Reporting season is nothing if not fun and watching how different stocks attract different kinds of attention is always entertaining. But I genuinely feel sorry for Marketo as it feels the ire of analysts who are unhappy with its outlook. What happened?
Well, there's a combination of things in play here. First, Marketo did better than expected in its latest quarter, posting metrics that should please any investor. From the blurbs:
- First quarter revenue increased 42 percent year over year to $46.0 million
- Deferred revenue increased 47 percent year over year to $66.9 million
- First quarter calculated billings increased 37 percent year over year to $49.9 million
- Subscription dollar retention rate was 109 percent
- Customer count increased to 3,972
What's not to like? Well, it turns out that Marketo is guiding cautiously for the next quarter 'only' reckoning to post revenue in the $49.5-50.5 million range. That would be a sequential gain of 7.6-9.8% or 39% year over year. The full year outlook is for revenue in the range $208-210 million, up around 39% as well.
Second, the competitive landscape is white hot. In the large enterprise space, Adobe and Salesforce are going after those markets with a vengeance and Marketo really doesn't have top SI partnerships in place that would allow it to get into the CIO office so easily. On the call (login required), Phil Fernandez, CEO Market said:
I think that we are going to see a world where each of the major operating departments in the large enterprise – finance, product, sales, marketing, customer service – are each going to be choosing a platform to run their part of the business. And they may choose to buy that platform from one large multi-function vendor or they may choose to buy best-of-breed, the sales products from Salesforce, the marketing product from Marketo, the ERP product from SAP, and so forth. And I think that's the dominant buying view.
The problem is that despite these fine words and the fact Marketo is making significant strides in mobile, the big dogs in the game can always outspend them for marketing and without missing a beat. In short, it's tough for the company to make the enterprise breakthrough.
However, it does have good things going for it. On mobile, Fred Ball CFO said:
So our view of the world is that consumers don't exist in silos. They don't compartmentalize social media one minute and email the next and mobile app the next and a web browser the next. They just are in this digital swim that they just move in between. And so our vision, and it's distinct from how our competitors have planned it out, is that marketers need to be able to talk to the customers seamlessly across every place the customers are. And we'd all be kidding ourselves if we didn't think mobile is big and central.
The next year will tell if Fernandez and Co can pull off a push into enterprise. Right now, the focus is upon expanding in Europe and Japan. It seems the market isn't overly confident and on that basis caned the shares 4.67% in today's trading.
Disclosure: Marketo and Salesforce are both patterns at time of writing