Salesforce.com aims for next $1 billion business with ExactTarget buy

Salesforce.com will "double down and focus" on building out its marketing software arm, says CEO Marc Benioff

Salesforce.com's pending US$2.5 billion purchase of marketing software vendor ExactTarget will help it develop a new $1 billion annual revenue stream and set the company on a clear strategic course for the foreseeable future, according to Salesforce.com CEO Marc Benioff.

The ExactTarget deal, the largest in Salesforce.com's history, was announced Tuesday and is scheduled to close by the end of July.

Salesforce.com already had some marketing capabilities, especially for social media ad campaigns and associated analytics, gained through its acquisitions of Buddy Media and Radian6. But it wasn't enough to play in today's market, Benioff said during a conference call Tuesday.

"We recognized we have to get stronger in critical areas like email as well as marketing automation and lead nurturing," he said. "We wanted to make one large purchase that brought all of these things together. We can't keep making these small acquisitions. We needed to do something of consequence. We needed to do something now."

Benioff also suggested that Salesforce.com was involved in a bidding war with other, unnamed parties for ExactTarget. "This was a very competitive process and we're thrilled to be the victors here," he said.

But now Salesforce.com is going to close its wallet for a while. "I think what you're going to see is us taking a vacation from [mergers and acquisitions] for anywhere between 12 and 18 months," Benioff said. "We are going to really double down and focus on the success of ExactTarget. Now we have a clear trajectory for a $1 billion marketing product line. This is a clear product strategy for Salesforce.com to take into the future."

In buying ExactTarget, Salesforce.com is simply following the money. Gartner has predicted that chief marketing officers will spend more money on IT than CIOs by 2017.

ExactTarget's capabilities will also give Salesforce.com more weapons to battle against competitors such as Oracle and IBM, both of which have made major investments in marketing software.

Salesforce.com shares many of ExactTarget's more than 6,000 customers, and expects to have plenty of cross-selling opportunities, executives said on the conference call.

ExactTarget has also been a Salesforce.com partner, and there's already a degree of integration between their products.

Still, some market observers had expected Salesforce.com to purchase an ExactTarget competitor, Marketo, with which it has also partnered. Marketo recently launched a successful IPO.

Marketo could have been too expensive for Salesforce.com to buy, said analyst Ray Wang, CEO of Constellation Research.

Meanwhile, it's not clear how Salesforce.com's existing relationships with Marketo and other marketing software partners will change moving forward.

Salesforce.com's AppExchange, where partners can showcase their products, is "a dynamic marketplace," Benioff said during the call. "People are constantly coming and going. We understand that and you can see how it changes and evolves over time."

"We certainly plan to continue to support all of our partners in the AppExchange," Salesforce.com chief operating officer George Hu said in an interview. "We've always had an open philosophy."

However, Salesforce.com's ability to offer a unified marketing platform will result in many customers making the switch from other marketing products, Hu added. "We think customers are going to be very excited about it."

Hu declined to say whether Salesforce.com had considered buying other companies besides ExactTarget. "This is the company we've been focusing on for a while now."

While it may be surprising that Salesforce.com waited until now to buy a company like ExactTarget, it had its reasons, according to Hu. "We have been learning a lot about CMOs in the last few years," he said.

Salesforce.com's previous acquisitions of Buddy Media and Radian6 provided "a huge catalyst" for the ExactTarget deal, he added. "We had many deeper conversations with the CMO that gave us the education and understanding of the market that allowed us to move forward with such confidence."

Overall, Salesforce.com will be "in co-opetition with Marketo and all other marketing automation products," but the stakes will vary depending on the situation, Wang said.

As a whole, Salesforce.com's Marketing Cloud product family "plays a central role as an aggregator for the CMO," he added. "So if you are very specialized in marketing analytics, it's not an issue. If you are doing core marketing automation and campaign management, you are in direct competition."

But one observer questioned whether Salesforce.com is overpaying for ExactTarget.

"I look at this and I shake my head," said analyst Denis Pombriant, managing principal of Beagle Research. "ExactTarget has done a great job over the years of expanding its offering. But I just question the $2.5 billion, that's a huge amount of money for something like this. A company like Salesforce could have built this."

There's also a bit of product overlap between ExactTarget's and Salesforce.com's product line, such as in analytics, Pombriant added. "The question that keeps popping into my mind is why they didn't finish building out the suite themselves," he said. "For $2.5 billion you can hire a lot of people. Obviously they thought this was the best approach for them."

That said, "it's a quality acquisition," and an important move for Salesforce.com to make, Pombriant said. "Marketing is the tip of the spear in CRM these days."

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Show Comments

Latest Videos

Launch marketing council Episode 5: Retailer and supplier

In our fifth and final episode, we delve into the relationship between retailer and supplier and how it drives and influences launch marketing strategies and success. To do that, we’re joined by Campbell Davies, group general manager of Associated Retailers Limited, and Kristin Viccars, marketing director A/NZ, Apex Tool Group. Also featured are Five by Five Global managing director, Matt Lawton, and CMO’s Nadia Cameron.

More Videos

Great read. I agree that it should be a perfect balance between interacting with your customers and knowing your brand. As a business, yo...

Caroline Scott

7 ways CMOs can improve their customer engagement game

Read more

Very true. Team development helps improve collaboration among the team members. I was able to improve my team's collaboration skills by t...

Quent Sinder

Why empowering others can help make you a great leader

Read more

CRM is a very good software that can help you succeed in your business. In my company, this system has allowed me to improve customer rel...

Anna Janicka

Sensis rebrands to Thryv and brings business software to Australian SMBs

Read more

AI Leasing Assistants have finally arrived for the multifamily industry. With so many to choose from it can be hard to figure out which i...

Alice Labs Pte. Ltd.

CMO's top 8 martech stories for the week - 6 May 2021

Read more

Nowadays, when everything is being done online, it is good to know that someone is trying to make an improvement. As a company, you are o...

Marcus

10 lessons Telstra has learnt through its T22 transformation

Read more

Blog Posts

Why if marketing is all you do, you’ll never be very good at it

OK, so you’re probably thinking: “Here comes another article to badger me about living in my bubble.” And also, “I bet this bubble-bashing piece will go on to explain how I can achieve better results through some heady dose of new life experiences, new routines and annoyingly different opinions on social media.”

Dane Smith and Toby Harrison

Ogilvy Australia

A leader’s role in rebuilding a culture of confidence

Every day, there are new predictions and studies on the future of work, the state of the economy and the unfolding global pandemic. All of which creates uncertainty and heightens the imperative of effective leadership.

Michelle Gibbings

Workplace expert, author

Confused About Your Customers?​

​I've worked in brand and marketing for more than 20 years. But there’s one area where I’ve found myself going around in circles and I must admit I'm becoming increasingly confused.

Rich Curtis

CEO, FutureBrand A/NZ

Sign in