Marketo IPO may spark suitors, including Salesforce.com

Analyst: SAP and Adobe are among other vendors who seek to buy the marketing automation software vendor

By , IDG News Service |  Software

Cloud-based marketing automation vendor Marketo's plans to raise up to $75 million in an initial public offering, which were revealed this week, could influence larger companies to acquire the company, including Salesforce.com and SAP.

While Salesforce.com gained some social marketing capabilities through its acquisition of Buddy Media, for broader-based marketing capabilities it has relied on partners, including Marketo.

In turn, Marketo relies heavily on Salesforce.com, according to its S-1 filing on Tuesday with the U.S. Securities and Exchange Commission. "As of December 31, 2012, approximately 79% of our customers integrated our solution with certain capabilities of Salesforce.com using publicly available application programming interfaces (APIs)," it states. "In general, we rely on the fact that Salesforce.com continues to allow us access to its APIs to enable these customer integrations."

While Marketo is integrated with other CRM vendors, such as Microsoft, Oracle and SAP, it gains most of its revenue from Salesforce.com, according to the filing.

Salesforce.com has been seen as reluctant to acquire similar capabilities for fear of alienating Marketo and similar partners. But it has also stood back and watched as one Marketo competitor after another has been scooped up for handsome sums.

Oracle bought Eloqua, another close Salesforce.com partner, last year for $871 million, while Teradata purchased Aprimo in 2010 for $525 million and IBM acquired Unica in 2010 for $480 million.

These moves have left Marketo and a handful of peers, such as Silverpop and Neolane, standing as independents.

Marketo's IPO could spur Salesforce.com and other vendors to seek an acquisition, since IPOs, if successful, can create serious buzz around a company. IPOs also set a market price for a company's stock, helping bidders come up with an attractive offer.

It's not without precedent in the marketing automation world, as Oracle bought Eloqua just a few months after Eloqua filed for an IPO of its own, Neolane CEO Stéphane Dehoche said via email. "If the Marketo IPO is considered a success, you could assume that could drive additional interest from suitors," he added.

Marketo's S-1 filing didn't include an initial share price, but potential suitors gained other insights into its financial performance. For one thing, Marketo's revenue more than quadrupled between 2010 and the end of 2012, rising from about $14 million to $58.4 million.

However, like many startups, Marketo is running in the red as it ramps up the business. The company lost $34.4 million in 2012, a year in which it spent $37.8 million on sales and marketing efforts.

Marketo stands at a crossroads of sorts, according to one industry observer.

"Marketo's at a size where being an independent for the next two to three years is a viable option," said analyst Ray Wang, CEO of Constellation Research.

But a number of acquirers, and not only Salesforce.com, could be interested in the company, Wang added.

Others include SAP, Adobe, SAS Institute and Infor, he said. The latter company already has marketing automation software through its purchase of Epiphany, but buying Marketo, which has 2,000 customers, would expand that base, Wang noted. Marketo CEO Phil Fernandez was previously president of Epiphany.

Marketo's move comes during a hot period for enterprise software IPOs. Also Tuesday, analytics vendor Tableau revealed it intends to seek $150 million in its own IPO, while cloud-based financial and human-resources software vendor Workday filed a highly successful IPO in October.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

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