Questions Remain After Vista Equity Partners Purchases Marketo

Marketo (NASDAQ: MKTO) recently announced they were being acquired by private equity firm, Vista Equity Partners.  While the buyout offered a solid, but unremarkable return for Marketo’s shareholders above the public share price, the acquisition by a P.E. firm left some feeling disappointed that the suitor was not a technology company such as Microsoft, Oracle, Salesforce or Adobe.

Marketo acquisition rumors have been circulating for years, as Oracle snapped up Eloqua in 2012 for their Oracle Marketing Cloud and Salesforce acquired ExactTarget (including Pardot) in 2013.  Marketo, as the only major independent marketing automation provider that hadn’t been picked up by a major tech company in the CRM/customer analytics space seemed poised to be acquired by one of the big SaaS technology companies looking to fill out their portfolio of enterprise sales and marketing solutions.

Marketo and Microsoft teaming up made sense to me.  I oversaw a relatively large and advanced Marketo integration for two years in a recent role.  I witnessed the massive value that marketing automation technologies can bring to sales and marketing teams today.  Marketo was the best choice for us, but reevaluating our Marketo decision came up 1-2 times per year as competitors aggressively added new features and a spate of acquisitions presented consolidation opportunities between our various technology providers.  Marketo offered a solid feature set, pricing was in line with competitors in the industry and sticking with Marketo meant we didn’t have to deal with the pain of switching costs to a competitor.  Switching costs are high in the marketing automation space – a huge amount of customization and a massive learning curve of new platforms means moving to a competitor is almost guaranteed to negatively impact lead generation and sales initiatives. 

While Marketo was the best solution for us, it was not without its faults.  Marketo’s platform is ridiculously slow.  It wasn’t uncommon for reports and queries to take minutes to respond and, sometimes, they timed out completely. Marketo’s support forums were full of users complaining about performance and having to implement workarounds and hacks to get it to respond in a timely manner.  Slow system performance meant marketers had to spend their time waiting on the system to respond versus spending time focusing on building great campaigns and implementing automation to improve marketing efficiency.   An acquisition by a major technology company like Microsoft or Salesforce would have come with risks (would the product be absorbed and killed off?), but it also could have come with major benefits.  Microsoft and Salesforce know how to build performant enterprise applications. Having some of that performance know-how rub off on Marketo could have improved performance dramatically in the product which could have greatly increased customer satisfaction.

The acquisition by Vista Equity Partners was somewhat unexpected by many in the industry and leaves more questions than answers for Marketo’s customers in regards to future product roadmap and strategic partnerships with major CRM partners.

Question #1: Will Marketo’s Slow Platform Performance be Addressed?

A Marketo acquisition by a major enterprise SaaS provider offered hope of addressing Marketo’s performance issues.  Backing Marketo on a major cloud platform (like Amazon’s AWS, Microsoft’s Azure or Google’s Google Cloud) could present better scaling opportunities and even offer a revenue stream to Marketo in the form of letting customers upgrade their own instances in the cloud to an instance with more horsepower.  They may already host on a cloud platform, but opening that up to customers to upgrade their instances could be really exciting.  

Question #2: Will Marketo Improve Attribution Analytics and Data Insights?

Marketo’s solution is robust from an operational perspective, but weak when it comes to data analysis and providing a easy to consume view into customer data.  Looking at marketing campaigns and assets from a first-touch, last-touch and multi-touch model is key to understanding which activities are resulting in the most revenue for marketing organizations and Marketo’s solution is weak in that regard.  They do have features and functionality to help with it, but its a huge pain to implement and maintain.  Acquisition by a technology-first company who has a core competency in big data, data visualization and data analytics could be a massive win for the platform and provide that true visibility into marketing campaign attribution and ROI that so many marketers are lacking.

Question #3: Will Marketo’s Sale to Vista Equity Partners Help or Hurt 3rd Party CRM Integrations?

