Marketo IPO Filing: A Sign of Things to Come?

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Feb 28, 2013

On Tuesday, marketing automation technology provider Marketo formally began the process of making an initial public offering of its common stock by filing a confidential submission with the U.S. Securities and Exchange Commission for review. If the IPO moves forward, it will reveal insights about Marketo’s strategy and operations and could lead to a flurry of M&A and other IPO activity in this fast growing segment.

The San Mateo, CA-based company has raised over $100 million in venture capital funding since its launch in 2006 and has been an aggressive competitor in the crowded marketing technology landscape. Marketo CEO Phil Fernandez and his team have done a good serving both small-and-medium business (SMB) and enterprise customers by providing a scalable marketing platform with an intuitive interface and a strong network of partners and integrations. This strategy has grown the company to $32.9 million in revenue in 2011–or 3,545% growth in three years, according to its Inc. 500 listing.

Marketo is still small compared to larger marketing “stack” providers like Adobe, Salesforce.com, IBM, and Oracle, but its rapid growth and impending IPO signal just how important marketing management and automation is becoming to business of all types. According to a 2012 study from InfoTrends, almost one-quarter of U.S. SMBs surveyed reported that they were considering an investment in marketing automation technology. That finding was consistent across all size segments, from microbusinesses to companies with just fewer than 500 employees.

While enterprise deals are undoubtedly larger wins overall, having a scalable platform to support small businesses as they grow into larger businesses might deliver more value to Marketo long-term. Furthermore, Marketo is heavily investing in global expansion, with its Dublin-based headquarters working on improving multilingual support, and a new Sydney headquarters opened toward the end of last year. The company reported that its customer base in EMEA grew by 50% in the first half of 2012, and recent InfoTrends research confirms Marketo’s strength in that region. Our survey of SMBs in Western Europe conducted near the end of 2012 found that Marketo was the second most-used marketing automation platform in the region.

Marketing Automation Solutions Used by Western European SMBs

While Marketo’s IPO filing will reveal much more about its strategy and operations, it will be interesting to see how the company invests to continue its growth over the next few years. Will it go down the path of building its own marketing “stack” to compete against the existing behemoths in the space? Will it focus on organic growth initiatives or look to acquire smaller players to scale faster?

We also wonder if the company will ultimately be scooped up by a larger marketing technology provider that needs to add more robust lead management and automation capabilities to their solutions, such as Salesforce.com or Adobe? Recall that Oracle acquired Eloqua in December 2012 five months after its IPO for $871 million—more than double the IPO price.

Whatever happens, the Marketo IPO will likely prime the pump for other marketing technology-related IPOs and M&A activity, including the anticipated IPO of HubSpot and potential IPOs from companies like Infusionsoft and Neolane. With over dozens of small marketing automation companies fighting for customers and a variety of large technology vendors and services providers seeking a meaningful presence in this category, we expect continued consolidation over the next 18 to 24 months.

Bryan Yeager

Associate Director, Digital Marketing & Media Trends

InfoTrends is launching its Digital Marketing & Media Trends Consulting Service (DMM) to provide critical market insight to technology & service providers, marketers & advertisers, and publishers about important developments like the Marketo IPO. To learn more about how DMM can help your business, click here.

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