Marketo ended the day better than it began Tuesday. The marketing cloud provider’s share price hit a new 52-week low during trading based on comments from RBC Capital, but rebounded spectacularly - up 11% - after turning in better-than-expected fourth quarter numbers.
For the fourth quarter ended December, the company reported a net loss of$17.2 million, up from a loss of $15.9 million, on revenue up 38% year-on-year to $58.3 million. For the full year, revenue was up 40% to $210 million.
Guidance for the coming year is mixed, but those numbers were enough to keep Wall Street relatively happy for now.
In another positive move, the firm has signed a partnership with global digital agency Underman to offer what the two are calling ‘insight driven engagement’. According to the official announcement:
Marketo’s marketing automation and marketing management applications combined with Wunderman’s comprehensive approach to data-driven insights and engagement, will give brands the opportunity to engage customers in a cohesive way across all digital channels and measure how their marketing spend drives revenue.
Last month was the tenth anniversary of Marketo’s founding, which puts CEO Phil Fernandez in reflective mode:
We pioneered a whole software category and established our track record as the top dog leader within it. We have great products in use at enterprise scale of many of the world's largest and best-known brands. And we've earned a sterling reputation in the market as a leader, and as a high quality company with a deep commitment to diversity to our communities and to being great people to do business with.
Since that founding, the marketing cloud space has become distinctly crowded, with the likes of Oracle and Salesforce buying their way into a bigger slice of the action, while the likes of Adobe have made their own moves. As Marketo looks towards its second decade, Fernandez remains convinced of the firm’s competitive differentiators as an independent in the sector:
We started Marketo ten years ago with the distinct point of view about where the evolving worlds of digital advertising, social media, big data, and the mobile Internet were headed. We saw that the historically separate worlds of B2B and B2C marketing going to rapidly converge. We knew that CMOs were going to increasingly be asked to prove return on the trillions of dollars they spend every year on advertising and marketing. And we saw that marketing technology was going to reach across every corner of the modern enterprise and into every element of the customer experience. In short, to become an essential part of the digital transformations we see taking place in organizations everywhere.
And so we built a product that offers a superior level of agility, functionality, enterprise integration, and analytic sophistication than anything else in the market. The result is that Marketo has a product set that is not just a little bit better, but a lot better than anything else out there. The marketplace understands us better than ever before, and we are seeing more competitive migrations to our platform. The reasons we hear are pretty much the same every time; frustration at the lack of innovation, and poor customer service from up-market products, and lack of capability and sophistication from the low-end products.
Fernandez claims that the acquisition of firms such as Eloqua by Oracle and Radian 6 by Salesforce has not been followed through with innovation:
We've introduced breakthrough web and mobile personalization capabilities that our competitors still haven't come close to matching. We've introduced multi-touch attribution analytics to let marketers make superior investment decisions. And we've recently led the way for how first-party audience data, a new kind of digital advertising integration will completely change the way customers manage their paid, and their media strategies, and their digital advertising efforts.
From the competition, crickets, nothing; in the three years since our two primary competitors were acquired by giant suite-oriented software companies, we've seen innovation in competitive products more or less grind to a halt. Industry analysts are figuring this out. In the first few days of 2015, Gartner published their Magic Quadrant for Digital Marketing Hubs, and Marketo enjoyed one of the largest moves to the right in a single year in terms of the innovation and completeness of vision that frankly I'd ever seen in my career.
But he concedes that the marketing cloud space is now an increasingly competitive landscape, arguing that rivals are using pricing as their main asset, something that will hurt them in the long run:
It's clear to me that we're seeing a new level of price competition. What I would characterize as desperate price competition coming from the large suite vendors that are our primary competitors. We're seeing them literally give away their products to try to block us from closing deals, when we have one clear user preference. And we see this resulting in deal delays and lower price points in some highly competitive situations.
But we're here for the long run, and I like our odds. Our competitors are not innovating. And when using the kinds of panic-driven pricing strategies we're seeing, it's obvious they're not playing a sustainable game.
It has nothing to do with B2B or B2C. I think the market context in which we're playing has moved beyond that kind of block. It is largely with our primary enterprise competitor that's acquired several competing products and space, and has an ability, both with enterprise pricing and selective deal targeting, to really to play hard when they're losing deals. And as momentum [is] moving in our direction, we just see a reasonable amount of that kind of lashing out from them.
But it’s a rapidly-changing market and Marketo can drum up greater agility than a number of the enterprise giants, he concludes:
It's a very fast moving market in terms of dynamics and changes and puts a priority therefore on a nimble, agile, innovative vendor. It's therefore going through entire sets of cycles faster than we've seen any other market because the pace of change is faster. It feels a little bit like a consumer cycle rather than an enterprise cycle as a result.
And beyond that, where that leans, none of my history degrees of 30 years [as an entrepreneur] tells me other than [that] this is essential technology that every company needs to live in a current, digital, social, mobile era. There's a lots and lots of headroom in this market.
Happy tenth anniversary, Marketo. All indications are the second decade will see a more competitive landscape, but equally more commercial opportunities.
Disclosure - at time of writing, Oracle and Salesforce are premier partners of diginomica; Marketo is a partner.