As the credit crunch loosens its grip on our economy, M&A activity is starting to pick back up. Also in the marketing technology market – even in the campaign management market (for ease of use, it’s defined here as vendors in Forrester’s Wave: “Cross-Channel Campaign Management”), which has been pretty slow in relation to M&A activity in the last couple of years. Sure, Unica made a successful launch into web analytics by ways of acquisition and Alterian made a leap into Web Content Management and Social Media Listening Platform. But no players in the campaign management space were bought by bigger companies.
So, having seen two players being picked up within the last short while is noteworthy and arguably gives food for thought for other players on this playing field. And in the close to it, which is space that Agillic occupies.
First, Portrait were acquired by Pitney Bowes and subsequently Unica by IBM. Two out of eleven in the most recent Forrester Wave on the space, with Unica being generally perceived as the market leader.
Also, Alterian added social media consulting company, Intrepid, to its recent acquisition of social media monitoring platform,Techrigy. Perhaps not a huge M&A that will change the industry, but worth a comment.
Portrait & Pitney BowesI am so happy not to be working for Portrait. This must be a top ten candidate for ‘the worst acquirer for a CCCM company’ title. Every market analysis for the last five years has stated that inbound marketing capabilities and digital skills are crucial. And what happens? A massive print-based company goes and buys Portrait. They only recently went directly into the CCCM space by acquiring Million Handshakes and have struggled to integrate them. Now, Portrait becomes a small piece in a quite big puzzle focused around integrating its analytics capabilities into PB. I think it’s fair to say that enhancing the already limited digital capabilities in Portrait (the quite sophisticated email marketing tool they bought with Million Handshakes) is not the top priority for PB. This certainly leaves Portrait’s claim for fame in this space wanting as Forrester quoted Portrait clients for ‘stressing the need for stronger capabilities in the online channels’. Good news for Portrait’s closest direct competitors, SAS and Teradata, who were competing on data and analytics capabilities. But surely others will benefit as well. Portrait’s campaign management footprint was strongest in Scandinavia (as Million Handshakes was originally Norwegian), so vendors with a strong Northern European presence are likely to be ready to pick up any unsatisfied customers. And of course, there will be a few of those as investments in product roadmap get reprioritized. But in a broader picture, it will not make much of a difference to most marketers.
Unica & IBM
In mid-August, Suresh Vittal and Joe Stanhope of Forrester wrote an insightful blog on this acquisition (http://blogs.forrester.com/joseph_stanhope/10-08-13-suresh_vittal_and_joe_stanhope_consider_news_ibm_acquiring_unica) pointing to the very obvious conflict between Unica’s NetInsight and the recent acquisition of Coremetrics. My key takeaway from that: IBM are not fools and have not paid a stupid multiple on revenue from a product, where they already owned an equally strong competitive product. So with roughly 125M USD of revenue in 2009 and a sales price of 480M USD, multiples are close to 4. And perhaps more than four for the actual campaign management business. Interesting if you are VC-backed company in the marketing automation space. Such as Agillic (figured I’d make sure everyone got it).
But back to Unica, its customers and its competitors. As with Portrait, the acquirer’s commitment to the acquired company’s product roadmap is to be questioned. IBM has acquired Cognos, iLog, Lombardi, Initiate, SPSS, Sterling Software, Coremetrics, and now Unica since 2008 (thanks, Suresh and Joe), so investments in integration with current IBM marketing technology suite are likely to be made before investments in further enhancing Unica’s own suite. Unica have made a number of small-to-medium-sized investments in a strong strategic move to broaden its offering across the spectrum of especially digital marketing. Integrating these acquisitions seamlessly into the Affinium suite is a task not yet completed if customer testimonials and industry analysts are to be trusted, thus leaving Unica’s future competitiveness weakened. At least in the short-to-medium-term. Obviously, tapping into IBM’s customer-base will propel Unica ahead in the campaign management space and hopefully IBM’s entry will change the dynamics in the space in the long run. One likely outcome is further consolidation if ‘IBM-size’ muscle is going to be a ticket to compete in the space. I’m guessing that Alterian, Neolane and Responsys are all hoping this will be the case as they are probably the most likely targets for acquisitions.
Another possible outcome is that the differentiation within the space increases and is split into two macro segments: An enterprise-focused segment consisting of Unica/IBM, Portrait, SAS, SAP, Oracle, Infor(Epiphany) and Teradata focusing on enterprise applications and an end-to-end (or one-stop-shop if you prefer) delivery from one vendor. Of course, this segment will continue to pay attention to online capabilities – but not nearly as much as the other macro segment, the SaaS-focused segment. This segment, made up chiefly by Alterian, Responsys and Neolane but with potential new entries like Eloqua (currently all B2B) or salesforce.com (also mainly B2B), is likely to spend much more of its energy on integration with numerous digital applications. Responsys recently announced a partnership with eCommerce platform, eCommera, and other similar initiatives are being launched by other players. At Agillic, we are piloting a number of new applications in collaboration with key partners, including an eCommerce app, a CRM-retargeting app and a cross-channel advertising and marketing analytics app. Our partners have already made integrations with Facebook, foursquare and adservers. So I’m guessing we haven’t seen the last of this. From a personal point of view (or a “PVTS Point-of-View” if you will) I find this segment to be not only much more dynamic and interesting, but also much more in touch with marketers.
You can argue that there are two approaches to developing technology. You either build moats or you build bridges. The first approach is classic enterprise thinking: you try to cut out other applications and build a self-sufficient entity within your moat. You acquire if you find your proposition to be lacking. The other approach is SaaS. You have a number of API’s and allow for easy integration with other systems, because you realize that your technology can never be sufficient in a world that evolves and develops so damn quickly. Needless to say which one I believe in.
Alterian & IntrepidAlterian’s acquisition of Techrigy (which became a product labeled SM2 in the Alterian suite) was a bold move into social media and the first of companies in this space to venture into this territory. Predominantly, social media is a space occupied by creative agencies and technologies that are either custom-built or tailored to cater to these agencies’ needs. So a gutsy move by Alterian. But might also be an explanation why they have not had a lot of success in getting the traction they had hoped for. Insiders have led me to believe (there you go, the first bit of industry gossip even though I tried to steer clear of it) that SM2 has been very hard to get off the ground. Retrospectively, it makes sense: brands want to buy hyped social media services from cool, young, groovy and creative people. Not from MSP’s who are what Alterians partner network consists of. There are lots of great things to be said of MSP’s, but cool and groovy are not amongst them. This makes the Intrepid move seem logical. But it also jeopardizes Alterian’s quite successful MSP strategy as they in theory start competing with the MSP’s for services. Maybe their analysis is that the MSP’s were never very interested in SM2 anyways, so no channel conflict. Let’s hope so – for Alterian’s sake.
I suppose the question is whether acquiring Intrepid is another bold and offensive move or a desperate and defensive move to try and get some kind of value from a poor investment. I’m not quite decided. But one thing is for sure: if my previous hypothesis of Alterian being a potential acquisition target as the market diversifies to include a more clearly defined high-growth SaaS segment to which Alterian belongs, then I would be a pretty concerned Alterian shareholder. Why? Well, multiples for a services company (Intrepid) is about 20% of those of a SaaS company. So, potentially Alterian just sliced their valuation quite significantly. But of course that’s very speculative.
On a final note: Since the SaaS/online segment would be smaller but with higher growth figures, it would suddenly appear more interesting to various types of investors. Or at least there are a few of us in Agillic, who would hope so.
As always: share your thoughts on the above.
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