Marketing Automation's Unhappy Users: Trouble in Paradise?

As I mentioned in last week's post, I’m writing a paper on stages of marketing automation deployment. Key findings will be presented in a Webinar next Thursday, sponsored by TreeHouse Interactive; you can register here. The paper itself will be available to Webinar attendees.

The premise of the paper and Webinar is marketing automation has a problem: clients who don’t move beyond basic email functions are unhappy. Last week’s post provided statistics that show how many marketers fail to make this transition, but it didn’t actually show why this matters. So let’s look at some more data that illustrates the trouble in marketing automation paradise.

First we’ll start with the paradise itself: B2B marketing automation has indeed been growing quickly, at about 50% per year over the past few years according to my estimates.  I do expect that to slow somewhat in 2014 as the core market of tech companies approaches saturation and adoption in other industries remains spotty. The great hope is that acquisitions by Oracle, Salesforce.com, Adobe, and other big software vendors finally push the industry across this classic Geoffrey Moore chasm from the beachhead niche to mainstream users, but that’s by no means certain to happen.

If and when that growth does occur, it will be fueled by positive experiences of previous users. But the news on that front is mixed: a survey by one of the industry’s best analysts, Jim Lenskold, found 60% of marketing automation users reporting increases in the key value measures of lead quantity and quality. That’s a happy majority, but it also means that about 30% found no improvement or even a decline.

Questions about satisfaction give a similarly ambiguous result: just over two-thirds of users in a Winsper Group survey reported themselves satisfied with the business value of their system, again meaning that nearly one-third were neutral or actively dissatisfied.

Even more scary (and just in time for Halloween, if you're still looking for a costume): yet another survey, this by Holger Schulze, found that 31% of current marketing automation users anticipate changing their system within the next two years, nearly always because they want better or different capabilities.

Although these figures come from different sources, they all point to the same conclusion: about 30% of marketing automation users are not happy with their systems. The Schulze survey suggests that most believe a different system will give them better results, so they’re not yet ready to give up on marketing automation entirely.

But will those users really do any better with a different product? I’d be the last person to say that all marketing automation systems are the same, but it's also true that the vast majority of systems purchased have all the functions needed to run a successful marketing program. Some fraction of users really did buy the wrong product, but I’ve no doubt that most have problems due to flawed deployment.

One final survey reinforces this point. This one, from BtoB Online, found that just 26% of users had fully deployed their system – and nearly 40% had only some or moderate adoption.

I’d guess that the dissatisfied users in the earlier surveys are concentrated in the low deployment groups in this survey.  But if that’s true, those marketers are abandoning their systems before giving them a real chance. The BtoB survey does show that strong and complete adoption have increased considerably from 2012 to 2013, which is good news.  It also shows that full adoption will double next year, which would be even better news if it happened – but those figures probably reflect aspirations more than reality.


All of this brings us back to where we started: rather than blaming their tools, marketers need to work harder at ensuring full deployment of the systems they’re already purchased. Join me at next week’s Webinar for a roadmap to making this happen.

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Oracle Buys Eloqua: Winners and Losers for B2B Marketing Automation

Oracle announced today that it has agreed to purchase B2B marketing automation leader Eloqua for $23.50 per share, which comes to $871 million. This was a bit of a surprise, given that Eloqua just went public in August. The stock had been hovering around $17.50 recently, so $23.50 is a 34% premium: reasonable but not exciting. It suggests that neither Oracle nor Eloqua management felt the company was substantially undervalued.

The deal makes obvious sense, in that it gives Oracle a much stronger position in the fast-growing B2B marketing automation industry*.   Oracle does have an existing B2B marketing automation product, based on the technology it acquired from Market2Lead in 2010.  Market2Lead was very good system, but it lacked the huge market presence that Oracle gains from Eloqua. Oracle may also be gaining a more sophisticated “cloud native” platform, since other Oracle products grew largely from on-premise roots.**

So that’s all fine, but what industry observers really want to know is how Salesforce.com will react. Before addressing that, let’s acknowledge that it’s an "inside the Beltway" concern.  Working marketers care more about how this affects the products and services they’ll get as current or potential Eloqua customers.

