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Digital Marketing Software: Spring 2014 Update
 

Digital Marketing Software: Spring 2014 Update

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Our latest report on the transaction environment, trends, major players and sector overview in marketing software.

Our latest report on the transaction environment, trends, major players and sector overview in marketing software.

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    Digital Marketing Software: Spring 2014 Update Digital Marketing Software: Spring 2014 Update Presentation Transcript

    • PRIVATE AND CONFIDENTIALTECHNOLOGY FOCUS. BROAD REACH. OPTIMAL RESULTS. Digital Marketing Software Transaction Environment and Sector Landscapes Spring 2014 Peter Falvey Managing Director peter.falvey@falveypartners.com P. 1.617.598.0437 Jeffrey Monk Analyst jeffrey.monk@falveypartners.com P. 1.617.598.0445 Jeffrey Cook Vice President jeffrey.cook@falveypartners.com P. 1.617.598.0439
    • 2 Marketing Software Continues to be an Active Sector in 2014 We believe that M&A and investment activity seen in 2013 will accelerate in 2014 as several trends continue to shape the digital marketing landscape Strong Market Growth • We are only partly through the growth phase of upgrading and expanding the enterprise marketing stack CMO Influence Grows • CMOs are wielding increasing purchasing power and influence over marketing software solutions Complexity Increases • Areas like mobile, social, integrated analytics, and personalization make the creation of a marketing solution much more challenging SaaS model Speeds Adoption • The emergence of enterprise SaaS model companies greatly eases purchasing, integration and flexibility Emergence of Platforms • Platform vendors pursuing full solution suites through organic development and inorganic acquisitions Personalization Hits its Stride • Pure-play, data-driven personalization and eCommerce optimization becomes a key category
    • 3 Overall Market Growth Remains Strong CMO v. CIO Spending (% of Revenue)Key Drivers Source: Gartner, Forrester, Technavio 0 5 10 15 20 25 30 35 40 2010 2012 2015 2016 Analytics Social CRM WCM Email Automation Sales CRM eCommerce $14.2B $20.2B $33.3B14% CAGR 19% CAGR The foundational elements of digital marketing will continue to grow quickly even as they mature – emerging point solutions are growing even faster  The CMO is the new CIO − CMO tech budgets are expected to grow at 11% per year, compared to 3% for CIOs − Solutions that demonstrate rapid time-to- value and robust integration will be beneficiaries of the CMO directed spend  SaaS delivery is expanding the market − Lower cost and flexible solutions expand the market  The marketing stack as a competitive advantage − Successfully integrating customer touch points, analytics, and internal workflow software allows CMOs to create more effective campaigns Digital Marketing Market Size 3.20% 3.79% 2.50% 3.80% 0.00% 1.00% 2.00% 3.00% 4.00% 2013 2017 IT Spend CMO Directed IT Spend CMO IT Spending: +11% IT Spending: +3.4%
    • 4 Marketing Software is an Extremely Complex Ecosystem… CRM Automation E-Mail Web Mobile Social Channels 3rd Party Networks (Display Ads) Consumer ExternalEnvironmentInternalEnvironment Facebook, Twitter, etc.E-Mail Account PC Browsing Mobile Browsing Engagement Customer Data Infrastructure Middleware E-Mail Campaigns Core Website Mobile Website Web Storefront Mobile Storefront Mobile Campaigns (Text, GeoLocation) Social Campaigns Lead Scoring Lead Management Customer Data Records Channel Interaction Data (clicks, likes, time spent browsing, emails opened, etc.) Testing & Analytics Personalization & Optimization Data Management Platforms (DMPs) Tag Management Middleware Layer: Data Synthesis // Personalization // Optimization Personalized Actions A/B Testing Multivariate Testing Web Analytics Personalized Web Recommendations eCommerce Optimization Actions Data 1st to 3rd party data aggregation Display ad heritage Customer data analysis Cookie-less targeting eCommerce Social Marketing Platforms Web Content Management Mobile Marketing Platforms E-Mail Marketing Platforms Historical Customer Data
