As I was reading this article this morning in the WSJ, This Tech Bubble Is Bursting, I couldn’t help but to think about Martech. Marketing has always been a marriage of art and technical execution but over the past several years, marketers have been inundated with new marketing technologies. In fact, marketing is becoming one of the most technically complex functions in business today.
CabinetM has developed a comprehensive directory of marketing tools and they have listed more than 5000 companies that sell some type of marketing technology to help us do our jobs better listed on their platform. CabinetM groups the tools into twelve major categories, each with hundreds of solutions; advertising buying, serving & management, advertising by medium, analytics and business intelligence, big data, content marketing: design & illustration, customer relationship marketing, email marketing, marketing automation & management, mobile marketing, productivity, collaboration & workflow, social media marketing, and web analytics & optimization.
Each one of these solutions solves one piece of the complex marketing puzzle. The martech challenge for any CMO is determining the ROI tipping point between using technology to market and the resulting value it brings to the organization – managing tool spend versus performance.
Martech is Ripe for Integration
Martech is a very fragmented market, consisting of many players both big and small, with no clear leaders all competing for the same customers. This is a very desirable market condition for smaller innovative players because strong differentiation and bold communications programs can help raise awareness, create company value, and help these companies rise into leadership positions. Companies that have strong differentiation, bold communication and solid business fundamentals tend to survive and thrive or they exit successfully during market consolidation while others close up shop or exit for pennies on the dollar.
As martech matures, CMOs are not going to want to purchase and use a plethora of point products – they will gravitate towards solutions that integrate several functions to simplify their marketing stack. It is easier and more cost-effective to onboard and support a set of products that have multiple functions rather than a number of point products.
Market Consolidation Has Begun
We are already seeing consolidation in the market, in particular the PR tools market. Cision, a leading tool used by PR professionals, has been on a buying spree with the acquisition of a number of smaller players and more recently purchased PR Newswire in December 2015. Check out our blog post Why did Cision Pay $841 million for PR Newswire?Two months later Nasdaq purchased Marketwired. Cision has announced their intent to manage the entire lifecycle of communications – from influencer discovery and content distribution to engagement and campaign analysis – while Nasdaq has highlighted social media and analytics as one of its primary motivations for purchased Marketwired.
Is Martech in a Bubble?
Yes and no. This is very reminiscent of the dot.Com error. $132 billion has been poured into martech over the past five years but even the superstars like Hubspot have yet to turn a profit. Twitter just turned a profit late last year. There are many companies that have shallow value propositions or are solving problems that don't really exist. They have a cool technology that may or may not be useful in the future.
Having said that, market fragmentation like we are seeing in martech creates opportunity for innovators to come in and create a killer company. Someone will figure out how to cut through all the clutter out there and create a company that adds significant value to CMOs and it will skyrocket. The rest of us will all look at that company and think "Why didn't I thinkof that?"
What does this mean for martech companies? As the market continues to consolidate, martech companies that have a robust partner and integration program as well as solid business fundamentals will have a better chance to survive or exit successfully. Martech companies that have cash, will begin buying up firms that offer functionality that complements existing technology.
For CMOs, market consolidation can only help with your marketing stack. Consolidation will help you strip out the posers from the players and help you manage your tools spend as well as enhance your overall marketing performance.
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