Despite being a very solid solution in the marketing automation space today, Marketo is vulnerable.  Salesforce’s acquistions of ExactTarget and Pardot means there is promise of a fully integrated sales and marketing CRM platform.  Last I spoke with Salesforce about their Pardot integration (spring 2015), full data unification was still in-the-works – marketing automation data and salesforce data lived in two backend databases and were constantly synchronized.  Synchronization like this is brittle, it opens the door to data merge conflicts, sync latency causing inconsistent data views between the sales CRM and the marketing automation platform (MAP) and difficult unified reporting of marketing and sales touches in one simple place.  Salesforce will hopefully ( (though maybe not) fix this as the ExactTarget/Pardot acquisition matures as full marketing and sales data unification would present a killer solution.  It was fairly unlikely Marketo would have been acquired by Salesforce (since Salesforce already had a strong marketing automation solution), but an acquistion by Microsoft could have offered the CRM + MAP integration via Microsoft’s Dynamics CRM.  Unfortunately, Marketo’s acquistion by a private equity firm means it still isn’t clear who will be their CRM of choice.  Marketo has a great integration with Salesforce’s CRM today, but it isn’t clear how long that will last.  If Salesforce starts to handicap that integration or offer advanced integration only through their own marketing automation solutions, then Marketo’s existing and prospective customers will have a painful choice to make – to go with a fully integrated solution from Salesforce or continue to buy two seperate solutions and deal with integration issues and cross their fingers that the relationship with Salesforce stays strong.   

Question #4: Will Vista Equity Partners’ Portfolio Companies Strengthen Marketo’s Product?

Despite the downsides of Marketo not being acquired by a technology-first company like Salesforce or Microsoft, there are at least two upsides to the Marketo acquisition by Vista Equity Partners.  The first is that Vista has some other great companies in their portfolio that could strengthen the Marketo product.  Return Path, for example, offers the potential for a high value email deliverability and email reputation management platform, something Marketo struggles with today despite their platform being so reliant on email marketing and email deliverability.  Return Path helps brands monitor and maintain email deliverability across the web.  So many email marketing team results are hampered by poor email deliverability that integrating Return Path into Marketo’s platform could make teams more effective on the Marketo platform.  It is an exciting prospect and could present an increase in contract values as well for an Advanced Email Deliverability module. 

Question #5: Will Marketo Continue to Innovate Post-Sale?

Vista Equity Partners will likely look to increase the value of Marketo with the eventual goal of selling it again, versus hold on to the company into perpetuity.  Maximizing enterprise value can be done in a variety of ways, ranging from increasing the value for customers (improving the product) to improving profitability (decreasing expenses).  While Marketo as a public company had to focus on quarterly and annual results, the sale to Vista may allow them to increase that time horizon to focus on building value for the next 5-10 years instead of worrying about short term metrics. This longer term focus could present a great benefit to Marketo customers.  A purchase by Microsoft or Oracle could have put the product at risk of being integrated into other business units (effectively killing the product) like we have seen so many times before with acquisitions by technology companies.  The risk, however, is that Vista’s acquisition will put product development on hold, in a quest to maximize revenue while minimizing investment.  This risk was articulated by analyst Ray Wang of Constellation Research who stated “Pretty soon it’s just about keeping a maintenance stream of customers and not really growing the market,” he explained. “What most of our customers are worried about [with the sale of Marketo to Vista Equity Partners] is the lack of innovation that could occur, especially given Vista’s reputation.”

It will be exciting to see how Marketo’s acquisition by Vista Equity Partners helps shape the product over the coming years and what the long term outcome will be for the Marketo platform.  Marketo is most vulnerable due to the absolute necessity of having a marketing automation platform integrate into a sales CRM and Marketo not having an in-house CRM solution.  I don’t see another company in Vista’s portfolio that offers that robust CRM solution, relegating Marketo to the awkward position of being an enterprise sales & marketing technology solution without the ‘full stack’ capabilities that Salesforce and Oracle can offer through their solutions.