The jury on that is very much still out.  Eloqua’s press release promises that Oracle will “significantly increase engineering investments in Eloqua products” and “make Eloqua the centerpiece of its Oracle Marketing Cloud”.  But that’s what they all say, eh? It seems more likely that Oracle will slow down Eloqua enhancements as it evaluates the product’s direction and decides how to best integrate existing Oracle technologies. Indeed, the company says as much in its FAQ on the deal: “Oracle plans to integrate several of its key technology assets, such as Big Data and Business Intelligence, to deliver enhanced value to Eloqua’s products.” That may be the best for Eloqua’s customers in the long run, but the changes will take time to deliver and necessarily distract from near-term product enhancements.

The impact on customer service is likely to be even more negative.  Eloqua’s culture is very focused on customer success, and it has been a clear leader in areas like marketer training. Oracle is less customer-focused and generally less nimble (I'm being polite here).  It will be Oracle’s culture that dominates the combined organization.

Small businesses in particular can expect little love from an Oracle-ized Eloqua.  The company had already been pulling away from that market and now will almost surely give it even less attention. One very specific reason is that B2B marketing automation vendors have always touted client counts as a competitive success metric, which encouraged them to sell to a lot of small clients to inflate that number. Oracle doesn’t report client counts, so that motivation will be gone.

What if you're an enterprise marketer?  In that case, this might well be a good thing.  If you look back at my earlier post this week on the industry future, I argued that the major marketing automation systems will become platforms that support a range of independently developed applications, similar to the Apple and Android app stores or the Salesforce.com AppExchange. As part of the Oracle “Customer Experience Cloud”, Eloqua itself will plug into a larger platform: so it’s pretty much the same model but on a larger scale.

The advantage is that this platform (shown in Oracle’s diagram as the “Customer Experience Foundation”) is unequivocally designed to span all customer-facing activities in the company.  A marketing automation platform can't do this because it bumps up against the competing platform of CRM. A platform that truly includes all customer-facing activities can be more powerful than one limited to marketing automation. This applies especially to the data structures, which are limited for different reasons in both marketing automation and cloud-based CRM systems. (The reasons: marketing automation databases are constrained by the need to synchronize the CRM data structures; CRM databases are limited by the challenges of delivering adequate performance at reasonable cost for operational processing.)


Of course, a platform that serves all customer life stages also by definition contains all information about each customer.  This is another Good Thing, since it provides a truly complete customer view and thus enables the best possible coordination of customer treatments across systems and throughout the relationship.

I’m not saying Oracle is guaranteed to fulfill this potential (see my earlier comments under "nimbleness, lack of"). But at least it’s possible. And, just maybe, Oracle managers will see the value of Eloqua’s “appcloud” marketplace and expand rather than kill it. Wouldn’t that be nice?

Okay, now we can talk about Salesforce.com.  There’s a case to be made that this whole purchase is just a way for Oracle’s Larry Ellison to annoy Salesforce’s Marc Benioff: after all, Eloqua isn’t costing that much more than the Hawaiian island that Ellison bought himself not long ago and it might give Ellison greater pleasure.  It’s certainly worth a chuckle at Oracle headquarters that Eloqua was recently selected as Salesforce’s own marketing automation tool.

More significantly, the Eloqua purchase poses an awkward dilemma for Salesforce, which wouldn’t let Market2Lead continue to integrate with Salesforce after Oracle bought it. Taking the same line with an Oracle-owned Elqoua isn’t quite as easy, and in fact is probably impossible. So now Salesforce finds itself forced to give Oracle access to prime customers, which cannot be a pleasant prospect. We’ll see how they handle it.

