Marketo’s CEO talks martech consolidation and his enterprise customer ambitions

Chief of marketing automation vendor responds to ongoing acquisition rumours as well as the martech and adtech industry collision

At a time of aggressive acquisition by enterprise software giants such as Oracle, Adobe, IBM and Salesforce to shore up their marketing technology propositions, Marketo stands alone as a best-of-breed player.

But there continue to be questions about how long the company will or can remain that way. Industry rumours reported by Bloomberg this week suggest the vendor has appointed Morgan Stanley to look at strategic alternatives for the business, including a potential sale. The news, which has yet to be confirmed by Marketo, saw the vendor’s share price jump 25 per cent to US$26.77, raising its market valuation to more than US$1 billion.

At the same time, Marketo has set its sights on becoming much more than just a marketing automation offering for mid-market organisations. Among announcements made at its Marketing Nation Summit this week is a replatforming of its core architecture, code-named Project Orion, aimed at ensuring the platform has the capacity to house every customer interaction an organisation, as well as analyse and act on customer engagement across the enterprise. Marketo said the technology innovation will enable companies to listen, learn and respond to each customer in a personalised, relevant and contextual way.

Earlier this year, Marketo also struck a partnership with consulting goliath, Accenture, a move which many suggest pushes up its profile in the enterprise space and brings the vendor into more competitive contact with established platform players.

CMO had the opportunity to catch up with founder and CEO, Phil Fernandez, during Marketo’s summit to talk about the vendor’s aspirations to not just own marketing’s customer engagement efforts, but also become the customer engine fuelling modern enterprises.

Marketo has set its sights on extending its reach across the enterprise, putting you on a collision course with a host of enterprise-oriented software competitors. At the same time, we are seeing aggressive Marketing Cloud consolidation thanks to acquisitions by Oracle, Adobe, IBM and Salesforce. Not only is Marketo on the radar for acquisition, stories today suggest you are actually looking at potential buyers. How do you describe Marketo’s position in the market today, and can you survive as a standalone business?

I remember the days when was growing up and people were saying it was inevitable they’d get bought by an Oracle. It didn’t turn out that way. I think there’s an absolute reality that we can continue to be the iconic creator of a very large software category with lots of participants. It’s how we’re running the business every day.

As our asset becomes more visible and valuable, our customer successes gain exposure and tech M&A ebbs and flows, we’re in a frenzy zone where people are looking to put things into play. That I think is what we’re seeing in the near term: People are trying to literally put assets into play, and let’s face it, bankers make money that way. That’s not a very good reason to have industries realign.

We see our category, and the data managed and ‘owned’ by Marketo in an enterprise, of strategic value and substance, as much as any other large enterprise platform in there. I don’t think martech needs to be part of something bigger to survive. But it may end up being too attractive for someone not to pull the trigger on making us an offer we can’t refuse.

As Marketo moves to extend across the enterprises, would you agree your competitive landscape changes?

Yes, there are different competitors but also different, big friends. To have Accenture emerge as a big friend is phenomenally beneficial to our company. We weren’t on the radar two years ago because we couldn’t drag along enough revenue to matter. Now Accenture has seen we can. So there are big, new and scary competitors, but also new, powerful friends.

That’s also why you see us so dialled into our partner strategies, because we think it’s ultimately the only way to navigate and survive in this world.

Eighteen months ago, you talked about best-of-breed holding its own against the single platform play. Do you still think this is the case?

The plumbing of integration is easy enough now that the trade-off has shifted [from best-of-breed versus consolidated stack]. What we’ll see is three, four or five large-scale enterprise platforms in this category. I don’t know what this new vision of a customer enterprise platform is going to be called – CRM is taken – but I think it’ll exist and be identified as a standalone category. The question is do we succeed at being the last standalone player that’s essentially able to define the category, just like Salesforce did to a perfectly mature category at the time they redefined it.

Whether we’re best-of-breed or not then becomes the wrong way to define the question. I’m hoping we move beyond that question, rather than resolving it one way or the other.

Why was it important for Marketo to launch Project Orion now?

