Boom! Marketo ignites the real marketing platform wars

Marketo Goes Platform

My fellow marketing technology enthusiasts, mark this week in your journals. Here at their Marketing Nation Summit in San Francisco, Marketo just triggered a major inflection point in our industry.

First, let me set the stage for the significance of what they’ve done.

For a number of large companies assembling marketing “suites,” the narrative they’ve been preaching is: buy from us, and you’ll get everything you need in one box. Buy our cloud or hub, and you’re all set. It’s been an attractive narrative to buyers, who have certainly been frustrated with DIY projects of patching together disparate software from dozens of vendors. And obviously, it’s an attractive narrative to the suite sellers, who would like to exclusively own those relationships.

The black fly in the chardonnay, however, is that narrative is disconnected from reality.

Marketing and technology are simply changing too rapidly. The scope of marketing is expanding exponentially by the day, as its responsibilities grow from customer communications to customer experiences, spanning the entire customer lifecycle.

To pretend that a single software vendor will master all of that — and be able to keep up with all the innovations blossoming in a thousand directions across the industry — and somehow make that all stable and useable is, in my humble opinion, a fantasy.

Instead, I’ve believed for some time that the major players in the industry would do far better to pursue open platform strategies — positioning their software as the foundation of a marketer’s technology ecosystem, while enabling, encouraging, and outright championing third-party software products to plug into their backbone.

To be fair, many of the major marketing systems out there have laid the technical groundwork for this. They’ve provided APIs for third-parties to connect their applications. They’ve established partnership programs for those third-parties. You can probably find a list of those partners somewhere on their website — although for some vendors, it’s actually quite hard to find them.

But few have made third-party software a key part of their positioning. That would create dissonance with the “everything you need is in the box” narrative.

There are some notable exceptions. Salesforce played the third-party platform strategy masterfully with their CRM. Eloqua, ExactTarget, and Marketo have all been growing their third-party marketplaces. Act-On made their third-party marketplace a key part of their positioning last year.

But most, when they look at my landscape of nearly 1,000 marketing technology vendors, contact me only to say, “Just so you know, we also have capabilities in this category, this other category, that other category, etc.” They’re focused on being able to claim that they cover everything in the landscape themselves. That’s fine. I appreciate where they’re coming from, and I’d like to do a better job of fully representing their footprint.

But I feel they’ve missed the larger point of the spectacular diversity and innovation in that landscape. I’ve been waiting for one of them, someday, to reach out and say, “You know, we’re never going to keep up with all of these innovations ourselves — so here’s our plan to co-opt hundreds of these other marketing technology innovators into our platform.”

Well, Marketo just reached out and said that. Actually, they announced it on their blog.

Marketo moves to become the marketing software platform

Yesterday, Marketo co-founder and VP of marketing Jon Miller posted the Rise of the Marketing Platform on their blog, which outlines Marketo’s new strategic position. In a section on Why a Platform? Why Now?, he points right at my landscape and a post I wrote claiming that a 1,000 marketing technology companies is the new normal — a theory that makes most major marketing technology vendors cringe — and declares, yes, this is what’s happening, and we’re going to embrace it enthusiastically.

To quote his post:

I think there will ultimately be two main classes of marketing software companies:

  1. Marketing Experiences: These companies are all about delivering customer experiences at the point of interaction. This can include video advertising, content marketing, event management, social media marketing, and display ads, to name just a few.
  2. Marketing Platforms: The core systems of record for marketing that provide a common way of orchestrating the experiences across channels and applications, including operational management and measurement, with the ultimate goal of driving customer engagement.

The platforms will provide open ecosystems that the other companies can build on and plug into. The “marketing experience” companies are the horns, strings, percussion, and wind instruments; the platform is the orchestra conductor making sure everything is in harmony. A great platform helps you sidestep cacophony, and stands in as a virtuoso conductor who unifies your marketing into a lyrical masterpiece that can truly captivate its audience.

Marketo wants to be the leading marketing platform.

