Despite 1,500 New Customers, Analysts Say 2010 Adoption Curve Is Behind Expectations

• Marketo said it’s on track to pass the 700-customer mark through Q3 and has upped customer acquisition and revenue plans;
• Eloqua has seen a 40% customer base growth rate from January to the end of Q3, and currently has more than 50,000 active marketing users;
• Pardot has seen four quarters in a row with at least 50 deals won, and over 225 deals won in the last four quarters, earning 175 YTD.

Marketo and Eloqua have each upgraded to the prestigious platinum level sponsorship at this year’s Dreamforce event, the only two marketing automation vendors in that sponsorship category. “That is a fairly vivid sign of how fast his market’s growing and how bullish we are in the market,” said Jon Miller, VP Marketing, Marketo.

However, despite the growth, analysts still point out that adoption rates for the category are relatively low. Sirius Decisions sees the adoption of marketing automation platforms at about 18%, according to VP and Service Director Jonathan Block. He added that the adoption rate is “probably more than 50%,” when point solutions, such as email and landing page tools, are counted.

Some industry watchers put the adoption amount significantly lower, considering more than 60,000 companies have deployed CRM solutions, yet less than 4,000 are using marketing automation tools.

Block said Sirius Decisions had anticipated higher adoption rates by this time of year, but it is clear that organizations have realized that it’s “people and processes first, and then the technology.”

Carlos Hidalgo, President of marketing consultancy The Annuitas Group, pointed out that confusion is another factor limiting adoption. “There is still so much noise in this space from the vendors, the uneducated user (even though we have seen more education, we still need more), is left wondering what’s real and what’s not,” Hidalgo said. “The hesitant marketer is afraid of making that leap in fear of a potential mistake.”

Malcolm Friedberg, Principal of Silicon Valley-based consultancy Left Brain Marketing, added that confusion among some early adopters has also been a hindrance to wider adoption. “Because marketing automation is challenging, marketers underestimate the resources required to be successful,” he said. “It’s not just money, but also the time it takes and skills required to get value from the investment. If a marketer goes into the process thinking they’re going to change their business in 90 days (because a vendor has painted that picture), it’s not surprising when they get frustrated by their lack of progress.”

The shift in focus from simply buying a solution to re-engineering processes around lead management has also driven a spike in business for industry consultants and service providers. Hidalgo said The Annuitas Group is coming out of its strongest quarter in the company’s history, working with clients who are looking to pair automation with a solid Lead Management Framework.

Left Brain Marketing acquired several new enterprise and SMB clients in Q3. “Because of our strong strategic capabilities, we’re being asked to help develop product launches and support other core business initiatives that leverage marketing automation and demand generation tactics,” said President Malcolm Friedberg. “We are looking forward to 2011 as a year where Left Brain will firmly establish itself, both from a client and IP perspective, as the pre-eminent Demand Generation Agency in the marketplace.”

2011 Projections
Although 2010 did see significant growth in the category, adoption still fell short of industry expectations. That said, analysts are again pointing to the coming year to see even more growth, particular among a broader range of business verticals.

“2011 will see continued adoption of marketing automation, and by that I refer not only to new users of marketing automation, but improved optimization of marketing automation platforms already in place,” said Amy Bills, Director of Field Marketing at Bulldog Solutions. “The adoption of increasing functionality — and overwhelming validation of the investment — is as important to longevity in the space as new users.”

Marketo’s Miller anticipates 2011 to be a year of adoption across more categories. “Marketers are waking up to the demand for them to be more a part of the revenue machine, and not just something that tacks on the front-end and delivers leads,” he said. “That requires deeper automation technology to have sales & marketing really operate as a single revenue engine.”

The Annuitas Group’s Hidalgo expects adoption rates to climb to 20-25% toward the end of 2011, while Sirius Decisions’ Block said the company expects adoption rates to be up 50% among BtoB marketers in 2015.

While North America has driven most of the early growth for marketing automation, vendors are starting to see a spike in activity in global markets. Koen De Witte, Chief Weaving Officer at LeadFabric, a Brussels-based sales & marketing alignment strategy firm, echoes the expectations for a big uptick in adoption rates for the coming year, pending that vendors ramp up product marketing functions.

“There is tremendous market growth and acquisition potential to be excavated but the current, too-simple offering structure does not allow [vendors] to grab all opportunities,” De Witte said. “Especially the ESP space is for grabs, but the MA vendors’ current offering structure is not competitive.” De Witte said ESPs, MOM, MRM and even CRM (OracleCRM’s latest product version already includes Market2Lead’s IP) will eventually all compete and converge. “It’s my personal believe that the MAPs can substantially improve their offering structure in order to seed better and convert more.”

“While 5 or 10 years ago it was often necessary to engage with a vendor organization in order to become educated on their solutions and the market space in general, this is no longer the case,” said Steve Woods, CTO, Eloqua. “As buyers are more able to self-educate, the onus is on marketing teams to carefully identify those who are potentially in an active buying process and might be interested in deeper discussions with sales professionals.”

The last few months, however, have seen interesting moves in the space, as giants Oracle and IBM have jumped into acquisitions. “The presence of those two enterprise behemoths alone in the space gives [the category] some legitimacy,” Hidalgo said.

One industry insider points to the growing pressure to drive revenue and growth. “We continue to see BtoB marketing budgets shifting to acquisition and away from “brand” spending,” Bulldog’s Bills said. “Marketers need to be able to identify new prospects, engage them effectively and hand them off seamlessly to sales. And they need to be able to prove that they did it. At the end of the day, for all of the items on marketing’s scorecard, if the leads aren’t there and if they can’t be matched up to revenue, marketing is not in the winner’s circle.” Bills said this means marketing has to build large-scale, repeatable and measurable platforms, which is difficult to do without marketing automation.

Adoption Drivers
While the automation space has indeed grown rapidly in 2010, some experts suggest that we haven’t yet seen the tipping point as the category is still significantly lacking on adoption. “The category is too limiting,” said Jeff Pedowitz, Founder & President, The Pedowitz Group, which has added 200 new customers in 2010. “It’s challenging for marketing as a business department to bring about significant organizational change. We need to spend more time targeting a messaging to the sales team and the C-Level so they can understand the importance of aligning sales and marketing and to understand what needs to happen to manage the revenue cycle.” He added that the category has to grow beyond marketing automation to embrace true revenue performance.

Prospective adopters are focused on the ability to create business processes, but many experts agree that automation tools are often mistaken as a “set it and forget it” fix, but the process of simplifying the already complex buying process is getting even more difficult, as buyers are more educated than ever.

“The drivers are still fairly tactical,” said Adam Blitzer, COO & Co-Founder of Pardot. “Clients are looking to integrate their marketing channels (namely email, web site, paid search, etc.) into one platform and one unified tracking view. As we move into 2011, reporting, not only campaign execution, will become a primary driver for purchasers.”