With a number of big IPOs and large M&A deals in the space over the past twelve months, Marketing Technology is a hot area right now. Only this week Terry Kawaja wrote a piece on recode about ad tech valuations that included some interesting charts showing big multiples paid for marketing tech companies versus ad tech vendors – with the only exception being RocketFuel, which to its credit still seems to defy market logic.
The Marketing Tech space is a sprawling mess of companies – from search to marketing apps. Scott Brinker has attempted to catalogue all these companies in his latest industry landscape. Here ExchangeWire speaks to Brinker about the current state of the market, the importance of “platform” players in the marketing technology, and the role of ad tech and the future of media agencies.
There seems to be a lot of marketing tech point solutions on this chart? Are there key platforms that stitch the ecosystem together? Who are they, and how critical are they to marketers?
Indeed, there’s an astounding diversity of marketing technology point solutions out there. It poses challenges with choice and integration.
However, it’s important to remember that while choice is a challenge, it’s also a good thing. Marketing is the anti-commodity. Different brands serving different different audiences can adopt more specialized marketing technologies that help them deliver unique customer experiences.
But integration matters. More specialized point solutions have to play nicely with the rest of your marketing software. You don’t want silos. You want more of an interconnected ecosystem.
This is where the platforms — and an emerging category of “marketing middleware” — come into play. If your backbone marketing systems, such as your CRM, your marketing automation platform, and your web CMS have good, open APIs and facilitate integration with point solutions, you can have the best of both worlds: a stable foundation, augmented with more specific capabilities that help differentiate your brand.
How important have the open platforms (SAP, Adobe, Salesforce, etc) been in the growth of the point solutions? Are open apis a critical piece of pushing innovation and growth in this market?
Salesforce.com has been particularly effective in this regard. In many ways, the third-party ecosystem that they nurtured around their CRM — let’s face it, everybody plugs into Salesforce — is a template for where other marketing technology could go.
For many of the large players though, they need to make a critical choice: are they going to embrace an open strategy, or are they going to try to be one-stop-shop closed solutions?
The latter approach is how other enterprise software markets evolved in the past, and some of the early consolidation in marketing technology seemed to point in that direction. But marketing is not ERP — there’s far more heterogeneity. The scale and speed of innovation in marketing for the foreseeable future makes the open strategy a better choice. More marketing platform companies are now pursuing that strategy.
You have literally created one of the biggest industry landscapes of all time. Can marketing technology support such a huge ecosystem? Or are you expecting to see consolidation in marketing tech?
First, I should note that the graphic I put together is far from complete. There are hundreds of successful companies — indeed, entire categories of marketing technology — that I missed. So the industry is actually bigger than that landscape. And at least for now, it’s continuing to expand. Marketing is a massive industry that’s being reinvented. There’s so much opportunity for entrepreneurs with creative ideas and the infrastructure of cheap cloud computing at their fingertips.
Is such a huge ecosystem sustainable? Possibly. If the core platforms and middleware products in the space continue to evolve to provide a stable, open foundation, then more specialized marketing technologies can innovate on top of that in a manageable way. Of course, not all of them are going to grow up to be billion dollar companies. But we may have a marketing technology industry that is as diverse as, say, the agency business has been.
To be sure, there will be consolidations. And there will be companies that go out of business. But as long as the entrance rate of new ventures is equal to or greater than the exit rate of those bought or failed, a large marketing technology landscape could very well be the new normal.
Ad tech seems to play a minor role in the wider marketing tech space. Do marketers see ad technology as less business critical than other parts of the ecosystem? Does ad tech matter at all? How does ad tech become relevant to marketers?
I’ll be the first to acknowledge that advertising is still a huge portion of marketing — still over half a trillion dollars just in media spend today. There are some amazing ad tech companies that are innovating that space. And for the foreseeable future, advertising and ad tech will remain an important part of the overall marketing universe.
