Salesforce Buys ExactTarget

Salesforce.com has made an acquisition reputed to be its biggest ever: The company has snagged marketing automation and campaign management vendor ExactTarget for US$2.5 billion.

As part of the transaction, Salesforce will acquire all outstanding ExactTarget stock for $33.75 per share in cash. Approval for the deal has been secured by both companies’ boards of directors.

The acquisition is expected to increase total revenue for Salesforce by $120-$125 million. This transaction is not expected to have any material impact on its fiscal second quarter FY14 revenue results.

Salesforce provided few details about how the two companies’ respective marketing applications will eventually be integrated, but it offered hints of a robust offering. The combination of ExactTarget’s marketing automation and campaign management capabilities with Salesforce’s social marketing features will ultimately dazzle CMOs with cross-platform functionality in email, social, mobile and the Web, the company said.

Building a Marketing Presence

Marketing has been Salesforce’s weak spot, although the company has been making steady strides in building out the functionality in recent years with its Salesforce Marketing Cloud.

It has also snapped up such companies as Radian6 and Buddy Media for their niche expertise.

The ExactTarget acquisition goes beyond these efforts, however, given its size and the complexity of its suite. It is the largest acquisition Salesforce has ever made in this niche, and it also signals Salesforce’s utter seriousness in getting ahead of the digital marketing wave.

“There has been a lot of speculation about whether or when Salesforce will more heavily into the marketing automation space,” Jeffrey M. Kaplan, managing director of THINKstrategies, told CRM Buyer. This deal, he says, should put that speculation to rest.

Digital Marketing Wave

Salesforce arguably had little choice other than to invest more heavily in marketing technology. As the company itself noted, chief marketing officers are becoming more influential in corporate tech purchases.

By 2015, consumer technology companies will have switched one-third of their traditional marketing budgets to digital, Salesforce noted, pointing to Gartner figures.

This latter point — a shifting of resources from traditional marketing to digital marketing — has been something of a sleeper trend among marketers, but now is gaining greater visibility.

“CMOs are definitely making more tech purchases, and that is a trend that will continue,” Lyris CMO Alex Lustberg told CRM Buyer. “A lot of people are paying a lot of attention to those Gartner numbers now, even though this has been a trend in the making for a while.”

As a result, the industry is bound to step up acquisitions such as the one Salesforce is making, he continued, noting “we will see more consolidation along these lines.”

A Bigger Integration

Vendors and customers need to look beyond the digital marketing functionality to consider the bigger picture, Lustberg suggested.

“All of these pieces make up a greater whole — and they all revolve around the customer record. Connecting and automating the lead to the sales process to onboarding makes a lot of sense and is where the industry is headed.”

Salesforce is becoming a true enterprise application provider for CRM functionality, Kaplan said. “This acquisition is one of the biggest steps it is making in that direction. The marketing automation piece is a huge one.”

That said, companies need to make sure they don’t fall into the same trap that many ERP customers did a decade ago — that is, by overpurchasing functionality, Lustberg warned.

“ExactTarget customers did not always use all of the functionality of the product or even most of it,” he pointed out. “So for the customer, he needs to carefully think what functionality he is most likely to need and use.”