Windows 8 – A revenue transformation for Microsoft

We are not for a lack of commentary on Windows 8, but despite all the subjective commentary on the Windows 8 User Experience and the Surface tablet, I think there is a really important story lying under the surface about the revenue potential for Microsoft.
I’m not unlike many computer users – I regularly use a version of Office 2003 I bought five years ago because it just works, and there is no need for me to upgrade.  I bought an iPhone when it came out – Apple truly revolutionized the mobile phone space.  I installed Ubuntu Linux on my home PC for a few years to learn about the offerings and state of the open source operating system market.
Two weeks ago, I tired of the Windows 8 news snippets and me-too commentary and installed the Windows 8 Consumer Preview on my home desktop to dual boot with Linux.  The preview build was a little awkward, no Windows 8 apps for Skype, Netflix, no free music player (ala Pandora, Spotify, etc).  The dual-desktop situation took a little getting used to but isn’t the traumatic experience that it is made out to be.
When Windows 8 launched, I installed it on my main laptop PC.  First the first time ever, a Windows OS upgrade went incredibly smoothly.  I downloaded it from the web, I installed it within an hour or so, it preserved all my files and gave me a genuinely refreshed view of my operating system.   More importantly, it really showed me the new revenue paths for Microsoft associated with Windows 8.
Movies and Premium TV
Windows 8 lets me buy movies directly from my PC, from within the core operating system.  I dropped premium cable years ago in favor of a Roku device connected to my flatscreen TV.  I don’t have a media PC, I hate moving around cables and hooking my laptop up to the TV to watch content online.  Roku solved a lot of those problems for under $100, but it is a partial solution.  Roku has proven to have a relatively dormant app ecosystem.  The Netflix app lacks pizazz, the news apps that were once great have been fragmented into a bunch of awful little network-centric apps.  Overall, Roku was the right solution at the time but didn’t solve all of my media consumption needs.  I still use it regularly to buy movies on Amazon and watch streaming content on Netflix.
Windows 8 changes this.  If I hook my PC up to my television, buy a media specific PC or purchase an Xbox, I can access all my media directly on my TV through Windows 8.  More importantly for Microsoft, I purchase the movies from Microsoft instead of Amazon.  Amazon, Hulu Plus, iTunes and Netflix all offer a decent experience for me to purchase content but having it built into the OS makes it all that much more seamless and it’ll eventually be the sole place I buy my content.  Movies and Premium TV content, I believe, is revenue stream #1 for Microsoft in Windows 8.
Apps
I’ve gone from flip phone to iPhone (1st gen) to Android over the last 6 years.  I’ve purchased some premium apps, I use a lot of free apps and am comfortable with the ‘App Store’ concept on my mobile devices.  Despite the current awkwardness of maintaining the Windows 8 “Metro Style” desktop as well as the old Windows XP/Windows 7 styled desktop – it’s clear that Microsoft is finally moving in the right direction in regards to bringing the vibrant mobile app ecosystem to the relatively stodgy app environment on desktop/laptop PCs.  Merging legacy Windows desktop apps into the Windows 8 “Metro-style” desktop will happen eventually, but maintaining both is key for user adoption as it doesn’t require a major shift in usage for those who are most comfortable with the old Start button style interface.
Most importantly, Microsoft has introduced a new generation of fresh applications and revenue for the company.  Criticism abounds about the number of apps in the app store for launch.  The practical truth of it is they have 10,000 apps available right now – far more than any consumer of Windows has realistically had access to with one-click install in the past.  Most are free or freemium, introducing a wave of crisp UIs and laser-focused mobile-style apps to the desktop.  Critically for Microsoft, this new app infrastructure is new revenue stream #2 for Microsoft in Windows 8.
Music
I don’t buy music anymore.  I use Pandora with Ads, I use Spotify on laptop and desktop and I usually listen to Podcasts while driving.  I’ll pay to subscribe to music services, but purchasing physical albums and even dealing with migrating digital music from device to device is too obnoxious.  Subscription services like Pandora and Spotify are the future of music consumption.  Windows 8 understands this shift and is embracing it.  Microsoft built a Pandora-meets-Spotify experience directly into the OS via the Music app.  Listen to an artist’s tracks or start up an artist-inspired ‘station’ directly from the OS.  I won’t use Pandora any more on my laptop or desktop and, if I did want to purchase a track or album, its built into the OS.  I bought a Zune when it came out many years ago.  It died with the advent of the iPod and iTunes, but it was an amazing deal for music consumers.  Microsoft learned from that and built it into Windows 8, making paid subscription optional in exchange for audio and video ads interspersed with your music.  Music subscriptions and premium audio and video ads from the Music app is revenue stream #3 for Microsoft in Windows 8.
There are a host of other ways Microsoft can monetize Windows 8 on a service level.  Skype credits to talk to friends overseas (something I’ve already done prior with Skype), now built into the gorgeous new Skype app.  Subscriptions for core apps like MS Office (I haven’t purchased Office 365 and it feels like they missed an opportunity in tying that directly into Windows 8) would keep me paying Microsoft a reasonable fee on the monthly basis for my most critical productivity tools.  SkyDrive paid storage, for those that exceed the generous free allotment, should be the #1 backup solution touted by Microsoft now with built in OS support, mapped folders and enough free space to get you hooked without giving away enough space to back up all of a digital family’s most important photos, videos and documents.
I think Windows 8 is going to be a cash cow for Microsoft – with 1.5 billion PCs worldwide and 400 million new PCs sold every year, earning recurring revenue from that massive user base could be truly transformative for Microsoft.   The latest generation of All-in-one desktop PCs with gorgeous touch screens are very reasonably priced at under $1000.  The newest round of laptops, either super-light ultra books or convertible tablets are really attractive and still come in hundreds less than comparable hardware from Apple.  Tablet manufacturers finally have a chance to get away from the serious OS-fragmentation that is Android and the introduction of Surface, while I don’t see a massive market for it today, means Microsoft can finally monetize the tablet market that has completely gotten away from it over the last three years.  I look forward to monitoring my Movie, App and Media spend with Microsoft over the next year to see if I truly shift dollars away from Amazon, iTunes, Google Play to Microsoft – at this point I don’t see how I could avoid it.  Microsoft has released a sexy new operating system while also making itself the #1 recipient of my software and service subscription dollars moving forward.