That being said, there are far more marketing technology ventures that are doing things outside of advertising than there are ad tech firms. I’d estimate at least by a factor of 3X. Social media marketing, content marketing, customer experiences on the web and mobile devices, email marketing, marketing operations and automation, customer analytics, and so on. It’s a huge field. And its center of gravity is the digital customer experience beyond the ad.
You seem to have grouped a lot of ad tech solutions in the “Customer Data Platforms”. How critical will this be to the marketer, and will we see some acquisitions by the martech “platform” players who want to offer marketers this solution?
It’s a fascinating corner of the ecosystem. A number of demand-side platforms (DSPs) have evolved into data management platforms (DMPs), and they’re increasingly selling to in-house marketers. After all, having a cohesive profile of your audience that you can programmatically target is valuable not just in advertising, but in touchpoints throughout a brand’s digital marketing footprint.
That’s where the line between DMPs and an emerging category of customer data platforms (CDPs) gets fuzzy. DMPs traditionally assembled their data from cookies. CDPs pull much more information from a marketer’s in-house systems, such as CRMs and e-commerce platforms. But their high-level visions are very similar, and I expect we’ll see more overlap between them.
A cohesive profile of prospects and customers that you can leverage across many different channels is the brass ring. I clustered DMPs and CDPs in the “marketing middleware” layer of my graphic because they can help make all the other software a marketer is using more effective. It helps break down silos and integration barriers. The dynamic customer profile becomes the glue that ties everything together.
So, yes, I expect we’ll see acquisitions here by some of the larger players. Keep in mind that Adobe already acquired DMP DemDex a few years ago, and they’re now one of the leading players in the space.
I noticed that media buying agencies don’t seem to have a box on the chart? As data management/activation becomes more and more about customer experience, and media buying becomes as much about upselling to/managing existing customers as it does about driving new business, what role does the agency play going forward? Where is the opportunity for the agency?
To mangle Shakespeare, there’s more in heaven and earth than was dreamt of in my graphic. I certainly haven’t done justice to the range of technologies in media buying and other agency operations.
However, it’s hard not to see the rise of programmatic media as a significant threat to the business models of media buying agencies. It’s not a perfect analogy, but think back to traditional stockbrokers who were displaced by software-driven discount brokerages. When you find yourself competing against computer algorithms in a quantifiable playing field, you know you’re in trouble. See Garry Kasparov.
Yet while traditional agency business models are under pressure, the opportunities to deliver valuable strategic and creative services seem greater than ever. Marketing budgets are growing. Marketing is rising in influence in most organizations, as the owner of the customer experience. There’s so much work to be done. There’s so much need for the talent and perspective that agencies can bring. But the work itself, the way it’s being done, and the way it’s being paid for need to change.
You have written extensively about marketing department becoming a critical part of every business, particularly around customer experience and product development? Can you expand on that a little more?
Your brand is defined by two things.
First, your brand is the direct experience individual customers have with you. That’s always been the case, of course, but the disruption is that now their “experience” begins much earlier. When a prospect is at the very start of awareness and consideration, they will interact with your web site, your mobile presence, your social media outposts. That experience will shape their perceptions of your brand.
Second, your brand is what other people say about you. That’s always been the case too. But search and social have changed the scale and speed of those effects. Prospects will Google you, they will read your ratings and reviews, they will ask for opinions on Facebook and Twitter. They will extrapolate the experiences others had in the setting of their own expectations.
Advertising and PR can’t really game this system. It can prime the pump. It can amplify the narratives that are out there. But it can’t define the brand to the degree that it could ten years ago.
So what’s a marketer who is concerned about their brand to do? Make sure that prospects and customers have an amazing and coherent experience, across every channel, from the very touchpoint onward. Marketing must move from the message communication business to the experience delivery business.
To be sure, it’s a much larger mission. But that’s why marketing budgets are growing. It’s why marketing is being viewed more strategically in the C-suite. And it’s why the center of gravity for marketing technology innovation is deeper in the organization than advertising on its perimeter.