People need to start to think about understanding the customer better, and break out of that marketing lead cycle mentality. Understanding the customer is about understanding the totality of all micro interactions that make up the experience of someone engaging with your brand or doing business with you. If you open the window on creating leads through inbound marketing to understanding how service interactions are happening, commerce interactions and point-of-sale interactions are happening, the volume of insight is massively higher. Today, it’s possible to understand what a customer’s experience was in a voice response unit and link that to their digital experience and derive real insights from it - but only if you gather that data in one place.

That’s what is driving Project Orion. People want to connect Marketo into places that were never on the horizon even a year or two ago. Our customers figured out long ago there is much more capability being offered and more opportunities to take our product into different places in their organisation and that’s what we’re addressing.

Picking suitable metrics to showcase marketing’s worth continues to be a problem for marketers as they try and demonstrate value to the executive team. What metrics can help them shine?

The metrics that need to start to come forward are much more around how many touchpoints your brand is integrated in, if you’re hearing customers, and what insights you’re learning about them from that. Those are different metrics to ROI per say, but they’re very strategic in the sense that they’re a read on competitiveness and strategic effectiveness of major company programs.

Marketing needs to earn a seat to be able to talk about metrics that aren’t just making sales more successful. That’s the goal. In some sense, the pervasiveness and size of the digital advertising market and the ability to talk about changing the efficiency of that spend is a great way to be in a very different place. Marketing can talk about having made their digital advertising spend 20 per cent more efficient, as there is enough cost savings around things like advertising that it’s a safe ground for people to talk about now.

Marketers also need to talk about how rapidly they’re able to do tests, and get people to understand that a modern organisation needs to test and learn as a priority. Senior management at our customer Microsoft, for example, values that test-and-learn process because they know it’s the only way for the organisation to move and improve.

Account-based marketing was another announcement made this week. There has been a bunch of vendor launches in this space in recent times. Why was it imperative for Marketo to jump into the ring?

A set of capabilities have come together and while they fit, they’re not the only building blocks your need. I started to see this with ABM [Marketo’s own co-founder, Jon Miller, launched ABM vendor, Engagio]; everything looked like features. They still wanted the insights about the customer that end up inside a place like Marketo, and the campaign execution capabilities to communicate to these people in the same way.

ABM isn’t a standalone thing, it’s part of a customer lifecycle that isn’t necessarily addressed by such a point tool. It requires continuity beyond having good account data. Those are features of a broader strategy of how you score, evaluate and engage with a buying team in a large organisation.

With ABM, I saw we were creating the same fragmentation that has been the devil of marketing tools for a long time. At the same time, it was important to say as Marketo that we don’t want to do everything in ABM, we want to create an ecosystem so a number of people have a thing to anchor to, so they can add real value, build great businesses, make customers successful and solve use cases we can’t solve. There is a foundational place that needs to exist around who is the customer and audience data, what it tells you, how you analyse it and predict off it.

The martech and adtech collision: What’s your view on the state of consolidation?

Ad tech is going through what’s going to be a radical transformation over the next couple of years. And it will be consolidated; there are going to be two or three giant players in the end. At present, it stills very much like an ad market, with spot buys and finishing orders.

Our world of martech is then about infrastructure and long-term stability. They don’t match very well as a result in the same business. The revenue models are different, too. I remember talking to our biggest investor 18 months ago on whether we’d do an adtech buy and they turned white, as they didn’t even know how to evaluate that business. There are some deep structural lines that keep martech and adtech separated as industries.

But it’s also why we see people like Facebook partnering with martech providers. Martech is going to make that product so much better, and that creates some discontinuity in the market. We’ll have to wait and see how that plays out. Everyone sees martech being swallowed up by an Oracle, SAP or whoever, but I actually think we’ll see the likes of Facebook, Google and others becoming the marketing tech leaders as well. We saw Google just almost declare war on Adobe a month or so ago with its products, and that’s exactly the kind of evolution we’ll keep seeing.

- Nadia Cameron travelled to Marketo Marketing Nation Summit as a guest of Marketo.

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