    • 5 … Creating Demand for Simplicity through Consolidation Examining acquisition activity of the major acquirers highlights the trend towards large acquirers beginning to assemble platforms Infrastructure Applications Customer Engagement Data Management & Action CRM Automation WCM eCommerce E-mail Social Web Testing Personalization eCommerce Optimization Data Management Tag Management in 2013 for $600M in 2010 for $240M in 2013 for $600M in 2011 for $400M in 2010 for $240M in 2009 for $1.8B in 2011 for $58M in 2010 for $480M in 2010 for $1.4B in 2010 for ~$600M in 2011 for $1.5B in 2012 for $870M in 2011 in 2010 for $1B in 2013 for $1.5B in 2012 for $300M in 2011 in 2014 for $400M via ExactTarget in 2013 for $2.2B in 2012 for $689M via ExactTarget in 2013 for $1.3B Acquirer Adobe Partnership Adobe Partnership
    • 6 Maturing Sectors Provide a New Crop of Acquirers… Vendors reaching scale in their heritage markets are looking to broaden their product offerings through acquisitions to maintain historical growth rates Traditional Consolidators Example New Acquirers • Growing base of acquirers for marketing software • New group of consolidators are building suites - Typically newly public companies outgrowing their heritage focus and needing to maintain growth - Actively looking to move into adjacent areas • Increasingly competitive with the traditional enterprise acquirers, who are still extremely active
    • 7 … Who Have Been Very Active in Their Own Right Target Acquirer Date Solution April 2014 Optimization March 2014 Tag Management March 2014 Mobile Marketing January 2014 eCommerce January 2014 Analytics January 2014 Mobile Marketing December 2013 Personalization October 2013 Data Management July 2013 eCommerce February 2013 Tag Management January 2013 Social December 2012 Data Management October 2012 Automation October 2012 eCommerce February 2012 E-mail marketing
    • 8 Multiples Across Digital Marketing are As Strong as We’ve Seen Demand for high-quality marketing assets from an increasingly large group of acquirers is driving up multiples paid in acquisitions Avg. LTM Rev. Multiple: 4.2x 2009 – 2011 2012 – 2013 2.4x 1.0x 5.1x 4.1x 5.4x 2.6x 6.1x 0.8x 4.3x 6.6x 1.9x 5.7x 3.4x 10.0x 3.0x 14.9x 8.7x 9.7x 7.1x 10.7x 10.3x 7.7x .0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x Avg. LTM Rev. Multiple: 8.4x
    • 9 Certain Sectors Have Matured & Consolidated, Others ‘On Deck’ Sector Private Companies at Scale (Est.)* Major Acq. ($150M+) Pure-Play Public Companies E-mail Marketing Web Content Management eCommerce Automation CRM Social Marketing - Testing / Analytics Personalization / Optimization - - Data Management - Tag Management - - Mobile Marketing *$50M in Venture Funding or estimated $30M+ revenue
    • 10 Emerging Space Maturing Sector Level of Maturity for each Sector Provides Window into Future Activity • Market still coalescing, enterprises realizing they need solutions • Leading vendors starting to emerge • Transaction activity focused on seed and mid-stage financings • Some early-stage acquisitions Tag Management E-Mail Marketing eCommerce Mobile Marketing Testing Data Management Social Marketing CRM Content Management Less Mature More Mature Peak of Activity • Market in high-growth mode • Group of clear leaders distancing from the rest of the competition • Significant mid and late-stage funding • Major acquisitions start occurring, others on path to IPO • Growth slows in core market • Large companies begin to acquire into complementary sectors • Later-stage funding for clear leaders for consolidation, some early stage funding for disruptive new comers • Intra-industry acquisitions Peak Activity Personalization Automation