Build Your Business, Not Your Product

I’ve had a copy of The E-Myth Revisited floating around my house for years, picked up at Half Priced Books a while back and forgotten as I read through The 4-Hour Workweek, Crush It, The Dream and, most recently, Rework.  A friend reminded me of the book again last week so I sat down in the sun yesterday and cracked it open.  I skimmed through the first few chapters, reminding myself of the writing style and key concepts that being a business owner is not the same as being a working in your business.  The technician in you wants to work on your product, the manager wants to work on the people and process, but the entrepreneur needs to work on the business.


Photo courtesy of ihtatho via Flickr

The subtext of the book is that it reveals the secret as to why two thirds of small businesses fail in America.  I haven’t finished it yet, but midway through the book, I was struck by the concept of franchising and how its a valuable model to follow for any business, even if you don’t intend to actually turn your business into a franchise.

The argument for following the franchise model is that it forces you to focus on your business.  Your product is a commodity, your business is where the value is. It is likely that anyone can create your widget if given the focus and tools, but to replicate your business structure, processes, character and consistency is where the magic happens, and the book stresses that consistency is the key to business success. 

Build a business that doesn’t rely on hiring exceptional employees.  Requiring exceptional employees leads to scalability problems as you expand and find that the caliber of employee you rely on isn’t an option in many parts of the country or world.  The key to being able to hire ordinary employees and still achieve extraordinary results lies in the process.  Build a process that is fool proof.  Anyone can execute a well defined list of instructions and achieve similar or exact results.  If you can mechanize or automate it with software, you’ve removed that variable entirely. 

The aspect I was troubled by, which the book later addressed head-on, was employee satisfaction.  If your tasks only require low-skilled workers, how do your great employees feel motivated to grow and improve? The answer that I pulled from the book was to shift their focus as well.  Instead of your employee feeling like their job is to create widgets, make them feel as though their job is to improve the process of making widgets.  If your employees focus on improving the process and protocol that they use to do their job each day, they can see that improvements to the process increase their own efficiency.  Increases in efficiency driven by employees will motivate the employee and lead to higher margins and better quality for the product and company.

Business owners: Are you encouraging your employees to focus on your product or focus on your process?  If they did focus on your process, do you feel that it’d improve long term profitability and efficiencies for your company?  I’d love to hear your thoughts.

The book is E-Myth Revisited and you can purchase from Amazon here.

WhitePages.com Enters Groupon’s Territory with DealPop.com


Photo Courtesy of DigitalSextant on Flickr

DealPop.com is coming to Seattle on July 14th.  The Seattle Times did a story on the new launch from WhitePages.com on Thursday, announcing the launch date and the intent of the product as “the integration of bricks-and-mortar retail with e-commerce” with a focus on local merchants.

The space is definitely crowded, with the heavy hitters in Seattle being Groupon.com, LivingSocial.com, Tippr.com and Yubit.com. The DealPop Seattle launch is part of a larger plan for DealPop to expand to five additional cities in the US by the end of the year.

