.
Changing markets
Of the wider macro-trends at play that have triggered the interest of firms such as Salesforce.com, Infor and Oracle to up their own marketing cloud gambits, Fernandez rationalizes:
In a world where each of us is bombarded with an average of more than 3,000 marketing messages everyday, marketers everywhere are really waking up to the fact that things have to change.
Basically, they realized that they have to move away from traditional point-in-time campaigns, which involves talking at customers at ever-louder volume, whether by mass advertising or even batch and blast email.
Instead, they know they must start to build highly personal and enduring two-way relationships with each and every one of their individual customers, individual relationships that might be sustained for months or even years.
At the same time, CMOs are being asked to step above the transactional fray of their day-to-day business to act as their company's stewards of the entire customer relationship from acquisition to customer lifetime value, to customer satisfaction, loyalty and brand efficacy, and CEOs and other C-suite executives are taking note.
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Fernandez cites a recent McKinsey study that found that digital engagement of customers was the top technology priority among respondents. This is underlying what Marketo positions as the 'era of Engagement Marketing'. The Marketo CEO cites the example of one customer to illustrate what's meant by this:
MyFitnessPal has become one of the largest health and wellness sites in the world, with over 65 million users of their mobile app. And they know they can get a lot of people excited about their health, about tracking their physical activity by eating well. But they also realize that it's all too easy for these same people to slip back into their old habits, missing exercise and not eating right. I suspect I'm one of them.
MyFitnessPal uses our Engagement Marketing Platform across their mobile app, email, their website, and their incredibly popular blog, to activate and to reactivate their customers and to keep them moving forward with a healthier lifestyle. The Vice President of Marketing of MyFitnessPal says, 'Marketo helps us address the significant challenge, gives us the ability to scale and helps us leverage things like personalization, analytics and segmentation, to deliver the right content to the right person at the right time.'
B2C's spending millions
A major push for Marketo is into the B2C space where it wants to be taken “really seriously”. This is paying off, according to Fernandez, who cites recent signings such as Rocky Brands Footwear, the Hakkasan Restaurant chain and the Juvenile Diabetes Research Foundation (JDRF):
JDRF [is] moving away form a well-known email service provider to Marketo, in order to enable the staff and their 80 separate regional offices to create more personal and intimate conversations with each of their donors, so that they can improve participation, increase giving and drive awareness for their cause.
One reason such names are important to Marketo (and others) is simply one that talks to the wallet. As Fernandez puts it, in B2C organizations:
marketing, frankly, has a slightly stronger role in many cases and where spending millions of dollars on a Super Bowl ad doesn't make anybody blink. I believe that, in fact, B2C has a tendency to spend somewhat more liberally on these kinds of technologies.
Back in the B2B heartland though, there's the threat posed by other enterprise software competitors, although most of those cited by Fernandez he characterizes as legacy products, such as Teradata's Aprimo and IBM's Unica:
They're not really seen as apples-and-apples by customers, but they're seen as, now the time to make a generational replacement there.
And if that replacement decision is taken and a move to a cloud alternative is made, then according to Fernandez:
In B2B, the only other game in town is our friends over at Oracle.
What, no Salesforce.com? It seems not, although Fernandez does concede that:
We compete pretty significantly with Pardot [one of Salesforce.com's Marketing Cloud acquisitions].
Overall, Fernandez posits that we're still at a very early stage in the marketing cloud game, despite the headline grabbing acquisitions of the likes of the Oracles and Salesforce.coms:
I think this is still a multi-year journey, because CMOs don't in many businesses have the relationship with IT, with the CIO. Just the notion of standardization doesn't exist in the vocabulary, because the IT organization is not sufficiently well informed [with] CIOs everywhere scrambling to get smart about these categories.
It's massively more in that direction than it was even a couple of years ago. It's just got a long way to go. I think we're still a couple of years before it becomes common practice for a CIO to declare a standard around the marketing platform as they would have in their sleep around ERP for example.
But it's still his belief that :
we're going to see that the marketing platform gains legitimacy as a strategic enterprise platform sitting beside CRM and ERP and HCM.
My take
We said earlier in the year that 2015 would be the real year of the marketing cloud wars and we're sticking to that prediction. But Fernandez' pragmatic view that this is a multi-year conflict is a fair point. This war isn't going to be over by any metaphorical Christmas.
What remains in play of course is whether Marketo's best-of-breed ecosystem philosophy wins out over the one-stop-shop, end-to-end mantra from Salesforce.com and Oracle. How CMOs and CIOs decide to confront this religious choice will determine the outcome of this holy war.
Disclosure: at time of writing, Infor, Oracle, Salesforce.com and SAP are premier partners of diginomica; Marketo is a partner.