    • 11 Our Read on Potential Transaction Activity in Each Sector Sector Acquisition Activity Funding Activity E-mail Marketing 3 • Game of musical chairs underway • A number of consolidators still need to make bets, many attractive companies • Larger private companies acquire into adjacent spaces 2 • Later stage funding to fuel consolidation of larger independents • Some early stage funding for innovative newcomers (e.g. MovableInk) Web Content Management 2 • Market has played out over the last 5 years • Only a few integrated suites do not have WCM and a small handful of private companies at scale 1 • Potential for additional later stage funding for companies on IPO track (Acquia, Wordpress) • Little early-stage funding as market is highly competitive eCommerce 2 • Acquisition activity primarily results from newly public, large companies acquiring into new spaces • Potential for a vendor like Adobe or Salesforce to make an acquisition as they have no existing solution 2 • Growth stage funding for companies making progress at the SMB level
    • 12 Our Read on Potential Transaction Activity in Each Sector (cont.) Sector Acquisition Activity Funding Activity CRM 1 • Little acquisition activity, as most vendors have built their platform on CRM and independent companies are in growth stage 2 • Early stage funding for companies (e.g. RelateIQ) that are offering innovative, ‘CRM 2.0’ solutions Automation 1 • Automation has largely consolidated and most large integrated suites have automation as key piece of infrastructure alongside CRM 3 • Late and growth stage funding for the many companies pushing automation into the SMB level Testing 4 • Many of the historical acquisitions happened years ago • Testing becoming an integral piece of the stack – interest from vendors looking to add a solution for the 1st time or upgrade existing solutions 3 • Growth stage funding as vendors look to move away from legacy testing and expand solutions into the personalization market
    • 13 Sector Exit Activity Funding Activity Personalization 4 • High potential for acquisition activity – no major acquisitions have been made and many attractive companies • One of the hottest areas in digital marketing 4 • Several interesting companies ready for Series B / C funding • Additional later-stage funding as vendors take advantage of market demand Data Management 3 • BlueKai / Oracle could be the first domino to fall in a wave of acquisitions • Many late-stage rounds were raised within the last 2 years – companies will be pursuing exit or additional funding 3 • Late-stage funding – many Series B rounds were raised within last 2 years and fast-growing companies will need to fill the tank Tag Management 1 • Potential for integrated suites to pick off a perceived market leader as an early play 4 • Early stage funding as additional companies enter the space Our Read on Potential Transaction Activity in Each Sector (cont.)
    • 14 Sector Exit Activity Funding Activity Mobile Marketing 2 • Enterprises are just beginning to realize they need these solutions, will likely wait for a group of companies to break away from the pack before making acquisitions 4 • Market is only beginning to coalesce • Relative to other segments, very little funding has come into the space Social Marketing 2 • Many of the large consolidators have made entry acquisitions into the space (BuddyMedia, Vitrue, etc.) • Additional acquisitions over time as vendors fill-in functionality 3 • Growth and late-stage funding for vendors achieving scale Our Read on Potential Transaction Activity in Each Sector (cont.)
    • 15 Sector Snapshots Analysis of Trends, Transactions and Leading Players
    • 16 Company Investors Year Total Campaign Monitor Insight Venture Partners 2014 $250M LiveIntent First Round Capital 2014 Undisc. MovableInk Intel Capital, Contour 2013 $11M Target Acquirer Value Multiple Silverpop IBM $270M 3.0x Responsys Oracle $1,500M 7.7x Neolane Adobe $600M 10.5x ExactTarget Salesforce $2,250M 7.1x Average $1,155M 7.1x E-Mail Marketing Data Management & EnrichmentMarket LandscapeData Management & EnrichmentOur View on the Market Data Management & EnrichmentNotable Transactions Data Management & EnrichmentNotable Financings Scale FocusSMB Enterprise SMB Leaders Enterprise Leaders • E-mail marketing solutions are seen as true foundational elements of platforms • Winning vendors have proven ability to diversify away from core e-mail into adjacent areas (e.g. ExactTarget w/ Pardot, iGoDigital) • Among the strongest sectors in terms of activity over the past 6 months following ExactTarget and Responsys • A few consolidators still need to place bets