But to achieve that, they’re shining a spotlight on hundreds of other software vendors producing technology for “marketing experiences.” Marketo isn’t claiming that they’re going to provide all those capabilities within their own product, all wrapped up with a nice bow. They’re not pretending that those other vendors are peripheral. They’re not disparaging them with FUD tactics.

Instead, they’re acknowledging that these other marketing experience software companies bring tremendous value to the table. They’ve committed to make it easier for marketers to pick and choose from that incredible cornucopia of marketing technology solutions and seamlessly integrate them into their environment. And they’ve committed to give third-parties deep access into their platform’s data repositories, workflow capabilities, analytics, and more.

To quote a bit more of Jon’s post:

The implication of this model is that a marketing platform does not need to do everything in marketing. (In fact, I would argue that cloud vendors who claim to provide “all the solutions that marketers need” are missing the point.)

Instead, the right platform needs to bring a core set of capabilities, and then be open to third-party solutions that build on the common foundation.

That is a bold statement. Think of some of the other major vendors you know in this space and imagine them saying something like that. It’s a gutsy move. But it’s also the right move — and I bet I know at least one other analyst who would agree with me.

Digital marketing consolidation is not inevitable

On the same day as Jon’s post, Martin Kihn, research director at Gartner, published a column on AdExchanger stating that Digital Marketing Consolidation Is Not Inevitable.

This is a significant departure from the narrative of consolidation that other analysts have been predicting for the marketing technology space. To quote Martin:

[We’ve] all seen the logo farms and transit maps that show herds of providers just yearning to become the pick of the litter. Common sense says a frenzy of acquisition in 2014-15 should lead to a more domestic setup where a few megahubs divide most of the market, from CRM to advertising and analytics. We’ve already seen convincing shakeouts in categories such as ad servers, website analytics, marketing automation and, most recently, data-management platforms.

Is rollup inevitable? After the catfights subside, will we peer over a postapocalyptic landscape that looks something like telecoms or airlines, with four to five big bananas monitored by the government?

I doubt it. Just look at the logos themselves: They keep spawning not only providers but also categories that didn’t exist five minutes ago (geolocation analytics, anyone?).

Even though Gartner has championed the concept of digital marketing hubs at the center of this frenzy, Martin cautions that those hubs will be unlikely to consolidate the broader marketing technology landscape into self-contained suites for three reasons:

  1. The phenomenal rate of change in marketing and technology makes it impossible to capture everything in a bottle.
  2. Big companies simply cannot innovate at the rate of all these diverse start-ups.
  3. The conventional methods of lock-in that favored mega-vendors are waning.

Martin writes:

The speed of change in digital marketing alters math. It is not a stable system, and it has seemingly unlimited access to capital. The end state is nowhere in view. Products shadow the rate of change of underlying components, such as processing and connectivity, which improve at a rate that is not linear. This is a market that literally moves at the speed of light; an industry may never have changed so much, so fast.

The parallels between Martin’s perspective and Marketo’s new strategy are striking. Both have observed the explosion of creative marketing technology and don’t see any sign of it slowing down. Both believe that having one vendor who “does it all” is unrealistic and that marketers should embrace a heterogeneous marketing technology stack.

But Marketo, with its new platform strategy, has a way to turn Martin’s three cautionary notes to their advantage. And in the process, they may become the Platonic ideal of Gartner’s digital marketing hub concept.

A few predictions of my own

While I’m generally wary of prognostications, I’m feeling emboldened that my predictions that marketing would not evolve like ERP and that 1,000 marketing technology vendors would be the new normal seem to be gaining momentum.

At the risk of overplaying my hand, I’ll make two more predictions:

First, marketing software developers will embrace Marketo in return. An open platform with large adoption provides a terrific vehicle for other marketing software vendors to accelerate their adoption by becoming plug-and-play solutions on top of it. It gives them technical advantages (easy integration is what every one of their customers want), but it also gives them a market channel to reach their audience. This will be a virtuous cycle — the more marketing applications that plug into Marketo, the more others will want to. In fact, it will inspire new entrepreneurial ventures that will be built as Marketo plug-ins from Day 1. (Side bet: some of the more interesting ones will come from forward-thinking agencies.)

