We have covered Marketing Automation as a major topic, especially through the Techaisle SMB Marketing Automation Study conducted in US, UK, Germany and several blog posts, commenting on the rapid growth and consolidation in the market. In one fell swoop Oracle is now addressing a US$3.5 billion opportunity in the US by 2015 and US$6.0 billion opportunity globally.
Oracle’s announcement that it would acquire Eloqua for $871M, a leading Marketing Automation vendor, seems a little odd at first, mainly because majority of Eloqua’s customers are said to be using Salesforce.com as their CRM platform, and because Oracle competes with Siebel-on-Demand and recently released its’ own Fusion CRM product.
In the typical Oracle fashion of acquiring existing market leaders, i.e. Siebel Systems, PeopleSoft and JDE, Oracle snatched up another jewel for the Ellison crown, apparently valuing B2B and Enterprise-level functionality over SMB and Social Media Marketing automation that have been the focus of arch-rival Salesforce.com. It also sends a message to Redmond, whose recent acquisition of MarketingPilot seems to offer a substantial list of features and functions, but does not carry the weight of Eloqua’s brand. In the short term, it kind of looks like a mixed bag; the repercussions of the purchase seem to revolve along these areas:
SMB Customers:
1) Oracle says they will continue to support third party applications, but they have a huge vested interest in on-premise CRM in Siebel and other solutions that will compete for resources,
2) Enterprise customers who still have a staff to manage applications may be open to another level of integration with a combined Fusion/Eloqua/Siebel offer, but for those SMBs already on SFDC, it is very unlikely that there would be a compelling reason to move from SaaS to an on-premise model; getting away from capital purchases, IT headcount, maintenance fees and software upgrades was the main reason for going with Salesforce.com from the beginning. Same for those who are already managing their marketing campaigns and customer communication programs using Eloqua; it is hard to take that away without some revenue risk and employee dissatisfaction.
3) In a recent Techaisle survey, 77% of SMBs interviewed stated they were looking for vendors to reduce complexity. The type and level of integration of Eloqua into the larger Siebel suite will either make things more or less complicated depending on the approach taken by product managers to create a seamless experience.
Competitors:
4) Oracle denies access to Eloqua’s technology to Salesforce.com, which would have been a very good fit both in terms of customer acquisition/migration and start up culture. This may well be the most important (short-term) advantage gained by Oracle. This moves Marketo, SliverPop and others up the ladder as the large independents in the space, with Hubspot and Marketo obvious next-in-line M&A targets, in a market that has seen scores of start-ups, mergers and acquisitions over the past few years.
5) Despite a 30% premium paid by Oracle for Eloqua ($23/share over the market $17), there is already a class action suit alleging that the board should have shopped a buyer more aggressively, suggesting a $27 price as more reasonable. No comment.
6) Over the longer term the implications are larger in a market that is moving fast, which will be influenced increasingly by Big Data, Automation and Optimization - Enterprise capabilities to compete with the big players like IBM, Salesforce.com and SAP, who will be bringing competition and automation to a new level in the next few years. A recent Wikibon Post is a good example of how hardware and software are evolving to meet these emerging real time challenges. The post describes how fast the bar is rising in optimization in general and online advertising in particular:
“Many commercial Web publishers make space available on their Web pages for banner and display advertisements. Typically, when a user opens such a Web page, the browser reaches out to an online ad exchange network and requests an ad unit to serve to that user. The ad exchange broadcasts this information, often enriched with behavior data specific to the user in question, to multiple advertisers. Each advertiser compares the information against its internal ad inventory and existing ad campaigns to determine what that ad impression is "worth" to them. It then decides whether to place a bid and at what amount. Bids are returned to the ad exchange, which determines who the highest bidder is and delivers the winning advertisement.”
- Wikibon
All without noticeable lag to the user. These are the kind of industrial strength capabilities that are on the way as the market compounds at almost 130%, dominated by Mobile spending as devices grow by the hundreds of millions, as shown in this Kleiner-Perkins forecast.
Who’s Next?
So in our opinion this is a significant acquisition for Oracle, mainly because Eloqua has a strong base of satisfied users and a strong brand, and strong technology that can be applied to Oracle’s stack in the long run. The $871M price tag was not enough to prevent a lawsuit for some shareholders, but represents a sizable investment for Oracle as they strive to define the ultimate Customer-Centric, Multi-Channel Relationship Management platform in their race against the large horizontal vendors in the space (IBM, SAP, SAS, Google, Teradata). To this end Oracle has acquired eight companies in the last two years (ATG, FatWire. Endeca, RightNow, Inquira, Vitrue, Collective Intellect, and finally with this announcement, Eloqua). The scope of what used to be called the “360ᴼ customer perspective” has evolved to include pre-sales, sales, post-sales, customer service and lifetime customer value application components, with a relentless push to automate and integrate each piece of the puzzle.
In the wake of this acquisition, an obvious question is who's next? As mentioned earlier, Marketo is an obvious choice, as are Silverpop Hubspot, Responsys, and others. Will SFDC respond in kind or continue to focus on the lower end of the market and Social Media acquisitions? Regardless, we think 2013 will continue to see a rich market for Marketing Automation M&A activity, following two years that have seen scores of transactions in the space.
Even so, we can see the fundamental differences in the market structures between Germany and China shown in this graph, despite the huge volume increase in China. Germany demonstrates a much more mature mix of IT products and services, weighted toward value-added segments of Software and Services, while the China market remains very hardware centric; almost half the opportunity is still hardware devices by the end of the forecast period. However, China is different than many other emerging markets because it is not only strategic as an end user market, it is also critical as a supplier to the world and to its’ own domestic market. The history of the IT market in Asia Pacific, especially since introduction of the standard PC architecture, has been a race between US brands and local manufacturers whose production is adopted in the domestic market through osmosis along with cultural and distribution advantages. In the case of China, this is more serious as it becomes an increasingly important global segment; on one hand there is a push to open the market while on the other US giants like Apple, IBM, Intel and Microsoft become more reliant on the Chinese Consumer and Enterprise IT markets.