    • 17 Target Acquirer Value Multiple Fatwire Oracle $160M 4.3x Day Software Adobe $217M 5.1x Vignette Open Text $162M 1.0x Interwoven Autonomy $582M 2.2x Average $320M 3.5x Company Investors Year Total Ektron Accel-KKR 2014 Conf. SDL IPO 2013 $46M Acquia Investor Growth Capital 2012 $30M Sitecore TCV 2011 Conf. Web Content Management Data Management & EnrichmentMarket LandscapeData Management & EnrichmentOur View on the Market Data Management & EnrichmentNotable Transactions Data Management & EnrichmentNotable Financings Scale Focus • Game of musical chairs is almost played out at the enterprise level though a few consolidators still need to make bets • SaaS adoption continues to lag other sectors, though managed service offerings become key differentiators for leading vendors • Open-source companies like Acquia / Drupal continue to expand user base and take market share, especially at the SMB level SMB Enterprise SMB Leaders Enterprise Leaders
    • 18 Target Acquirer Value Multiple Hybris SAP $1,341M 10.7x GSI Commerce eBay $2,139M 1.6x ATG Oracle $1,000M 5.4x Sterling Commerce IBM $1,400M NA Average $1,510M 5.1x Company Investors Year Total Borderfree IPO 2014 $80M Shopify OMERS, Insight, Bessemer 2013 $100M Bigcommerce Revolution 2013 $40M Avangate Francisco Partners (LBO) 2013 NA eCommerce Data Management & EnrichmentMarket LandscapeData Management & EnrichmentOur View on the Market Data Management & EnrichmentNotable Transactions Data Management & EnrichmentNotable Financings Scale Focus • Market is saturated at the enterprise level, with offerings from most consolidators • Most activity taking place at the SMB level, where companies like Shopify are enjoying rapid success by delivering turn-key storefronts • New channels (mobile, social) and a focus on global capabilities defining the best products in the market • We anticipate additional funding and acquisitions as the next group of leaders emerge SMB Enterprise SMB Leaders Enterprise Leaders
    • 19 Target Acquirer Value Multiple Parature Microsoft $100M NA Rightnow Oracle $1,521M 7.0x Average $811M 7.0x Company Investors Year Total Base CRM RRE, Index, OCA, others 2014 $15M RelateIQ Redpoint, KPCB, Felicis 2014 $40M Capillary American Express Ventures 2014 $4.5M SugarCRM Goldman Sachs 2013 $40M Insightly Cloud Apps Management, Emergence, TrueBridge 2013 $10M Core CRM Data Management & EnrichmentMarket LandscapeData Management & EnrichmentOur View on the Market Data Management & EnrichmentNotable Transactions Data Management & EnrichmentNotable Financings Scale Focus • The consolidation game hasn’t quite begun yet. However, larger players have been adding capabilities (e.g. Social) to their systems via acquisition • Entering a ‘2.0 phase’ of this mature market, where startups are challenging larger incumbents by offering better functionality, intelligence and vertical plays • The SaaS trend is accelerating in CRM, as 40% of CRM systems are consumed via SaaS • SMB is fastest growing segment of the market SMB Enterprise SMB Leaders Enterprise Leaders
    • 20 Target Acquirer Value Multiple Silverpop IBM $270M 3.0x Neolane Adobe $600M 10.5x Eloqua Oracle $870M 9.7x Unica IBM $500M 10.0x Average $560M 8.3x Company Investors Year Total Act-On Software TCV, Trinity, USVP, Norwest 2014 $42M Salesfusion Noro-Moseley Partners 2014 $8M Intercom Bessemer, Social+Capital 2014 $22.8M Infusionsoft Goldman, Arthur Ventures 2013 $60M Signpost OpenView Venture Partners 2013 $10.5M Automation Platforms Data Management & EnrichmentMarket LandscapeData Management & EnrichmentOur View on the Market Data Management & EnrichmentNotable Transactions Data Management & EnrichmentNotable Financings Scale Focus • Automation is still a greenfield market, with only 5% penetration • SMB driving market growth • Current players face competition from the explosion of startups in the space and integrated suites from the large consolidators • Among the most active spaces in recent quarters with the acquisitions of Silverpop, Neolane and Eloqua • While most consolidators have placed their bets, a few competitors of scale remain (Marketo, Hubspot) SMB Enterprise SMB Leaders Enterprise Leaders
