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Marketo: Rising from the ashes?

Last week, the marketing automation software provider, Marketo announced its first quarterly results after going public, which exceeded consensus estimates.   The market cheered the news by sending the stock, over 20% north.   It was a sharp contrast to the market sentiment exhibited about a couple of months back, when Salesforce.com's announcement of acquisition of Marketo's bigger competitor ExactTarget, when the buzz in the market was other way around.

Marketo went public back in May this year.   In the IPO filing (Form S-1) with SEC1, in April 2013, Marketo, emphasized on its (potential souring of) relationship with Salesforce.com as well as the latter's (possible) acquisition of Marketo's competitor(s) as some of the risks to its business.   As of Dec 31, 2012, Marketo had around 79% of its customers integrated its solutions with some capabilities of Salesforce.com.   This clearly provided the warning on it sole reliance on the CRM provider.   Hence, it was no surprise that the market sent the stock down over 15% during the intraday, when the deal between Salesforce.com and ExactTarget was announced.

However, in the reverse of fortunes, if the latest quarterly results were any indication, Marketo's customers can feel a sigh of relief in the former's viability - Last Tuesday, Marketo announced its first public quarterly results, which demonstrated its continuous march towards growth: Increased Revenue - 14% from the previous quarter (and 62% increase over the prior year period) and narrowed per share net loss - $0.49 Vs $3.30 over the prior year period.    The customer base increased close to 2600 from the IPO filing figures of around 2000 customers.

All in all, my thought in this two part play is that it is not as easy as one may think for any CRM platform providers to shut the doors for any of its partners simply for the competitive reasons, when they have the ability to continue to provide their offerings.   This will certainly backfire on itself, with its own customers.  Even if the platform provider were to offer its own solution alternative, there are many soft expenses, such as internal trainings and tool adoption costs, which a customer will have to incur and they hence will be reluctant to go with the transition.  

From the solution partners' standpoint, it becomes more imperative that they are not tied any single CRM platform provider and position their solution as platform agnostic as possible for their own good.   Marketo currently has over three fourth of its customers tied to Salesforce and by its own recognition, it will be prudent to reduce this reliance and expand its reach with other CRM platform providers.

From the customer's standpoint, it is clear that solution portability should be one of the factors for consideration during its evaluation of process.   More than often, portability on the cloud is very difficult process, if not outright non-existent.   Hence, while making the switch to the cloud, just like any other platform change, they understand the relative importance of portability to them.   Also the platform providers' market & financial strengths, as well as that of the CRM providers' partners into consideration.  

1. Marketo's IPO filing report - http://www.sec.gov/Archives/edgar/data/1490660/000104746913003841/a2214086zs-1.htm#da77701_risk_factors
2. Marketo's (Q2 2013) financial results highlights - http://finance.yahoo.com/news/marketo-announces-revenue-increase-62-200500315.html

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