CEO Phil Fernandez says Marketo is leading digital marketing while Salesforce.com is buying 'commodity' capabilities with its $2.5 billion ExactTarget deal.
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Marketers are getting really good at using automation systems to deliver well-targeted, high-frequency marketing campaigns across multiple channels. The next big challenge, according to Marketo CEO Phil Fernandez, is interpreting and appropriately reacting to each individual customer response with the right content at the right time.
"Campaign automation products have historically been inadequate in this area," said Fernandez, who includes Marketo on that list. "Users have had to write really complex and brittle rule sets to try to create true, personalized interactions."
As you might have guessed, Fernandez said Marketo, fresh off a $78 million IPO, is now redefining cutting-edge capabilities with a new Customer Engagement Engine announced Tuesday. The engine eliminates complex rules, he said, so marketers can focus on developing the content while letting the engine intelligently guide the content and the timing or content to each and every customer action, keeping track of customer reactions across multiple channels, be it email, mobile, social or websites.
What about Salesforce.com, Marketo's long-time partner, which last week announced plans to acquire ExactTarget
in a $2.5 billion mega-deal? Will that move bring Salesforce such state-of-the-art capabilities? Not by a long shot, said Fernandez, who characterizes ExactTarget as a leader in email delivery, a market that is now "getting commoditized," with prices falling from about $2 per thousand messages to 25 cents per thousand messages in recent years.
Both Salesforce.com and ExactTarget declined to comment on Fernandez's take on their pairing, but they would no doubt point to the marketing automation capabilities ExactTarget picked up in October through its acquisition of Pardot. But while that company is more of a competitor to Marketo, Fernandez said it's not in the same league.
"Pardot is at the low end of marketing automation, so we only see skirmishes with them among our smallest customers," said Fernandez. "It's fine for small business and first-time users, but Pardot hasn't aspired to serve global companies like American Express, GE, Google or other large companies that show up in our customer base."
Marketo is one of many companies offering an opinion on the Salesforce-ExactTarget deal. The comments ranged from the "this confirms our strategy" variety, served up by competitors Brand Networks, Lattice Engines, Neolane and Responsys, to the "we have more complete/mature capabilities" type barbs, offered last week by Act On, Badgeville, Lithium and Zoho.
Are Fernandez's comments just sour grapes? Turning to one analyst perspective, Gartner in April named ExactTarget as a "visionary" in its Lead Management Magic Quadrant based on Pardot capabilities. Oracle-Eloqua and Marketo, meanwhile, were the only two vendors in the report's "leaders" quadrant. Visionaries are lower on the Quadrant report's "ability to execute" axis, which hints that scale might be one area where the ExactTarget-Pardot combo had yet to prove itself.
How is Marketo's Customer Engagement Engine upping the ante in personalized delivery? The engine sets an appropriate cadence for marketing messages in an automated, yet individualized way, according to Fernandez, with marketers specifying the content and order of messages and the engine figuring out which message to trigger, when. Technologies including the MongoDB NoSQL database, Hadoop, Solr search and machine learning make it happen behind the scenes, he said, but marketers need only follow the lead of the cloud-based application.
If the goal is trying to generate consumer advocacy on Facebook or Twitter about a particular brand of salad dressing, for example, one marketing message might be about the health aspects of the product while another might be about how kids love the taste of the dressing and will thus eat their salad.
In practice the marketer might find that customer A is responding to the health message while it's not sparking likes or tweets from customers B, C and D. The system keeps track of responses and can automatically cut over to the "your kids will love it" message for customers that haven't responded to the initial marketing message.
"This is the reality of modern content marketing," said Fernandez. "Marketers are generating messages trying to get a result, and success depends on the system keeping track of the degree of engagement both across different customers and across different pieces of content relative to other content on social, email, phone and Web channels over time."
The real challenge is handling all that at scale, with hundreds of messages presented to tens or hundreds of thousands or even millions of customers across multiple channels. Fernandez said the Content Engagement Engine also can alert marketers that a particular message is no longer working, that one message is outperforming another or that X percent of customers have seen every piece of content on a particular topic, suggesting it's time to come up with new messages.
During a conference call with analysts last week, Salesforce CEO Marc Benioff asserted that the Pardot acquisition puts ExactTarget in a strong position in marketing automation, and he added that Pardot enjoyed high customer satisfaction ratings.
Can Pardot be made to scale? "It's software, so of course it can [scale] up," Fernandez said, "but the algorithms in our Customer Engagement Engine were built for big, hard problems, and I don't see any of that DNA in Pardot."
Benioff also noted that Salesforce will likely avoid additional acquisitions over the next 12 to 18 months as it digests ExactTarget, which makes it clear that it will focus the company's attention on integrating and scaling up everything that the acquired company has to offer. The first fruits of that effort will undoubtedly show up at the Dreamforce conference in December, if not sooner. We'll be anxious to hear customer testimonials about high-scale automation deployments.
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