    • 21 Target Acquirer Value Multiple Tealeaf IBM $500M 10.0x Coremetrics IBM $600M NA Omniture Adobe $1,800M 5.3x Average $967M 7.7x Company Investors Year Total Maxymiser NXT Capital 2013 Undisc. Optimizely Benchmark, Bain, Battery 2013 $35.5M Testing & Analytics Data Management & EnrichmentOur View on the Market Data Management & EnrichmentNotable Transactions Data Management & EnrichmentNotable Financings • Testing market is split between large SMB and enterprise players • Many multi-variate testing vendors are moving into the personalization space • No major acquisitions have occurred for a few years, we anticipate demand for leading companies as suites add testing or upgrade existing solutions • Importance of market grows alongside personalization market, where testing is a critical element Data Management & EnrichmentMarket Landscape Scale FocusSMB Enterprise SMB Leaders Enterprise Leaders
    • 22 Company Investors Year Total Smarter Remarketer Battery Ventures 2014 $7M Monetate First Round, OpenView 2013 $10M APT Goldman Sachs 2013 $100M Demandbase Scale Venture, Sigma 2013 $15M RichRelevance Crosslink Capital 2012 $28M Target Acquirer Value Multiple Insightera Marketo $23M NM Runa Staples NM NM Average NM NM Personalization & Optimization Data Management & EnrichmentOur View on the Market Data Management & EnrichmentNotable Transactions Data Management & EnrichmentNotable Financings • Growing demand for personalization solutions that sit in a distinct layer between infrastructure and customer engagement assets • Vendors differentiated by ability to ingest vast amounts of structured and unstructured data • Market split between personalization for web and eCommerce applications • Active market for acquisitions (no major acquisitions have occurred) and for funding as more capital flows towards leading companies Data Management & EnrichmentMarket Landscape Scale FocusWeb eCommerce Web Leaders eCommerce Leaders
    • 23 Company Investors Year Total AgilOne Tenaya, Sequoia, Mayfield 2014 $25M Lotame Sozo Ventures, TrueBridge 2014 $15M Turn BlackRock 2014 $80M Mintigo Adams Street, Sequoia 2013 $10M [x+1] Ares Capital (Debt) 2013 $15M Target Acquirer Value Multiple Knotice IgnitionOne NA NA Bluekai Oracle $400M NA Aggregate Knowledge Neustar $119M NA Demdex Adobe $58M NA Average $192M NA Data Management Data Management & EnrichmentOur View on the Market Data Management & EnrichmentNotable Transactions Data Management & EnrichmentNotable Financings • Category quickly becoming the ‘data warehouse’ for complete customer interaction data • Different heritages for leading vendors, though many come from a display ad targeting background • Leading vendors enhancing offerings by becoming the system of record for 1st party data • Over time, becomes the platform and system of record from which personalization campaigns are launched Data Management & EnrichmentMarket Landscape Scale FocusData Enrichment Enterprise SMB Leaders Enterprise Leaders
    • 24 Target Acquirer Value Multiple TagMan Ensighten NM NM Ubertags X+1 NM NM Average NM NM Company Investors Year Total Ensighten Insight, Volition 2013 $40M TagMan Baird, Yahoo, Pritzker 2012 $13M BrightTag Greycroft, iNovia 2012 $50M Tealium Battery, Tenays, Presidio 2011 $27M Impact Radius Redpoint 2010 $6M Tag Management Data Management & EnrichmentOur View on the Market Data Management & EnrichmentNotable Transactions Data Management & EnrichmentNotable Financings • An early space in a ‘land grab’ as demand for management of user- generated tags grows and cookie- based targeting becomes less effective • By managing customer interaction data, vendors are well-positioned to be platforms to launch personalization applications • All the vendors we have spoken with are experiencing rapid growth • We expect vendors to build application portfolios on top of their infrastructure in the coming years Data Management & EnrichmentMarket Landscape Scale FocusSMB Enterprise SMB Leaders Enterprise Leaders
