CMOs or CIOs, it's all about education when it comes to marketing in the cloud, says Marketo CEO

Profile picture for user slauchlan By Stuart Lauchlan October 22, 2015
Summary:
A 20-year arc? After 8 years at the helm, Marketo CEO Phil Fernandez says customers are still learning about the potential for marketing in the cloud.

phil fernandez ceo marketo
Phil Fernandez, CEOMarketo

Regular readers may have picked up on my irritation with the continued recital of that Gartner prediction that the CMO will take over as the dominant IT decision-maker in organizations some time around now.

It’s nonsense - and it always has been.

As a broad-sweep marketing claim, it served its purpose to get attention, but in reality the idea takes only a few seconds to fall to pieces under scrutiny. Line-of-Business increased influence, that I’m fine with, but CMO as CIO-replacement? - gimme a break.

I’m pleased then to hear Marketo CEO Phil Fernandez tackle this hoary chestnut head one with a nuanced response to the idea:

Is it faster to Chicago or by bus? - meaning that it's not really literally sensible in the sense that budgets tend to be matrixed and shared between organizations like CIOs and CMOs. But what it really tries to hint at is where is the center of action going on in the IT technology environment in the modern enterprise? I just don't think there's any question that it's in marketing.

That I can buy. Fernandez goes on:

We have very, very deep, mature penetration of ERP systems. We have very deep, mature penetrations of call it sales systems, we have very deep and mature penetration of human capital systems and the like, and marketing is still the new frontier. Any time you've got the new frontier that's where time and energy and attention goes. So I continue to think that CIOs are probably spending more time cozying up to their CMO partners, and that's where I think pretty clearly the center of the action is, in large enterprise, certainly in the United States and EMEA, for example.

Of course this scenario varies according to the size or the organization you’re pitching into, he adds:

When you sell to a small or medium-sized business, sales and marketing are really pretty close together and the CMO and CIO or the Chief Sales Officer, they know each other, and they work in the same building frequently.

When you get into larger enterprises, with large divisions and stuff, the CMO and the marketing function tends to get further and further away from the sales department. In many cases, marketing exists, say, in product organization, and then sales exists in a distribution organization.

Twenty-year arc

Despite Marketo’s status as the original Marketing Cloud, Fernandez is quick to argue this is still a “very, very early” sector of the cloud industry and there’s still a need for education and evangelism here:

I believe the single biggest growth limiter for our market at large is, in fact, customer education…we see still very frequently customers that understand the benefit, [but] will say, ‘We're absolutely going to do this, but I have to get a Vice President of Marketing Operations hired first’ or something like that. That is a very common kind of thing.

So this is still a market that is in the learning and skill-building phase. I think very distinctly so. If I look back over the eight years we've been at this, it's way better than it was eight years ago, but, this is a 20-year arc, not a two-year arc.

One issue that Marketo has been seeking to address is the need to beef up its sales infrastructure, a task that’s the responsibility of Steve Winter, who’s coming to the end of his first year as the firm’s global sales lead. Top of his agenda is to accelerate the hiring of quota-carrying sales reps to get out into what is becoming an increasingly-competitive space.

It’s a big job, admits Fernandez, but he says he’s confident progress is being made:

One of the great things Steve has done since he's been here is hired and built a massively more capable sales enablement organization than we've had previously, much more courseware and much more structure. So we're very well positioned to take and bring people along as we do get them on board.

It is hard to hire enterprise reps going into Q4, because the good ones typically are driving towards a commission check at the end of the year. Very often it's not a good time to pull the rip cord on. So, this is a tough time to be hiring just as we're going into the end of the year.

In the meantime though, positive actions are being taken, he adds:

One of the things Steve does every week is a ‘must-win-deal’ call that I sit in on to be sure we leverage all the company's resources. It's a thrill to me to suddenly be finding new names as new folks at Marketo are working on global deal strategy at large brand name customers that we're engaging with. Those are all very positive signs to me that these people are coming on line, and getting up to speed and working on real deals, and going to impact revenue growth in the future.

Growth

Revenue growth at present, year-on-year, is ticking over solidly. Yesterday the firm reported third-quarter numbers showing a net loss of $18.2 million on revenue of $54.9 million, up 40% from a year ago.

But there’s increased competition on the rise out there with the likes of Salesforce, Oracle and Adobe pushing their own (functionally-different) marketing clouds (lower case).

Fernandez points to the inevitable Gartner Magic Quadrant - where Marketo is positioned with Oracle Eloqua in the desired upper right section - as proof of his firm’s leadership position:

We now have earned the industry approval, if you will, to be considered a leader in that space. That is causing people to move from older Eloqua and older Responsys to us and we see that happening all the time.

With Salesforce, I have characterized the market with ExactTarget as basically always being a replacement market. That's a replacement of ‘batch-and-blast’ e-mail with a modern multichannel engagement marketing engine.

The competition in the SMB [space] with Salesforce around their Pardot product and ours tends to still be mostly a greenfield market, although, because their product serves a simpler, more entry-level user, we do get a reasonable number of graduates kind of coming up to the more sophisticated Marketo product. But we're doing very well competitively these days.

He concludes:

I like where we are here at Marketo.

We're showing great growth, and consistent progress towards positive cash flow in our long-term operating model. We're continuing to execute well. We're innovating, leading the way for our industry. We're making our customers successful around the world.

I like our position in the market, I like our competitive performance and I feel momentum continuing to move our way.

My take

A solid performance from a ‘veteran’ of a still-emerging sector.

 

Disclosure - at time of writing, Oracle and Salesforce are premier partners of diginomica while Marketo is a partner.