Eloqua files for IPO, new bellwether for marketing tech

While much of the marketing world was caught up in the announcement of Steve Jobs’ resignation as the CEO of Apple, e.g., The Meaning of Steve, a much happier piece of marketing news slipped through the commotion: the marketing technology company Eloqua filed to go public with a $100 million IPO.

As disclosure, my company, ion interactive, is an Eloqua customer, and many of our customers are also Eloqua customers — we’ve found great synergy between our post-click marketing software and Eloqua’s platform.

But what really excites me about this news is that it would be the first of a new generation of marketing technology companies to go public — and has the potential to serve as a bellwether for the state of the new marketing and the public market’s assessment of that opportunity.

Sure, there are other public companies adjacent to this space. Salesforce.com is the big one — certainly similar in terms of being a SaaS that has been adopted by sales and marketing alike. But Salesforce didn’t represent a new way of doing sales, simply a (much) better way to provide CRM technology. Similarly, Unica was a public marketing technology company before IBM acquired them, but their foundation was on technology that powered the previous generation of marketing operations. Constant Contact is a successful public email service provider, but they’ve been more of a champion for the broad adoption of email marketing, part of the first generation of Internet marketing technology.

Eloqua represents a huge wave of companies that are defining the new marketing operations. Many of the players included on the marketing technology landscape infographic I published earlier this month fall into this category. There’s been huge investment in this sector over the past 5 years. Eloqua’s IPO will be an important test of how ready that investment is to mature.

Given the overall market’s current ups-and-downs, this may be a bumpy ride. But if Eloqua breaks through under these conditions — and I hope they do — it will be a referendum on the potential of this space in spite of (and maybe even because of) an uncertain economic climate.

The following are excerpts from Eloqua’s S-1 registration statement, where I’ve highlighted some of the information that I found most interesting. They did, however, fail to state an essential piece of information: it’s pronounced EL-oh-kwa (like eloquent), not eh-LOW-kwa.

On customers and market opportunity…

Our solutions are particularly suited to modeling and supporting the complex sales processes of both business to business, or B2B, sales and high-value business to consumer, or B2C, sales. As of June 30, 2011, we had over 1,000 customers, encompassing a wide spectrum of industries, including the technology, financial services, entertainment, manufacturing, business services and telecommunications industries. Our customers include Adobe Systems, American Express, Cummins Power Generation, Dell, The McGraw-Hill Companies, the Miami Heat, National Instruments, Nestle S.A., Siemens AG, Standard & Poor’s, VMware and Wells Fargo. Our ten largest customers accounted in the aggregate for less than 12% of our total revenue in each of 2010 and the six months ended June 30, 2011, and no single customer accounted for more than 3% of our total revenue during either of those periods.

On market opportunity…

Forrester Research, Inc. predicts that spending on interactive marketing in the United States will increase from $34 billion in 2011, or 18% of overall U.S. marketing expenditures, to $77 billion in 2016, or 35% of overall U.S. marketing expenditures. Within this category, spending on email, mobile and social media marketing is projected to grow from $4.7 billion in 2011 to nearly $15.7 billion in 2016, representing a compound annual growth rate, or CAGR, of 27%. Business spending on automating, analyzing and optimizing marketing and sales functions is also projected to increase. International Data Corporation, or IDC, predicts that the marketing automation market will grow from $3.2 billion in 2010 to $4.8 billion in 2015, while the CRM analytics market, which includes marketing and sales analytics, is projected to grow from $2.2 billion in 2010 to $3.4 billion in 2015.

The significant increase in online activity by prospective buyers has led to a corresponding increase in the amount of prospect-related digital data. If appropriately analyzed, a prospect’s Digital Body Language provides marketing and sales professionals with valuable information about a prospect’s progress through the sales funnel. We believe enterprises are increasingly realizing that effective sales execution is dependent upon leveraging the vast quantities of available data to enable the delivery of a precise, targeted and timely message that caters to a prospective buyer’s unique concerns and desires at each stage of the buying process.

Marketing executives are increasingly confronted with managing complex constituencies, including internal and outsourced marketing groups, direct and indirect sales channels and traditional and online prospective buyers. At the same time, marketing and sales teams are being asked to demonstrate their direct impact on revenue generation to justify the value of marketing and sales expenditures. In many cases, marketing and sales teams continue to compete within organizations for resources and recognition, resulting in a lack of coordination between the two departments. Businesses are increasingly recognizing that this divide is counterproductive and that a company’s marketing and sales functions need to be tightly coordinated and aligned around the same goal of growing revenue.

On revenue…

We derive most of our revenue from subscriptions to our on-demand software and related subscription-based services. Subscription and support revenue accounted for 86.6%, 91.7%, 93.0% and 91.1% of our total revenue during the years ended December 31, 2008, 2009 and 2010 and the six months ended June 30, 2011, respectively. Subscription and support revenue is driven primarily by the number of customers we have, the number of prospective buyer profiles our customers manage with the Eloqua Platform, and the levels of service for which they contract.

Professional services revenue accounted for 13.4%, 8.3%, 7.0% and 8.9% of our total revenue during the years ended December 31, 2008, 2009 and 2010 and the six months ended June 30, 2011, respectively. We derive our professional services revenue primarily from services provided in connection with the onboarding of new customers onto the Eloqua Platform, including implementation and integration with our customers’ sales automation and other marketing systems, as well as educating the customer on optimal use of our solutions.

On competition…

The services we provide are also offered by others and in the future may be offered by an increasing number of parties. The market for marketing automation and RPM software is evolving, highly competitive and significantly fragmented, and we expect competition to continue to increase in the future. With the introduction of new technologies and the influx of new entrants to the market, we expect competition to persist and intensify in the future, which could harm our ability to increase sales and maintain our prices. We face intense competition from software companies that develop marketing technologies and from marketing services companies that provide interactive marketing services.

Our competitors vary with each challenge that our solutions address, but some of these providers include:

• plan and spend management software vendors, such as Oracle Corporation and SAP AG;
• workflow, project management and brand management vendors, such as marketing agencies who develop custom systems for their clients;
• email marketing software vendors, including Responsys, Inc., ExactTarget, Inc., Constant Contact, Inc. and numerous other email marketing companies;
• campaign management software vendors, such as Oracle Corporation, SAS Institute Inc., Aprimo, Inc. (a division of Teradata Corporation), and Unica Corporation (a division of International Business Machines Corporation, or IBM); and
• lead management software vendors, such as Oracle Corporation, Genius.com, Incorporated, Marketo, Inc., Neolane Inc., Pardot LLC, SilverPop Systems, Inc., and smartFOCUS Group plc.

We expect to face additional competition with the continued development and expansion of the RPM and marketing automation software markets. We also expect competition to increase as a result of software industry consolidation, including through possible mergers or partnerships of two or more of our competitors or the acquisition of our competitors by larger and better-funded companies. For instance, in December 2010, Teradata completed its acquisition of Aprimo and in October 2010, IBM completed its acquisition of Unica.