For the small business, I think this is great news.  I’ve worked with several small businesses to help them get a presence online and I think having large, established online companies in the space helping those small businesses boost sales (even if just for a day) is a great boon for these companies.

Key to a lot of these group/social buying sites is the social media aspect, the ability to easily share the daily deal or your purchase on a variety of social networks such as Twitter, Facebook, MySpace and email for those with their contact lists established outside of the social networking sites.  Having your small business represented, even for a day, on these sites with such large amounts of traffic (WhitePages.com with just over 22 million/month, Groupon with just under 2 million/month) can bring in hundreds or thousands of new customers.  Groupon’s recent deals page for Seattle shows several of their top deals generating thousands of sales for a given merchant in a 24 hour period, something you just can’t reliably get with traditional advertising without taking a big bet and spending thousands on PPC, print or radio/TV advertising.

Its an exciting time for small businesses.  With heavy hitters like LivingSocial, DealPop and Groupon on your side to help you get online quickly and sell your goods, you can reap the rewards of viral marketing and huge internet reach without having to build a full ecommerce solution yourself.

“There is nothing wrong with change, if it is in the right direction”

The title of this post is a quote by Winston Churchill.


Image by ColdSpire

This blog is close to four years old and, since starting it, my interests have shifted.  In college, I was maniacal about the stock market.  Classmates were making money day trading, one even owned a late model Corvette.  I never got too involved in day trading,  instead preferring place by bets on stocks I expected to shift over 6-12 months.  I went through periods where I traded heavily, suretrade and scottrade enjoyed these periods of my life. I remember filling out my tax return at the end of the year and regretting my prolific, yet unprofitable activities over the course of the year on more than one occasion.

I eventually drifted into real estate, buying my first home at 25 and eventually another from family at 28.  Real estate is interesting to me, but to be profitable over the long haul it eventually means landlording in one form or another. Not something I’m very interested in.


Image by LemonadeDay

Over the last two years, my interest has shifted in the direction of entrepreneurship.  Both of my parents were great role models for me growing up and I always had an entrepreneurial bent as a kid.  My dad being self employed, at times with a hand full of employees, in the construction industry.  My mom often worked for others but generally did it with a direction of getting joy out of her job rather than focusing solely on the paycheck. 

Over the last few years, I’ve worked at a great internet startup in Seattle where several of my coworkers either have left to pursue their own opportunities or worked for themselves for a time then came back to the corporate setting for security, family or opportunity to work on unique technologies that may not be possible at a small business.

I’ve decided to shift the focus of this blog onto my new focus of small business and entrepreneurship.  With my technical background and interest in business, I’m looking to put my knowledge and skills to good use either in my own venture or in helping small business owners grow their businesses and be successful in this new, technology-driven marketplace.  Even local businesses need to blend ecommerce, social networking, targeted online marketing campaigns and the new wave of location based services into their businesses to give themselves maximum potential in their market. I think there is a huge opportunity to help small business owners bridge that gap and take their businesses to the next level.

I hope you’ll stick around as a reader, I’ll do my best to keep it interesting!

Great resource for internet business entrepreneur interviews

I’ve run across several links recently to a site called mixergy that interviews web entrepreneurs about how they got started in thier businesses, how they’re doing today and their plans for the future.  Its a great resource if you’re looking for inspiration, a few war stories and the nitty gritty on what it takes to get started and run a profitable internet business.  All the videos are completely free to watch and most are 10+ minutes, much more than just sound bytes.  Check it out http://www.mixergy.com

Come back here and leave a comment with your favorite interviews.  So far I’ve watched: Anand Shimpi, Neil Patel, Alex Algard and Jason Calacanis.  Next up? Seth Godin, Tim Ferris and Gary Vaynerchuk.

Starbucks raises coffee prices up to 33%

Wow, apparently Starbucks raised coffee prices today, up to 33% for some “complex orders”.  I’m not sure how I feel about it. Its discretionary spending, but they aren’t the only players on the block anymore.

