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Salesforce Buys ExactTarget for $2.5 Billion

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Re: Salesforce Buys ExactTarget for $2.5 Billion

#21

Post by johnvschmitt »

It's a natural fit.

Startups use Mailchimp & Sendgrid, etc. for email marketing, but then as they mature & grow, they see the need for more mature (although, yes, more expensive, complex, & slower) tools like ExactTarget.

Very similarly, how do startups track their customers & leads? Often, with no CRM other than spreadsheets or in-house tools. When they scale & have >10 sales staff, they realize they need a more mature, slower, more expensive CRM, & SalesForce is there.

So, yes, the acquisition price seems high, but the complementary fit is solid.

Re: Salesforce Buys ExactTarget for $2.5 Billion

#22

Post by inthewoods »

Jd wrote: post #3

Here's some perspective from someone deep within the Salesforce ecosystem: Salesforce has very concretely and deliberately pursued the "imperial" approach in the B2B/Enterprise market, which is to do a careful survey of existing products in a particular space, the potential revenue to be gained from expanding into that space, and what is needed to get a heads up on existing products. As is generally the case in the e…

"Salesforce has done this extremely effectively, from salesforce automation, to customer relations management, to customer service, etc. In many cases now it is virtually unimaginable not to use Salesforce, since the feature set is so extensive."

This is the same strategy that Microsoft has pursued for years - and it sometimes works and sometimes doesn't - MSFT going after Intuit comes to mind, as does their own Salesforce.com competitor.

ExactTarget is a good large-scale email tool, but it is a very below average marketing automation tool. Now, they purchased Pardot, which is a decent, if basic marketing automation tool - good for small business but nowhere near an Eloqua or a Marketo - more comparable to Hubspot. So the question is how integrated they can make all these various tools. To date the Pardot/ExactTarget integration was rather weak - probably more to come on that front. I could see a world where they use Pardot's front end and ExactTarget just for scale email sending but the existing user base won't appreciate that move.

Now, I look at the integration (or lack thereof) with existing Salesforce acquisitions, and I have little confidence that Salesforce will be able to build a world-class, fully integrated product. For reference, look at the integration of Buddy Media or Radian6. So Salesforce may have all the tools, but true integration between the tools has been historically lacking. Now they're adding a company that is strong in B2C email and has a small B2B marketing automation tool that they themselves are trying to integrate. Sounds very complex and difficult - and sounds like something that would take a number of years to get right.

The real question for me is what now happens to Marketo and Hubspot - Hubspot, for example, has an investment from Salesforce, but was probably unavailable for acquisition as they want to spin public. Now that Marketo is public, and it looks like their business is not very sustainable (based on my read of the S-1), they'll likely see their stock price dip to the point where they look more interesting as an acquisition to someone. They're valued at around $800m right now - so if they show poor financial metrics, I'd expect that to dip. If they get cut in half, then a pick-up in the $600-800m range becomes viable - about the same price as Eloqua - but I'm not sure who would be the buyer at this point.

I think Salesforce did the right thing in terms of topline revenue (ExactTarget does around $300m vs. $65m for Marketo) and customers (ExactTarget has large B2C brands, Marketo mainly B2B), but they bought a far inferior product. Maybe they pickup another company in the space for the product?

Re: Salesforce Buys ExactTarget for $2.5 Billion

#23

Post by inthewoods »

tommccabe wrote: post #6

I use Exact Target, every day, and I'm very happy with their product and their service. I won't speak to the valuation, but their technology and application is great.

What's interesting is that the Salesforce.com integration is pretty poor when compared to other tools (including Pardot which they own). So Salesforce bought the tool with the worst integration. In contrast, Marketo has probably one of the deepest. So clearly more about revenue and customers than tech.

Re: Salesforce Buys ExactTarget for $2.5 Billion

#24

Post by ripter »

tommccabe wrote: post #6

I use Exact Target, every day, and I'm very happy with their product and their service. I won't speak to the valuation, but their technology and application is great.

As a developer for ExactTarget I'm glad you are happy with our services. This is an exciting time for us.