Second, other major cloud/hub/suite vendors will tack to platform strategies too. This will be easier for some than others — not so much due to technical barriers, but due to barriers of politics and pride. But most will overcome those barriers because they cannot cede victory in the coming “marketing platform wars” to Marketo by sitting this out. They need to win third-party/ISV share. They cannot afford to become Blackberry while their competitors become iOS and Android.

To be sure, Marketo still has a lot of work to do to live up to the platform vision that they’ve unveiled. They have to make sure that third-party developers really feel the love — not just at a technical level, but at a marketing level. If they do, I think they’ll gain an impressive lead in this next era of the marketing technology space.

The real winners here, however, will be marketers. They’ll end up with the best of both worlds: a stable foundation for their marketing infrastructure and the flexibility to plug in an amazing array of creative marketing applications without the pain of the previous DIY era.

It will truly be the Golden Age of Marketing Software.

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Comments

  1. Really great recap, Scott, as always.

    As we discussed, I was super impressed by what I heard coming out of Marketing Nation, and I think Marketo is on a strong trajectory here too. The problem I see is this: adding value from the vendor side begins from the collection and analysis of customer digital behavioral data. The vendor that does so becomes that “system of record” from which all else extends – campaign management, personalization, offers, etc. I don’t think Marketo’s there yet. But it’s exciting to see that that’s where they’re headed.

    My thoughts and reax here: http://www.bullishdata.com/2014/04/09/marketo-dont-call-cloud-reax-marketing-nation/

    • I agree, Blair. There’s vision and there’s execution. I think Marketo has made a bold move with the vision they’ve put forth — but there’s a lot of work to do on the execution side. We’ll see over the year ahead how committed they are to realizing that vision.

      What will be interesting to me is to see how their competitors react. Will they:

      A) Refute this open third-party platform strategy.
      B) Embrace this open third-party platform strategy themselves.
      C) Wait and see.

      A fabulous bit of game theory in this situation.

  2. HI Scott,
    Good recap.

    IMHO, the war already started, this was just the sound of the horn declaring their arrival. The massive number of acquisitions in the marketing software space started about 18 months ago and the big players are building their armies.

    The big question, in my view, is will we see a further movement in the market towards business operation automation, since the customer experience should span the entire life-cycle, or will these platforms just stick to the classical marketing functions? Maybe it’s just the beginning of a much larger shift in the organization structure and in a few years from now, the power will shift from the CMO (who just got it from the CTO) to the COO?

    Whatever it is, it’s going to be fascinating!

    • Thanks, Uri. It’s a great question: where will the boundaries be?

      You know, the phrase “everything is marketing” seems more true each day. If you want your entire business to revolve around the customer, then your marketing platform — or as Marketo strategically calls it, your “customer engagement platform” — may very well become the plumbing across your entire organization. It’s an intriguing thought.

  3. Hi Scott. Great summary of the argument in favor of the open platform model. I agree it makes the more sense than single-vendor suites in today’s environment. But accepting this only raises another set of questions. Two to consider:

    – what belongs in the platform “core” and what is best left to third parties? There will be a natural tendency for platform vendors to expand the core, which will put them in competition with erstwhile partners. Remember that Marketo itself was a Salesforce-based app before Salesforce decided to add its own marketing automation components.

    – who is the platform’s core constituency? More concretely, should there be a separate “marekting platform” distinct from a “sales” or “service” platform? It really think it should be a “customer platform” (and, indeed, Marketo used the term “customer engagement platform” when they presented this to me last week). But if that’s true, then marketing alone isn’t the primary buyer. This has huge implications for which vendors will ultimately succeed.

    • Hi, David.

      Those are two great questions, out of what I’m sure will be many more.

