Marketo Growing B2B Marketing Automation; B2C, Social Are Next Says CEO Fernandez

Phil Fernandez is CEO and President of Marketo, a marketing automation software company.

Fernandez recently discussed his company and industry trends with AdExchanger.

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AdExchanger: Is there a connection between the audience buying world and the marketing automation space?

PF: Too little, at this point – audience and audience acquisition have become such a specialized discipline that to my world, it seems like it has sort of sailed off into a bubble now. It doesn’t mean it’s not a super important topic, but in so many companies that’s very “top of the funnel.” Obviously in different industries the path to conversion can vary in length. But, [in audience buying], there’s very little “closing of that loop,” it seems to me. Is an audience that’s being acquired, good? Can it be better? What kinds of things in combination with messages can motivate faster conversion or faster buying and so on.

There needs to be some “renaissance” people that start to think across that whole vision – more than there are now.

In the future, how could the audience buying space and marketing automation spaces come together? Maybe Google or SalesForce could bring both sides together. Do you think it takes an acquisition to get things moving or is there something else?

It might. That would certainly get things moving. Our space, my company, our competitors have all largely grown up in a B-to-B world. The center of the audience buying world tends to be B-to-C and they don’t intersect that much.

Before very long, you’ll see a significant move from us toward consumer markets and consumer-oriented applications. People that are on the brand and consumer side are waking up to these technologies and starting to adopt them at an increasing pace.

It may happen organically in that way and it may take one of the big guys making a move.

So what problem does Marketo solve?

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Fundamentally, we help companies grow revenue by being more effective at getting and capturing buyers at the top of the funnel and then increasing the total velocity of conversion of people as they move through the funnel to whatever conversion or buying event is at the other side.

We don’t get into where the leads come. We pick it up from… “Deliver them to our front door.” And then we specialize in how you learn from who the audience is and who the prospect is? How do you engage with them across social, mobile, digital, and online/offline channels? Because, in many cases, the minute you first acquire a prospect, they will not convert to revenue right away. We help companies help build relationships with those people. And ultimately increase the probability of buying.

So we build tools that promote interaction across channels with buyers and send the right messages at the right time, to the right buyer. And then by helping at the aggregate level, marketers can make better decisions about allocating investment in programs, in channels, in ad buys, and other marketing tactics because we’re able to provide the data and insight around what’s effective at converting prospects to buyers.

How do you define what marketing automation is today?

Well, I hate the term. First of all – because it’s not about automating marketing. There’s an automation aspect, which is to be able to hear a buyer behavior and trigger a response, but it’s increasingly a sophisticated, big data, analytical application that’s about understanding buyer behaviors and patterns, getting people the clues to make the decisions about how to choose and allocate tactics, and ultimately providing the insights that are necessary to choose tactics that increase buying and revenue.

There is the aspect that marketing automation started from somebody clicking on a link or on an email which will trigger a follow up – so, yes, it does automate those kinds of processes, which can turn out to be valuable, but it’s a term I hate.

Marketing automation has way outgrown the name. It’s about creating segments of one for every buyer and understanding where they come from, where they are going, and what they are saying.

What can Marketo do for something like sales force automation?

They’re complimentary but they’re certainly not one and the same. Sales force automation, in the end, is an accounting system for names and phone numbers. An ERP system is an accounting system for dollars and Euros and so on. CRM is a place to store names, phone numbers and roll up forecasts and claims that salespeople are making about what they’re going to sell. CRM systems don’t help salespeople make better decisions about who to spend their time with. They don’t automatically choose to recommend the right next offer for somebody.

I like to say that if all the users of SalesForce.com went home for a week they would process no transactions. But, if one of our larger customers, and all of its users, went home for a week we’d process two billion transactions, because we’re actively alive and interacting with customers, listening for behaviors across social and mobile and digital channels, analyzing those, responding with the right next offer, the right next action. What Marketo offers is a more active and analytically-driven application.

Now, in some companies where SalesForce is essential to the conversion, the closer the two systems intersect because we’re able to give salespeople deep insight about how to spend their time, how to prioritize their times, which buyers are most likely to buy and which buyers are less likely to buy by looking at all the data we analyze.