The Eloqua purchase certainly exposes the downside of relying on AppExchange partners to provide significant functionality needed by Salesforce clients.  Yes, Salesforce.com gets to leverage those partners’ efforts, saving its own funds for other, more strategic investments. But if a big partner like Eloqua goes away, there’s some danger it could take Salesforce clients with it. This doesn’t matter when there are plenty of alternative partners to provide Salesforce clients with similar capabilities, which has been the case with marketing automation.  The calculus changes when a few large vendors start to dominate the marketing automation space – especially among enterprise clients, who have special needs that only a few vendors can meet. More concretely, Salesforce now has to think long and hard about Marketo’s future. The expectation has always been that Marketo would remain independent, eventually as a public company. But what if they get bought by potentially serious competitor like SAP or IBM, either before or after a public offering? Salesforce might well decide to buy them itself just as a defensive measure.

As I say, this is really just inside gossip that's not terribly relevant to most working marketers. But who doesn’t like a good soap opera? Stay tuned…

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* Raab Associates estimates the industry grew about 50% this year, to $525 million.  I haven’t come up with a considered estimate for next year, but suspect the rate will fall a bit on a percentage basis, even though absolute dollar growth will be about the same or higher.

** In fact, Oracle has two B2B marketing automation products, the other being Oracle Fusion Marketing.

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Raab Report: Neolane, Aprimo, and Eloqua Rate Highest for Large Company B2B Marketing Automation

Tuesday’s post looked at the micro-business sector leaders according to our VEST report and gave a bit of background on how the ratings are created.  Today let's take a look at the same diagram for large businesses, which we define as companies with $500 million revenue or more.

These companies have large marketing departments that may manage hundreds of campaigns for different products in different locations. Our scoring reflects their need for special features for automated content selection, project management, complex lead scores, and tight control over the rights granted to individual users. This group had about 1,400 clients in mid-2012, generating an estimated $85 million in revenue. This is 5% of industry installations and 25% of industry revenue. Many of these were small departmental implementations; there are probably fewer than 500 true enterprise-wide deployments. The non-specialist vendors such as IBM Unica and SAS, are not included in these figures but also have significant revenue in this segment.

As before, vendors closer to the top have the most appropriate features for this segment, and those further to the right have the most similar customer base and company resources. The chart shows Neolane and Aprimo (owned by Teradata) as the clear leaders, with Eloqua also very strong.  Marketo and Oracle (specifically, Oracle CRM On Demand Marketing) are considerably further back in the leader quadrant.

It’s important to recognize that Neolane and Aprimo are fundamentally different from the others. Both are general purpose marketing automation systems that serve large numbers of B2C as well as B2B clients. The clearest technical distinction is the marketing database: Neolane and Aprimo are designed to connect with custom-built, external marketing databases, whereas B2B marketing automation products like Eloqua, Marketo, and Oracle are based on an integrated database using a CRM data model (usually Salesforce.com, although Oracle is tied to Oracle's own CRM). This doesn’t mean that every client actually connects them to CRM system. But it does mean that the standard data models match the CRM data models and, in many cases, that abilities to expand the data model with custom tables are limited.  One reason that Neolane and Aprimo rank so high in this sector is, precisely, that large businesses often want more database flexibility than the CRM-based approach allows.

As with Tuesday’s chart, the other important place to look on the chart is the upper left, which captures companies that have suitable features for this segment but are too small to rate as leaders. SalesFusion (which also ranked highly in the micro business segment; a good trick) and TreeHouse Interactive stand out in that region. So does MarketingPilot, a newcomer to the VEST that is more like Neolane and Aprimo in serving a mix of B2C and B2C clients. See my 2011 MarketingPilot review for more details, bearing in mind that they’ve added capabilities since then.

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Raab Report: Financial Comparison of B2B Marketing Automation Vendors

I’ve been so busy analyzing the new VEST data that I missed the announcement that Eloqua’s would make its initial stock offering today. The valuation was a bit disappointing – $368 million, or just over four times revenue trailing 12-month revenue – but certainly a good return on its backers’ investment of about $41 million. And the stock did rise 12% on the first day. Good for them, and congratulations.

Coincidentally, I was already planning to write today about industry financials. I’ve been creeping in that direction with the previous two posts about revenues, growth rates, and market share. Now let’s plunge in with some more substantial analysis.