    • 25 Target Acquirer Value Multiple Jumptap Millenial Media $245M 3.8x Average $245M 3.8x Company Investors Year Total Kahuna Sequoia Capital 2014 $11M PlaceIQ Harmony Partners, USBP 2014 $15M Tapjoy J.P. Morgan 2013 $30M Urban Airship August Capital, Intel Capital 2013 $25M InMobi SOFTBANK, Polaris 2011 $200M Mobile Marketing Data Management & EnrichmentMarket LandscapeData Management & EnrichmentOur View on the Market Data Management & EnrichmentNotable Transactions Data Management & EnrichmentNotable Financings Scale Focus • Market is just beginning to emerge and enterprise are starting to spend real money on these solutions • Leading vendors support mobile- first campaigns through push notifications, QR codes, location- based targeting, etc. • Fragmented from a functionality standpoint, and we expect category leaders will emerge for mobile campaigns to mobile commerce • We anticipate primary transaction activity will be growth stage funding for emerging leaders SMB Enterprise SMB Leaders Enterprise Leaders
    • 26 Target Acquirer Value Multiple Efficient Frontier Adobe $375M NA Vitrue Oracle $300M NA Buddy Media Salesforce $745M 18.7x Wildfire Google $350M NA Average $443M NM Company Investors Year Total Spredfast Lead Edge, OpenView 2014 $32.5M Lithium Undisclosed 2014 $86.5M Socialbakers Index, Earlybird Venture 2014 $26M hootSuite Insight Venture Partners 2013 $165M Hearsay Social Sequoia Capital, NEA 2013 $30M Social Media Marketing Data Management & EnrichmentMarket LandscapeData Management & EnrichmentOur View on the Market Data Management & EnrichmentNotable Transactions Data Management & EnrichmentNotable Financings Scale Focus • Becoming an increasingly important function for brands as the use and number of different social media channels continues to increase • Market still playing out, as competitors vie to be the first true leaders to emerge from a growing pack of startups in the space • While some of the consolidators have made a move, it still feels early in the space and we believe there will be a few waves of activity as the market matures SMB Enterprise SMB Leaders Enterprise Leaders
    • 27 We Know Marketing Software Advisory Assignments Recent Buyer Conversations  Several transactions completed historically in the digital marketing sector  Currently have 2 active engagements in digital marketing, each with an LOI on the table  Have received bids or had multiple meetings with over a dozen of the logical acquirers since the beginning of the year We have been as active as any advisor in marketing software with several engagements and extensive interaction with every major acquirer in the last quarter Advisor to Fatwire Has been acquired by Advisor to NorthPlains Growth equity investment from Under LOI eCommerce Infrastructure Software Project Port Under LOI Personalization Software Provider Project Bay Received offer or had multiple in-person meetings Placement Agent Growth equity investment from Placement Agent Series D Convertible Preferred Stock Led by
    • 28 Falvey Partners Overview FOCUS SELECT TRANSACTION EXPERIENCE December 2011 Has acquired July 2012 Has been acquired by September 2011 Series D Convertible Preferred Stock Led by September 2012 Has been acquired by A portfolio company of July 2011 Has been acquired by a portfolio company of April 2011 Has been acquired by July 2011 Has been acquired by February 2011 Growth equity investment from July 2011 Has been acquired by March 2011 Has divested its diagnostic solutions unit November 2010 Has received an investment from A portfolio company of October 2010 PGI Notify and Send platforms acquired by August 2010 Two divisions have been acquired by a portfolio company of April 2010 Has been acquired by August 2010 Series C Convertible Preferred Stock Led by SERVICES  Sell-side or buy-side M&A  Growth capital raising  Board and corporate advisory SECTOR  Software / SaaS  Tech-enabled business services  IT services  Internet / digital media COMPANY TYPE  $50M - $250M in enterprise value  Growing, with established scale  Profitable or near-term path to profitability Falvey Partners is a leading advisory firm serving mid-market clients across technology sectors  Founded in 2012 by Peter Falvey and key members of the Morgan Keegan / Revolution Partners team  Falvey Partners professionals have closed dozens of software transactions representing billions of dollars in transaction value