Re: Salesforce Buys ExactTarget for $2.5 Billion

#26

Post by mikecuesta »

inthewoods wrote: post #22
Jd wrote: post #3

Here's some perspective from someone deep within the Salesforce ecosystem: Salesforce has very concretely and deliberately pursued the "imperial" approach in the B2B/Enterprise market, which is to do a careful survey of existing products in a particular space, the potential revenue to be gained from expanding into that space, and what is needed to get a heads up on existing products. As is generally the case in the e…

"Salesforce has done this extremely effectively, from salesforce automation, to customer relations management, to customer service, etc. In many cases now it is virtually unimaginable not to use Salesforce, since the feature set is so extensive." This is the same strategy that Microsoft has pursued for years - and it sometimes works and sometimes doesn't - MSFT going after Intuit comes to mind, as does their own Sale…

Not sure I agree that Marketo's business is unsustainable - clearly they want to make more headway in the B2C space; the B2B Marketing Automation market would seem to be saturated, but I would argue that there's still plenty of growth for them for the next 3-5 years, at a minimum.

As far as I can tell, ExactTarget's marketing automation capabilities vastly pale in comparison to Marketo or Eloqua, I could be wrong though.

Re: Salesforce Buys ExactTarget for $2.5 Billion

#27

Post by endlessvoid94 »

brown9-2 wrote: post #12
jeremymcanally wrote: post #2

I would comment on this, but DHH has captured my thoughts nearly exactly on Twitter today: http://twitter.com/dhh This is insane. $2.5b for a company that has lost money through its existence, has a very small set of (likely not-so-diverse) clients (6,000ish), and makes 10% of what they paid for them in revenue ? Strikes me as a crazy purchase, but perhaps there's something else afoot that I don't see. I've been prov…

The best part is that this is literally the last full sentence of the article: It ran a $21 million loss on $292 million in revenue last year.

That may not matter -- in fact, most companies that take on VC money are not profitable for quite awhile, with the expectation that in the long term, the business will be enormous.

Before making the judgement that "psh, they're not profitable", be sure the vectors look right. For example, have they been making that margin smaller and smaller, and is the revenue getting larger and larger? If so, then they're fine in the long term, and it's a sound investment.

Re: Salesforce Buys ExactTarget for $2.5 Billion

#28

Post by photorized »

endlessvoid94 wrote: post #27
brown9-2 wrote: post #12

Earlier quoted context omitted.

The best part is that this is literally the last full sentence of the article: It ran a $21 million loss on $292 million in revenue last year.

That may not matter -- in fact, most companies that take on VC money are not profitable for quite awhile, with the expectation that in the long term, the business will be enormous. Before making the judgement that "psh, they're not profitable", be sure the vectors look right. For example, have they been making that margin smaller and smaller, and is the revenue getting larger and larger? If so, then they're fine in t…

We don't have any insight into their financials as far as margins etc. We do know they had raised $188MM, and had purchased 3 companies (according to CB anyway). My personal take on this, after looking at their funding history briefly - had their margins been getting smaller, they wouldn't have had to continue raising round after round.

I don't get the fascination with subsidized revenue growth - almost anyone can do that with massive infusions of cash.

Re: Salesforce Buys ExactTarget for $2.5 Billion

#30

Post by inthewoods »

mikecuesta wrote: post #26
inthewoods wrote: post #22

Earlier quoted context omitted.

"Salesforce has done this extremely effectively, from salesforce automation, to customer relations management, to customer service, etc. In many cases now it is virtually unimaginable not to use Salesforce, since the feature set is so extensive." This is the same strategy that Microsoft has pursued for years - and it sometimes works and sometimes doesn't - MSFT going after Intuit comes to mind, as does their own Sale…

Not sure I agree that Marketo's business is unsustainable - clearly they want to make more headway in the B2C space; the B2B Marketing Automation market would seem to be saturated, but I would argue that there's still plenty of growth for them for the next 3-5 years, at a minimum. As far as I can tell, ExactTarget's marketing automation capabilities vastly pale in comparison to Marketo or Eloqua, I could be wrong tho…

Spending 75% of revenue on marketing costs isn't sustainable. Losing $35m a year on $60m in total revenue isn't sustainable.
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