      Deciding what will be absorbed into the core platform and what will be left to third-parties is one of the toughest questions that any platform has to face. They need to pull enough in to meet customer expectations and stay baseline competitive in their category. But they need to leave enough white space and not undermine their third-party community in order to keep those ISVs committed to building on their foundation. Dissatisfaction with platform control by a large ISV community is the sort of thing that leads to open source platforms.

      There is never a perfect answer to that balance, but doing things like maintaining a clear roadmap that third-parties can navigate by, enthusiastically promoting third-parties so that ecosystem growth is far greater than ecosystem pruning, and making acquisitions from within that community when something does have to be pulled into the core can all help.

      As for the boundaries in customer organizations — is this a marketing platform? a sales platform? a service platform? all of the above? — I think Marketo’s choice of language with “customer engagement platform” tips their hand. This is a customer lifecycle play, which means it’s going to span many traditionally disparate departments. That will require more collaboration and coordination across the organization. But in truth, it won’t be that Marketo is the cause of that. The cause is the connected customer in an interconnected digital world. Marketo’s move strikes me as more of a reaction to that root disruption.

      But that doesn’t mean that’s going to be easy. In the famous people, process, technology trifecta, technology is by far the easiest to change. The struggle will be adapting the human dimensions of organizations to be able to take advantage of such a cross-silo platform.

      A CEO can get started on that mission today by asking this question within his or her organization: who owns the customer experience?

      As an aside, let me just say how much I am looking forward to discussing these topics with you at MarTech in August. :-)

      • Thanks, Scott. I agree this is a “customer lifecycle play” that includes departments beyond marketing. But that doesn’t seem to be Marketo’s position.

        Jon’s post puts marketers in charge (“marketers are responsible for an all-consuming process that starts with attracting initial buyer attention and continues all the way to locking in customer loyalty and advocacy”) and says “customer engagement platform is the core system of record for marketing, just like CRM is the system for sales and Human Capital Management is the system for HR.” This is all leading up to his core proposition that the “marketing platform should come from a company 100% focused on marketing,” which is exactly what differentiates Marketo from its major platform competitors.

        There is a case to be made for this marketing-centric approach. But let’s understand that it’s not the same as a single system that spans traditionally disparate departments. In fact, it is the exact opposite.

        • Good point.

          Although if a company is 100% focused on marketing — or, more diplomatically put, 100% focused on winning and retaining customers — can a platform both be “the marketing platform” and a cross-departmental hub?

          • I think the real question is, what’s the proper role of marketing if everything a company does is marketing? We have to answer that before we can determine what technology structure is appropriate.

            Personally, I expect that marketing will play an advisory role rather than being in charge of everything. The technical corollary is that all departments maintain their own systems but connect through a shared customer data platform which provides recommendations to ensure optimal, coordinated treatments. Marketing’s job is to manage those recommendations.

  4. Eye opening insight Scott, thanks. In response to David Raab “what belongs in the core”: Could that be Master/Customer Data Management / System of Record – from which all other Smart Marketing Process Apps feed off?

  5. I should have added in my last comment – are Marketo looking to transcend Salesforce.com?

  6. Thanks for the great post Scott. As a marketing technology enthusiast who loves playing with new toys, I welcome this development. Isn’t this a page out of the Salesforce.com/AppExchange playbook? It seems to have worked out well for them! It will be interesting to see if Marketo can pull it off. As you mentioned, other major MAP vendors have paid lip service to this approach, but in at least one leading vendor’s case in my recent experience, they have failed miserably.

    • Thanks, Colin.

      Yes, I think Salesforce.com/AppExchange wrote the book of how to harness a platform/ISV strategy in the enterprise. The only thing that’s held them back is that, at least to date, their platform-ness has revolved mostly around CRM.

      However, I believe that Salesforce’s expanding marketing cloud universe will turn to that playbook as well. They’ve certainly made noise to that effect. They’ve had their hands full with bringing together several very large — and very different — software systems through M&A. But I’d be very surprised if they didn’t play the platform game like the pro they are.

      Salesforce 1 is also in the same vein as Marketo’s customer engagement platform. I’ve also heard similar emphasis from HubSpot. This expansion from “marketing” to “customer” is very exciting. But as I replied to David above, that’s less about software and more about the transformation of the organization itself in this brave new world.

