A marketing automation software company is purchased by a private venture firm for $1.79 billion. A major player in customer relationship management (CRM) software pays $2.8 billion to buy a cloud commerce company. One of the biggest players in enterprise software acquires a social media behemoth for $26.2 billion in cash.
These mega-deals are ripped straight from the headlines—and all in the last month. Consolidation in the marketing technology space is here, and, as these deals demonstrate, they are getting bigger and bigger. Today, hearing about multi-billion dollar acquisitions in the land of marketing software isn’t uncommon—in fact, it’s expected.
The number of acquisitions in martech raises a couple of questions. For one, what are the factors behind consolidation in the space? And, more importantly, what are the implications of this trend for software buyers and the customers they serve?
Drivers of consolidation in martech
For established vendors, acquiring a smaller, more nimble company is often a defensive play. Acquiring companies with complementary offerings could help behemoths fend off potential competitors. (In many cases, they buy emerging companies that could pose a threat in the future.) Also, buying a smaller company is often a faster and easier way of taking advantage of emerging opportunities in the market.
Buyer demand is a driving force. The martech landscape has become so fragmented and confusing—in 2016, almost 4,000 companies are part of the martech landscape. Some consolidation could help simplify the space and reduce the overwhelming number of choices for software buyers by combining platforms that offer similar features.
The more significant reason for consolidation has to do with the wider trend of customer empowerment.
“The martech space changes faster than any other tech environment in an attempt to keep up with changing customer expectations and behaviors,” Arjen van den Akker, product marketing director at content management software company SDL, tells Martech Advisor.
The way customers buy and interact with brands is evolving quickly because of mobile and cloud technologies. To keep up with these changes, marketers are looking for software that will give them better intelligence about their customers. Many martech players see acquisition as a way of meeting demand for marketing needs that have emerged as a result of the evolving consumer landscape.
What martech consolidation means for software buyers
For marketers spending billions of dollars in martech each year, the growing trend in consolidation has few notable consequences.
Consolidation could lead to more accurate and easier ways of measuring the ROI of marketing software. That’s important while martech spending is increasing—one estimate suggests that $32.3 billion will be spent on marketing software by 2018—and marketers are struggling to demonstrate ROI for their software purchase. When software companies merge, their platforms become tightly integrated with each other. As this happens, tracking the entire customer journey and crediting successes to marketing investments could become closer to reality.
As software vendors combine resources, technologies, and data, marketers might see more innovative products. Salesforce acquiring commerce software company Demandware, for instance, could address “disjointed retail processes” in the market and result in innovative products that merge marketing and commerce.
“Marketers ultimately need to remember the real reason they’re investing in martech.”
Marketers ultimately need to remember the real reason they’re investing in martech: to better understand current and potential customers with the purpose of driving sales. Companies need to makes sure that their marketing stack—regardless of the vendors that they work with—provides deep customer intelligence and paints a holistic picture of the customer.
Martech consolidation is not about to slow down anytime soon. In fact, many tech experts expect that another major social network—Twitter—will be sold to a bigger company soon. More mega-acquisitions are ahead, and as behemoth companies become even bigger in the marketing software space, consolidation will only accelerate.
As the martech landscape consolidates further, marketers need to consider the implications not just from a technical or customer data perspective. Working with billion-dollar software companies won’t necessarily result in a deeper understanding of the customer or the market. In the end, having the best software doesn’t replace the need to engage directly with customers.