Apparently the price hikes mean a Triple Grande Soy Vanilla Latte now costs $6.25, up from an already astounding $5.55.  I live in Seattle and I can’t believe those types of prices. I can go to incredible coffee shops in the area such as Stella Coffee at 1st and University, Cafe Vita on Capital Hill or even Java Bean in Ballard and I won’t spend that kind of money.  If you want to have some control over your coffee without the mess of a coffee machine on your desk at work, I’d recommend a french press.  I have a Bodum and, though I don’t use it every day, its a great way to make only a few cups at a time from any fancy beans that you wish.  I’d say prices are around $0.35/cup if you make it yourself.

This price hike is the reverse of what is going on in the rest of the retail world.  The big guys are raising prices and the little guys look cheap in comparison.  I get price elasticity Starbucks, but at some point that elastic breaks. 

See MSN’s write up on the price hikes here: http://www.msnbc.msn.com/id/34925407/?GT1=43001

Career reinvention – what would you do differently?

We’ve all heard the sayings directed toward the younger generation about how much they could learn from those who’ve lived before them.  Your parents can teach you valuable lessons about life that will prevent you from living through some of the same hardships they endured.  The value in that learning doesn’t have to only show up in generational trends though.  Turning it inward and making it highly relevant to the present though, you can ask the question of what you’d do differently in your life if you started over.

I don’t mean a fictitious rebirth, reliving your youth, reliving your educational years or making different decisions over your time spent after school.  I’m talking about now.  Use everything you know, your experience, your income, your specialties to determine if you are using your resources to their fullest.  If someone else was in your shoes, what advice would you give them to rocket their income, their happiness, their career?

Forget about incremental changes from where you are now, forget about shaving a few more hours off your work week to spend time with your family, forget about putting in a few more hours to hope for the chance to move up in your job.  Think about a dramatic change, what if you could start from scratch, TODAY, with all the knowledge you have now.

What would you do? Would you do what you’re doing right now or would you change things?  Don’t wait for your older years to look back and regret the decisions you made. If you’re reading this blog, you’re likely mid-career with plenty of life experience, job experience, market knowledge and expertise.  Use that to your advantage, figure out how to best utilize your assets and make that your 12 month goal.  It may be a fundamental change, it may be something simple like plan for that overseas vacation you’ve always dreamed of.  What would you do differently if you started over?

NOW DO IT.

Awesome motivation from Gary Vaynerchuk

I missed a speaking event with Gary Vaynerchuk in Seattle a few months back, but have been following him a bit online and his bestseller Crush It! is on its way from Amazon as we speak.

He’s pretty direct and to the point when it comes to talking about the opportunity available to entrepreneurs today in the face of online marketing and the web. 

I’ve been perusing hulu.com today for some great content (don’t have cable, a trend Gary touches on in his talk) and stumbled across a great recording on Gary Vanyerchuk talking in San Franscisco in December 2009.  Its free to watch and really motivational, check it out: http://www.hulu.com/watch/115722/foratv-technology-wine-library-tvs-gary-vaynerchuk-on-crush-it#s-p1-sr-i0 

First month with all weekends booked!

We put the finishing touches on the vacation home up in Glacier, WA about a week before Christmas.  We hadn’t posted the home on vrbo.com or craigslist at all because we weren’t sure of a completion date so didn’t want to pre-book if we couldn’t deliver.  Experience told me that things always take longer than planned and when it involves people’s vacation schedules with friends and family, it seemed reasonable to exercise a little extra caution in making sure things were ready before we started booking.

In the first week, we quickly booked three seperate groups from Christmas through New Years day, two through family and one through our awesome cleaning service up in the Glacier/Maple Falls area.

I’m happy to say that, as of this morning, we’re also booked for all the weekends in January already.  The first weekend is a family booking so we can put some last minute touches on the place, paint some miscellaneous furniture and relax a bit ourselves, then we have two 2-night rentals and a 3-night rental for the other weekends which is great news.

A little back of the napkin math says that’ll be $225 * 7 = $1575 in rental income for the month, not bad for having a full weekend to ourselves as well.  It isn’t turning a profit on its own, but the important thing was to get it finished and start bringing in some income to offset expenses.  Even if it doesn’t break even, its great to have such a beautiful place up there to escape to for our family and friends.  I’m excited about the marketing prospects for the 2010 Olympics in Vancouver and Whistler and even through the summer to see how the rental demand changes, whether or not prices will fluctuate, or if they’ll be any other surprises.  A big adventure for 2010!

Here is the link to our Mt. Baker vacation rental on VRBO.com.