      May ye live in interesting times!

  7. Thank you, Scott, for your insightful analysis as well as all the positive commentary. You’ve been a wise guide as we think about our strategy, and I look forward to continuing to work with you!

    In the end, I think the core question will come down to this: do marketers want to get their “system” from a company that focuses on marketing, or will they accept marketing being an add-on to a broader set of applications like sales? I think my answer is pretty obvious.

    • Thanks, Jon. I think you’re charting a very exciting course that has the potential to significantly change how people think about the marketing technology ecosystem and their own marketing technology “stacks.” I hope you guys pull it off!

  8. I know you know this Scott: it is a royal pain to play in the AppExchange. From dev to QC to vendor evals…and all the associated costs (including SFDC costs!). So why do AppExchange participants do this, esp. when the SFDC sales team is not pushing your product? Because SFDC has the footprint, and it’s a size 24 shoe.

    I’ve got to think that the LOE for the 3rd party ISV to participate in the Marketo ecosystem is the same pain. The real question: will it be worth it? After all, Marketo’s shoe size is a 4 relative to SFDC, so you just can’t expect the same ROI.

    If I’m an ISV, I’m very cautious about this…and others!

    Joe

    • Platform/ISV partnerships do have their challenges — on both sides of the table. Salesforce did a better job than most in nurturing their ecosystem. They really deserve tremendous credit for what they achieved. After all, they didn’t start out as a size 24 shoe. They too had to build that community from the ground up, and it took them many years.

      I completely agree that Marketo — and any others who follow their lead — have their work cut out for them. Building a great ISV community is a lot of work. Part of it is getting the technical interfaces right. But a big part of it is relationship management, positive positioning of ISVs to their customers, great co-marketing opportunities, wise and fair ISV policies, careful choices about what they pull into the platform vs. what they leave on the table for ISVs, etc. They have to get those things right, and they need to get them right year after year after year.

      But if they do that, it can have a huge payoff for them. And I really hope they do, because I also believe it will advance our broader industry as more open and interoperable.

  9. Just wanted to echo what Jon Miller said. We really appreciate your detailed & insightful analysis. Thanks!

    • Great points!

      Attention reader: if you’re just browsing through these comments, take the time to click on David’s link and read what he has to say. You’ll be glad you did.

  10. strategyaudit says:

    I am starting to watch with a mixture of amusement and trepidation the reactions of some of my boardroom colleagues as they are encouraged to grapple with the governance and investment issues associated with the explosion of marketing technology.
    Until recently, most had been able to relegate marketing to the marketing department, and concentrate on the financial and regulatory challenges, but no longer.
    The danger is that many directors still see marketing as the fluffy end of sales, rather than the driver of commercial sustainability, and it does not get the amount or quality of consideration it deserves. I am operating in Australia, and in the SME space, so perhaps we are a bit more primitive than across the pacific, but I doubt it.
    Great post Scott, I shared it with the Australian company director network.

    • Thanks, Allen. I really appreciate all your support!

      You raise an important point. We’re just now starting to see the C-suite wrap their head around the scope and scale of marketing technology. The next stage beyond that is adapting board mindsets and governance policies to this brave new world. I think you’re right to assume that’s going to be a hurdle.

  11. In moving forward with the platform position, it will be interesting to see the routes to innovation that Marketo pursues. . What innovations will Marketo choose to build internally vs. buy through acquisition vs. enable with an open platform? Will the rationale resonate and prove attractive to ISVs?

    • Yes! That is probably the single biggest strategic challenge that Marketo will face down this road. Surely some of their competitors will continue to pursue the “everything in one box” approach. At more than a few junctures, Marketo will likely have to decide to either parry those attacks directly by building/acquiring pieces from the ISV community or double-down on promoting their ISVs as a better solution.

      Personally, I believe the latter is a better long-term strategy — for Marketo and their customers — but short-term battles have a way of pulling companies off track. I hope they stay the course.

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