Marketing Automation Vendors Chime In On Implications of Marketo’s New Funding

In total, Marketo has raised $107 million since its 2006 inception. From the $107 million raised, Marketo said it has $70 million available in the bank, and plans to use this for growth, both internationally and in product development, in the coming year.

“Marketo's funding is great validation for the market,” said David Cummings, CEO, Pardot. “VCs have made significant bets on the market suggesting that outsiders believe there's as much growth and market opportunity as insiders believe.”

Other vendors agree that the marketing automation market suffers severely from a lack of awareness, and Marketo’s most recent round of funding is another great indicator of the vibrancy and growth potential of the industry. “The number of channels through which marketers must reach their contacts continues to grow as does buyers’ desire for highly personal and incredibly relevant interactions,” said Bill Nussey, CEO, Silverpop. “Ironically, to be more personal, marketing programs must become more automated.  Enter marketing automation.” 

"This latest round of fundraising shows that investors are still bullish on the future of marketing technology and its ability to revolutionize marketing,” said Lisa Arthur, CMO, Aprimo.

While other MA vendors agreed that the news is great for the overall category, the funding could change the competitive dynamics of the automation space, as Marketo has the capacity to outspend smaller players, potentially buying market share. That said, other vendors are focused primarily on the growth of their own businesses and market share, and ultimately believe there’s room for everyone in the automation pool.

“As the space matures, it is increasingly important for the primary players to truly differentiate themselves and what areas they excel at,” noted Sam Weber, CEO, Genius. “No one company can be all things to everyone...There is room for more than one player in the space and we are all experiencing incredible growth.”

Additionally, competitors stated that the need to raise further capital could be an indicator of potential flaws in Marketo’s business model.

“According to analyst David Raab, the good news for Marketo is that they are winning more clients,” noted Joe Chernov, VP Content Marketing, Eloqua. “The bad news is that they lose more than $15,000 each time they 'win' a piece of business. Typically losses flatten as a business scales, but it appears Marketo's per client losses are increasing as their customer count grows. We think they raised the capital to cover their losses.”

Other vendors indicate the potential difficulties of garnering a measurable ROI on a $107 million investment, and ultimately, going out for an IPO.

“Given the competitive nature of the space, potential acquirers and strategic buyers will likely look elsewhere at companies with equivalent or better technology that will cost much less,” noted Erich Flynn, CEO, Treehouse Interactive. “Thus, an IPO becomes the exit strategy. If Marketo continues to struggle to achieve profitability, an IPO will be very difficult.”

Flynn added that this increases the pressure on Marketo to perform. “At $107 million paid in, with $25 million in funding 12 months ago and another $50M now respectively, it will be very difficult to get another round of funding.  If profitability continues to remain elusive for Marketo, it will be difficult for them to deliver the same customer experience and service.  It will also become difficult to spend at current levels to maintain the rate of customer acquisition necessary for a successful IPO.”

In 2011, Marketo has more than doubled its revenue, opened its EMEA headquarters in Dublin and launched Spark by Marketo, a new product solution specifically designed for the SMB sector. The San Mateo, CA-based vendor now has 240 employees and Fernandez projected the company would finish next year  approximately 450 on staff.

Pardot's Cummings pointed out that the huge growth in personnel could pose additional challenges for Marketo in providing consistent service to its clients. “The big challenge for them will be building a strong corporate culture while adding so many new team members to the roster. Money does not create a competitive edge as it's a commodity for startups.”

Marketo’s recent funding also could potentially impact its pricing model, which may provide a competitive edge for other vendors.

“Frankly, the more VC they take on, the less flexible they can be on price, which is good for us as we target the sub $500 million market and being price-flexible is very important in this economy,” said Kevin Miller, VP Sales & Marketing, SalesFUSION.

As part of the announcement, Fernandez said the company plans to use the funds aggressively to expand its Revenue Performance Management product suite.

“I want to congratulate Marketo for a very successful round,” noted Raghu Raghavan, CEO, Act-On Software. “If they truly go forward with the things they’ve said in their announcements, that they’re looking to vacate the marketing automation space and become Revenue Performance Management, we love it. If nothing else it makes for a very interesting dialogue among all of us in the industry. It’s interesting to see what the future of this industry holds.”