Salesforce.com aims for next $1 billion business with ExactTarget buy

Salesforce.com will "double down and focus" on building out its marketing software arm, says CEO Marc Benioff

Salesforce.com's pending US$2.5 billion purchase of marketing software vendor ExactTarget will help it develop a new $1 billion annual revenue stream and set the company on a clear strategic course for the foreseeable future, according to Salesforce.com CEO Marc Benioff.

The ExactTarget deal, the largest in Salesforce.com's history, was announced Tuesday and is scheduled to close by the end of July.

Salesforce.com already had some marketing capabilities, especially for social media ad campaigns and associated analytics, gained through its acquisitions of Buddy Media and Radian6. But it wasn't enough to play in today's market, Benioff said during a conference call Tuesday.

"We recognized we have to get stronger in critical areas like email as well as marketing automation and lead nurturing," he said. "We wanted to make one large purchase that brought all of these things together. We can't keep making these small acquisitions. We needed to do something of consequence. We needed to do something now."

Benioff also suggested that Salesforce.com was involved in a bidding war with other, unnamed parties for ExactTarget. "This was a very competitive process and we're thrilled to be the victors here," he said.

But now Salesforce.com is going to close its wallet for a while. "I think what you're going to see is us taking a vacation from [mergers and acquisitions] for anywhere between 12 and 18 months," Benioff said. "We are going to really double down and focus on the success of ExactTarget. Now we have a clear trajectory for a $1 billion marketing product line. This is a clear product strategy for Salesforce.com to take into the future."

In buying ExactTarget, Salesforce.com is simply following the money. Gartner has predicted that chief marketing officers will spend more money on IT than CIOs by 2017.

ExactTarget's capabilities will also give Salesforce.com more weapons to battle against competitors such as Oracle and IBM, both of which have made major investments in marketing software.

Salesforce.com shares many of ExactTarget's more than 6,000 customers, and expects to have plenty of cross-selling opportunities, executives said on the conference call.

ExactTarget has also been a Salesforce.com partner, and there's already a degree of integration between their products.

Still, some market observers had expected Salesforce.com to purchase an ExactTarget competitor, Marketo, with which it has also partnered. Marketo recently launched a successful IPO.

Marketo could have been too expensive for Salesforce.com to buy, said analyst Ray Wang, CEO of Constellation Research.

Meanwhile, it's not clear how Salesforce.com's existing relationships with Marketo and other marketing software partners will change moving forward.

Salesforce.com's AppExchange, where partners can showcase their products, is "a dynamic marketplace," Benioff said during the call. "People are constantly coming and going. We understand that and you can see how it changes and evolves over time."

"We certainly plan to continue to support all of our partners in the AppExchange," Salesforce.com chief operating officer George Hu said in an interview. "We've always had an open philosophy."

However, Salesforce.com's ability to offer a unified marketing platform will result in many customers making the switch from other marketing products, Hu added. "We think customers are going to be very excited about it."

Hu declined to say whether Salesforce.com had considered buying other companies besides ExactTarget. "This is the company we've been focusing on for a while now."

While it may be surprising that Salesforce.com waited until now to buy a company like ExactTarget, it had its reasons, according to Hu. "We have been learning a lot about CMOs in the last few years," he said.

Salesforce.com's previous acquisitions of Buddy Media and Radian6 provided "a huge catalyst" for the ExactTarget deal, he added. "We had many deeper conversations with the CMO that gave us the education and understanding of the market that allowed us to move forward with such confidence."

Overall, Salesforce.com will be "in co-opetition with Marketo and all other marketing automation products," but the stakes will vary depending on the situation, Wang said.

As a whole, Salesforce.com's Marketing Cloud product family "plays a central role as an aggregator for the CMO," he added. "So if you are very specialized in marketing analytics, it's not an issue. If you are doing core marketing automation and campaign management, you are in direct competition."

But one observer questioned whether Salesforce.com is overpaying for ExactTarget.

"I look at this and I shake my head," said analyst Denis Pombriant, managing principal of Beagle Research. "ExactTarget has done a great job over the years of expanding its offering. But I just question the $2.5 billion, that's a huge amount of money for something like this. A company like Salesforce could have built this."

There's also a bit of product overlap between ExactTarget's and Salesforce.com's product line, such as in analytics, Pombriant added. "The question that keeps popping into my mind is why they didn't finish building out the suite themselves," he said. "For $2.5 billion you can hire a lot of people. Obviously they thought this was the best approach for them."

That said, "it's a quality acquisition," and an important move for Salesforce.com to make, Pombriant said. "Marketing is the tip of the spear in CRM these days."

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags social mediacloud computingMergers and acquisitionsinternetOraclebusiness issuesSalesforce.comIBMsoftwareapplicationsCustomer Relationship ManagementsalesforceMarc BenioffSoftware as a serviceInternet-based applications and servicesMarketoExactTarget

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Chris Kanaracus

IDG News Service
Show Comments

Cool Tech

Toys for Boys

Family Friendly

Stocking Stuffer

SmartLens - Clip on Phone Camera Lens Set of 3

Learn more >

Christmas Gift Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Laura Johnston

MSI GS65 Stealth Thin

If you can afford the price tag, it is well worth the money. It out performs any other laptop I have tried for gaming, and the transportable design and incredible display also make it ideal for work.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?