70+ players, sub 5% penetration: Marketing automation still ‘crossing the chasm’

Image Credit: Wikipedia

After several years of 50-plus-percent growth, marketing automation is still the new kid on the block.

Even with 70+ vendors in the space.

cliffdiver3“If you’re in the business, it seems like everyone’s doing it,” analyst and consultant Dan Freeman told me yesterday. “But if you take a different perspective, it’s really early.”

In the tech business-to-business sector, most companies have now adopted some form of marketing automation, Freeman says. But that’s only a small slice of the overall market, so even though marketing automation gets a lot of hype and virtual ink — particularly via major acquisitions such as those by Adobe and IBM — it’s still very early days.

According to Freeman, that puts marketing automation squarely in the “crossing the chasm” phase, meaning that the sector is just now spreading from the early adopters and innovators to the early majority.

Freeman recently published What Every Marketer, Vendor, and Investor Needs to Know About Marketing Automation on VB Intel.

“What’s really happening is that the first wave of users is on board,” he says. “That’s actually a very small portion of businesses … it’s still at less than four percent of the U.S. market.”

Which means we’ve seen some progress, I suppose, since January of this year, when Act-On CEO Raghu Raghavan told me adoption was around three percent.

And which also means that we’re poised for hyper-growth, with the top solutions looking to take control of the market in a major expansion period over the next five years. We’ve already started to see that with Salesforce’s Pardot, which tripled its customer acquisition rate earlier this year.

“We’re in hyper-growth right now, with 40-50 percent increases in revenues per year,” Freeman says. “But a lot of companies aren’t participating in that growth like the aggressive companies: Act-On, Marketo, Pardot, Hubspot.”

The key difference? Venture capital — and lots of it.

hubspot-fundingThe companies that have received a significant amount of venture capital over the past few years are in hyper-growth — like Act-On, which just closed a $42 million round in April. At the time, CEO Raghavan told me Act-On’s growth was only limited by “how much money I have to hire salespeople” and that marketing automation was still “a greenfield market with only five percent penetration.”

In contrast, the slow-growth companies that are self-funding are growing at a still-good but more sedate 10-20 percent rate. The result, Freeman says, is likely some significant continued consolidation over the next few years.

In addition, as marketing automation as an industry becomes more penetrated, the larger companies will start offering industry-specific solutions. Salesforce is already doing that, IBM offers several “tracks” for different verticals, and Marketo is likely to release tailored versions of its core marketing technology for the medical, legal, high-tech, and other sectors.

One thing we’re already seeing is convergence between CRM and MA (marketing automation):

“You see more and more platforms that have basically both, and it makes a lot of sense,” Freeman told me. “There’s a whole complication when you have to integrate, which adds a lot of complexity, and small businesses don’t handle that well. For example, I use Salesforce, but I only touch on the features, so a very basic CRM system would suite me fine … I would see that as a real growth area.”

One interesting divergence in Freeman’s point of view is in terms of marketers’ core digital competencies.

While surveys by companies like Adobe have shown that marketers lack core skills in digital marketing and that shockingly low numbers of them know how to reinvent themselves for the new marketing technologies, Freeman thinks it’s actually not that big of a problem.

“That statistic is kind of meaningless,” he says. “I know a lot about the digital marketing world, but I don’t feel comfortable with it … there’s a lot to learn about the world of marketing tech, and it’s a world unto itself. There’s just a realization that the tools are constantly changing and you need to be open to the new tools.”

More information:

International Business Machines Corporation, abbreviated IBM and nicknamed Big Blue (for its official corporate color), is a global technology and innovation company headquartered in the Northeast US. IBM is the largest technology and ... read more »

With more than 100,000 customers, is the enterprise cloud computing company that is leading the shift to the social enterprise. Social enterprises leverage social, mobile and open cloud technologies to put customers at t... read more »

Whether it's a smartphone or tablet app, a game, a video, a digital magazine, a website, or an online experience, chances are that it was touched by Adobe technology. Our tools and services enable our customers to create groundbreaking... read more »

Marketo (NASDAQ: MKTO) provides the leading marketing software for companies of all sizes to build and sustain engaging customer relationships. Spanning today’s digital, social, mobile and offline channels, Marketo’s® customer eng... read more »

Pardot is a B2B cloud marketing automation software provider that increases revenue and maximizes efficiency for companies with multi-touch sales cycles. Pardot's platform features CRM integration, email marketing, lead nurturing, lead... read more »

HubSpot is the world’s leading inbound marketing and sales platform. Since 2006, HubSpot has been on a mission to make the world more inbound. Today, over 10,000 customers in 65 countries use HubSpot’s software, services, and suppo... read more »

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Siddharth Kulkarni
Siddharth Kulkarni

Karla & Vijay completely agree with both your thoughts marketing automation is to Marketing what salesforce is to Sales and that marketing automation needs to become more lead context driven. I think, for marketing automation to be become more lead context driven it needs to incorporate real-time intelligence which is the next challenge area.

Karla Haley
Karla Haley

Having used marketing automation for 8 years, it does seem odd to me that it's still considered an early adopter technology. I've hit the Chasm before and this does not strike me as a pre-Chasm category, but post-Chasm category.  I could be wrong, but 50% growth is a pretty good clip. What holds the growth at bay, is the lack of digital marketing skills and experience in most B2B companies. Like Vijay, I can't imaging living without it as a core platform.  

My theory is marketing automation is to Marketing that salesforce automation is to Sales.  My theory is that today Marketo is where was in 2005 and could become as big if they play their cards right.  At the moment, it is best-of-breed which makes it a magnet for new customers and integration partners like Vijay's NextPrinciples solution. 

Elliot Heath
Elliot Heath

Jenny that graph has 2nd year marketing written all over it haha

Vijay Ramaswamy
Vijay Ramaswamy

Great article John. As you have rightly said, we all have seen great initial adoption of marketing automation solutions. The burning question off course is what does it take to cross the chasm?  A vertical market approach as you mentioned makes a lot of sense. It is a proven approach.  What else can we do to make marketing automation even more valuable and drive faster adoption? 

Today's marketing automation solutions automate the otherwise very tedious task of nurturing leads and driving them down the funnel. As a marketer, I can't even image life without it. However, what it lacks is context. What I mean is lead level context. It does not add a lot of insights about the lead itself. This is where I believe social besides other channels can have a huge positive impact and offer lead level insights which can help drive faster revenue and even faster adoption. 

Mason Shakewell Neely
Mason Shakewell Neely

Wow. They nailed it "if you're in b2b tech it seems like everyone does it" - I can't believe it's less than 5%..

Brant Emery
Brant Emery

It's also a huge definition - can mean lots of different things. Which means market sizing and value is open to lots of opinions. Like all early markets really.