“You see investors building out these portfolios to be more valuable, but the question is how much continued investment in R&D is needed to gain market share,” said Ray Wang, principal analyst for Constellation Research. “Once you build a platform like Amazon or Google, you’re unstoppable. But you need investors that understand that platform mentality, otherwise you just milk a feature.”
Although Marketo declined to comment until the deal is complete, CEO Phil Fernandez heralded Vista’s “unique” investment and operating model for high-growth SaaS companies in a letter to customers.
“Our continued independence will allow Marketo to direct all of our energy to what we have done for so long: set the agenda for product innovation and thought leadership for the entire digital marketing industry,” Fernandez wrote in the customer letter.
Continued investment in R&D and innovation is critical for Marketo, and Wang isn’t convinced that aligns with traditional PE interests.
“It’d be different if Microsoft or Salesforce bought them – they’re software makers at heart, not bankers,” he said, adding that reduced innovation, R&D and marketing spend could pose a risk to Marketo's market position.
To retain current clients, Marketo will need to stay ahead of emerging needs in digital marketing, he said, given the competition from a range of MAS players – from enterprise stacks like Salesforce and Adobe to email point solutions like Adestra and Sailthru.
Whatever Marketo’s ultimate fate, its deal price is noteworthy. It's the largest transaction in the marketing cloud space since Salesforce’s $2.5 billion acquisition of ExactTarget in 2013, edging out Oracle's $1.5 billion acquisition of Responsys that same year.
Vista’s investment echoed ongoing PE interest in marketing automation: Private equity backer Symphony Technology Group bought Experian’s consumer insights division for $47 million last winter and HGGC rolled its own MAS acquisition targets, StrongView and Selligent, into a combined platform.
Jon Miller, who co-founded Marketo with Fernandez in 2006, told AdExchanger in a Q&A in 2014 that Marketo remained acquisitive on its own as it angled to become marketers’ system of record. Miller exited the company in February 2015 to found his own B2B marketing startup, Engagio.