For companies like Eloqua and its competitors, there are really two big financial questions: how fast can they grow, and how can they become profitable? In a young industry like B2B marketing automation, the primary focus is growth, and I published some figures on that yesterday  (repeated below). As we saw, Eloqua’s client count is growing considerably slower* than all major competitors except Infusionsoft. This may be one reason the stock market gave it a relatively conservative valuation.

Revenue figures tell a similar story, as does revenue per client. We looked at those in Tuesday’s post;  I’ll repeat the caveat that figures for Eloqua and HubSpot are my own estimates based largely on client growth and (for HubSpot) changes in client mix. The standout performer in all these tables is Marketo, but bear in mind that they’ve also taken much more investment than any of the others ($107.5 million) and the $70 million in 2012 revenue hasn’t happened yet. Still, this suggests that Marketo might be able to fetch a higher price than Eloqua.

What about profitability? I’ll repeat that the financial markets care much less about profits than growth for early stage companies. Still, profits will have to matter eventually.  So they're worth a look.

Eloqua is the only company in this group with published financial statements, so any profitability analysis has to be speculative. One useful measure is employee counts, which are a reasonable proxy for expenses and operating efficiency. The table below presents clients, employees, and clients-per-employee ratios.

The first thing you’ll notice is the broad range in clients-per-employee ratios: from 40:1 for Infusionsoft to less than 4:1 for Eloqua. The main reason is the size of each company’s clients – Infusionsoft serves small businesses that take much less effort per client than the mid-size and large companies who buy Eloqua.

Still, Marketo, Pardot, SalesFusion and Net-Results all serve primarily mid-size companies, so they are somewhat comparable. (Act-On tends a bit smaller.) Given that assumption, the figures suggest that Pardot, Net-Results and SalesFusion are more efficient than the others. That’s probably true, perhaps because they are all self-funded. Net-Results also markets primarily through resellers, which also lowers its costs.  Act-On’s ratio is notably low, probably reflecting aggressive staffing as it prepares for rapid growth.

The second thing you’ll notice is the year-on-year trend. Infusionsoft, HubSpot, Act-On, and Net-Results all show a drop in the clients-per-employee ratio since last year, meaning they have become less efficient. We can probably attribute that to gearing up for growth. By contrast, Eloqua, Pardot and SalesFusion have become substantially more efficient. Eloqua’s gain is particularly impressive since it has the largest client base and relatively low growth – suggesting the company has been working hard to keep costs down in preparation for its public offering. It looks like Marketo has become just slightly more efficient, but we'll revise that opinion in a moment.

Since we do have revenue figures for the top four vendors, we can also look at their revenue per employee. This is a standard efficiency metric and more directly comparable across companies.  Here's that data, along with revenue per client.

These figures put the client-per-employee ratios in deeper perspective. They confirm that Eloqua has improved efficiency, and by far the highest revenue per employee in the industry.  The figures may be be overstated (see footnote) but even more conservative values would leave Eloqua in first place.  The figures also confirm that Infusionsoft’s cost structure is pretty much stable.

The news is better for HubSpot, whose apparent productivity decrease (measured in clients-per-employee) vanishes when you measure revenue per employee instead. The difference is the growth in revenue per client (which, I’ll remind you again, is only my personal estimate).

The story is even more dramatic for Marketo, whose 6% improvement in clients per employee becomes a 23% gain in revenue per employee, boosted by a 16% increase in revenue per client.  Impressive, but let's hold the applause until we see the actual results.


Whew, that’s a lot of numbers. Maybe only industry insiders will find them as interesting as I do. But other marketers should also find them helpful as they try to understand each vendor's business situation and determine how well it matches the marketer's own needs.

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* And that's using Eloqua-provided figures of 900 clients as of mid-2011 and 1,375 for mid-2012, which yield a 53% year-on-year growth rate.  The revised S-1 published in mid-July showed 42% year-on-year revenue growth.  A 42% growth rate would yield 2012 revenue of $101 million vs. my estimate of $110 million, and a 7% drop in revenue per customer to $73,455.  Ouch!  On the plus side, even the adjusted $288,571 revenue per employee is higher than anyone else, and a 16% improvement over 2011.

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