Revenues for B2B marketing automation systems will grow 50% to reach $750 million in 2013, according to Raab Associates’ recently released B2B Marketing Automation Vendor Selection Tool (VEST) report. The 50% growth rate is lower than the 2012 rate of 54%, although the dollar increase is substantially higher: $250 million vs. $175 million.
B2B marketing automation continues to grow at a very healthy pace, according to VEST author David M. Raab. He explained that some larger firms are reporting a lower growth rate, and, unlike previous years, there has not been substantial growth by industry challengers to significantly change the overall rate.
The revenue estimates include sales by B2B marketing automation specialists and sales to B2B marketers by other marketing automation systems. Raab Associates estimates that the specialist vendors account for $525 million revenue, or 70% of the total, while non-specialists account for $225 million. The top four specialist vendors — Eloqua, Marketo, Infusionsoft and HubSpot — are projected to account for $380 million, or just more than half of all revenues.
Systems covered in the VEST report are used by all sizes of companies. The report defines four market sectors, each with different needs. Some B2B marketing automation systems are used across all sectors, but most vendors specialize in a particular type of client.
Demand Gen Report (DGR) recently spoke with Raab about the findings:
DGR: What were some of the most surprising outcomes of the report?
Raab: I’m always surprised to see how many vendors have been around for several years before we find out about them. This is particularly true in the small business market, where we sometimes discover companies with literally hundreds of clients. It also applies to vertical specialties such as marketing through channel partners.
The lesson I take from this is that there are many small specialist vendors who have developed within their niche, without any need to promote themselves to the industry as a whole. The big question for those vendors is whether they will be able to defend their turf from general-purpose marketing automation companies as the general-purpose systems become more widely adapted. It will be an interesting contest.
DGR: The report points to the growing market for services and apps marketplaces. Is this an indication that marketing automation is getting more complex and third-party services are become more vital?
Raab: There is some irony here, since B2B marketing automation itself started out as an app within the Salesforce.com marketplace. The fact that marketing automation vendors are setting up their own marketplaces shows how the industry has grown and how separate it has become from CRM. The question is whether that separation will continue, or marketing automation will become more tightly integrated with CRM through deals such as Oracle/Eloqua and Pardot/ExactTarget/Salesforce.com. If the big CRM vendors integrate marketing automation, then the supplemental apps will attach directly to CRM rather than to separate marketing automation platforms.
But, in the short term, there is definitely a need for supplemental capabilities that the marketing automation vendors can’t provide directly. So yes, I’d expect their app marketplaces to continue to grow.
DGR: What is driving the growth in sales to small businesses? Do most larger enterprises already have marketing automation, so vendors are just looking for new markets? Or has marketing automation hit a tipping point where it makes sense for companies of all sizes?
Raab: There’s still plenty of room for growth at the top of the market. Bear in mind that surveys showing things like 50% usage of marketing automation are either taken among a very skewed sample of respondents and/or include things like basic email systems in the answers. I’d say the growth in small business reflects across-the-board adoption as the value of marketing automation becomes clearer and the need becomes more urgent. As I mentioned above, there’s also apparently a large hidden base of small business installations among products outside the industry mainstream — so growth may be even greater than we realize.
It’s actually hard for vendors to move from serving big businesses to small businesses, so we’re unlikely to see many of the mid-market and enterprise vendors enter the small business segment. In fact, most of those vendors have been losing small business clients in recent years.
DGR: Did the report look at CRM integration at all? Is that becoming more crucial going forward?
Raab: CRM integration is pretty much a given for B2B marketing automation. What we do see is increasing integration with Microsoft Dynamics, SugarCRM, NetSuite and other vendors beyond Salesforce.com. This can only accelerate as vendors are increasingly concerned about whether Salesforce.com will favor Pardot over other marketing automation vendors.
The ultimate question becomes whether CRM systems just add enough marketing automation capability that separate marketing automation apps are no longer necessary. I still expect this to happen over time — it doesn’t mean that independent marketing automation systems will disappear overnight, but it will be increasingly difficult for those vendors to survive unless they offer extremely sophisticated or specialized features that companies can’t get within their existing CRM packages.
DGR: What about capturing social media data?
Raab: Social media is hugely important in B2B. So far, most of the vendors have focused on adding social publishing and response tracking rather than social data capture. Doing a meaningful job with social data typically requires advanced natural language processing technology which few marketing automation vendors possess. So we’re now seeing specialists such as Infer, InsideView, Lattice Engines, Leadspace and Mintigo, among others, provide that capability as a marketing automation add-on.
