How This Company Could Become the Next Salesforce
Oct 29th 2013 9:00PM
Updated Oct 29th 2013 9:02PM
According to eMarketer, in 2012 marketers spent $37.31 billion on digital advertisement. This number is set to rise in the next decade, as companies shift their ad budgets from newspapers, TV, and other traditional channels, to mobile and social apps, where users are more active and engaged.
This is very good news, not only for companies that sell ads -- such as Facebook or Google -- but for online marketing companies, as corporations pay thousands of dollars per month to have their online marketing activities monitored by well-known experts, such as Salesforce and Oracle .
Marketo is a promising company in the online marketing space. The company's revenue is growing very quickly. What makes this company so special? Considering both Salesforce and Oracle are spending billions to make their online marketing business stronger, is Marketo a good investment?
Marketo provides cloud-based marketing software that helps companies to acquire new customers, conduct marketing campaigns, and analyze and measure the result of such activities.
Salesforce, which was originally a set of cloud-based tools for managing customer relations, also provides online marketing services. It bought ExactTarget, a digital marketing platform with strong focus on email marketing for $2.5 billion, and Radian6, which focused on social media, for $340 million to strengthen its marketing solutions portfolio.
As the largest software-as-a-service company with a $32 billion market valuation, Salesforce has more resources than Marketo, and is able to dominate the market for online marketing. Its management has stated a $10 billion revenue goal, which can only be achieved by securing a dominant position in every promising cloud-service segment, including online marketing.
However, despite Salesforce's efforts to dominate the market, Marketo has done pretty well in the past quarters, capturing significant market share and building a strong brand among savvy marketers. According to the latest earnings call, Marketo was able to grow its revenue by 65% year over year, generating more than $25 million in a single quarter.
Furthermore, the company is strengthening its ability to do cross-selling and launch new products successfully: In the latest quarter, it was able to cross-sell its new application, Marketo Financial Management, and get more than 1000 customers for its Customer Engagement Engine in less than one quarter.
Marketo's software is conceived by marketers, for marketers
Clearly, Marketo is building strong economic moat. The company's secret sauce may be based on its user-friendly, low-priced, and time-efficient software. Instead of beginning the journey with software coding, Phil Fernandez, Marketo's CEO, spent the first year of the company's existence to interview senior marketers, and identify their real needs in detail. It seems he listened well.
The company's also very good at execution. From webinars and free marketing events to managing a high-traffic blog, Marketo is quickly expanding its reach, building a rich network of marketing executives all over the world. According to G2 Crowd reviews site, Marketo has one of the highest reputations in the field. It is ranked third in the ranking for best marketing automation tools, behind HubSpot and Oracle's Eloqua, which tend to sell their software at higher price points.
Beware of Eloqua
Oracle has been constantly updating Eloqua's features, making it a strong competitor. For example, last week it released Eloqua Profiler, a feature that builds out profiles of prospects based on their interactions with any assets tracked in Eloqua, like a landing page or an email. And Oracle just bought Compedium, a content marketing start-up, to bolster Eloqua's capabilities.
Final Foolish thoughts
Although big players such as Salesforce and Oracle are investing heavily to dominate the emerging online marketing industry, Marketo should do fine. Simply put, the company has a great product, which it sells at very aggressive price points. Despite its small size and recent IPO, the company already generates $25 million per quarter and has some impressive clients in its list, like Citrix, Samsung and Canon. This is admirable, because marketing executives usually focus on the amount of people that are already using the software, before buying it.
Several signals suggest Marketo will continue improving its top-line performance. At the current pace, Marketo may enter profit zone sooner than expected.
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The article How This Company Could Become the Next Salesforce originally appeared on Fool.com.Adrian Campos has no position in any stocks mentioned. The Motley Fool recommends Salesforce.com. The Motley Fool owns shares of Oracle.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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