We can help make salespeople radically more effective. That’s one of the huge value props of what we do for a lot of our customers. But they’re distinctly different apps.

You noted Marketo’s B-to-B product focus. But, is there some sort of brand element lurking in what you do? A brand metric that can be measured or optimized through tools that Marketo offers?

Absolutely, and in a couple of different ways. There’s nothing inherent about the category that’s B-to-B other than it grew up there. But we’re seeing a lot of that crossover opportunity for B-to-C and leveraging the ROI that happens when you’re able to make salespeople more productive. Salespeople tend to be B-to-B, but they pop up, obviously, in mortgage, wealth management, automotive, lots of different areas that would be considered more on the purchase side of B-to-C.

Ultimately, we’re doing business with auto companies, banks and even credit card issuers – B-to-C categories – and thus much further towards pure brand in our own business.

The goal is often to create loyalty, stickiness and deepen a brand impression. And, that’s what we do for B-to-B customers – we help them listen to buyer behavior. By listen, I mean see a tweet, watch a link that is clicked, etc. So, how do you put their behavior in context and understand what that says about their interest and intent? – and then have the ability to respond with the right thing.

We are starting to see apps around couponing and other things where the brand marketer is trying to accomplish a goal other than a direct sale. Two years from now, we’re going to see this whole category broken up broadly into the brand and consumer space.

Look. Brands still have to make impressions. Authenticity still matters. Brand stickiness still matters. Brand identity still matters. In a world where all buying starts online, if people don’t know the brand, then they don’t click on the Google ad or the banner ad.

And so, one of my biggest themes that I speak to marketing automation buyers is, it’s fine to build the machine, but you’ve got to focus on the brand.

Regarding the competitive set, Eloqua filed for an IPO back in August, and they still haven’t gone public. Is there a sense that marketing automation tools and services are getting increasingly commoditized? How does Marketo keep increasing value for its clients?

I’ve got a parade of investment bankers wanting to take us public and walking through here. In fact, they were just talking to me about how Exact Target went out a week or so ago. It’s much more of a pure email player, and there were worries that they were getting commoditized, but instead they’ve just had a “rock ’em and sock ’em” IPO.

I don’t worry the slightest about anything like being commoditized. We’re still in the early days of a wildly innovative run with the stuff we’re doing, Eloqua and others.

The market is only fractionally penetrated. Anybody that is marketing online, marketing in social and mobile environments and has any desire to build either a brand relationship needs what we do.

With the whole “big data” side of things, we’re still in very early days of the kind of insights that are going to start to come out.

I think we’re just like on the opposite end of the spectrum from commoditization or being done with this cycle.

Can you talk a little bit about revenue momentum, hiring?

We grew 140 percent in gap revenue from ’10 to ’11. That’s all recurring, subscription revenue. We were into the mid-30s last year, and we’ll double again. Revenue will double this year. We were 140 employees a year ago, we’re 300 or so now.

For the marketers that are most successful in your space, what are the things they’re doing to make it work for them?

Well, marketing has certainly gone through a change. It’s becoming much more technical, more analytic. It’s interesting, because my comment earlier is that I don’t think brand is any less important. In fact, it’s arguably more important than ever in that world. There’s this tremendous stress going on in marketing where a new set of skills needs to be learned, but the old set of skills is still very relevant. Even in the short life of Marketo, marketers used to be on their own to figure out how to get IT support and supported by their companies. I’m seeing a lot of CIOs and CMOs start to buddy up. Clearly that’s a very significant trend, and much more corporate IT budgets being reserved and allocated to marketing is a huge trend.

New jobs are being created in marketing, we just don’t have the vocabulary. There’s corporate marketing people and marcom people, and marketing ops people, but there’s nobody that really describes who a analytic, conversion‑oriented marketer is. There needs to be new tracks from schools like Kellogg and others that specialize in teaching marketing.

There’s a lot of change going on in the job and the experience of being a marketer today.

Can you be more specific on the role you see emerging in marketing?

In marketing, it’s a new job for somebody who is 50 percent “right brain,” 50 percent “left brain” in his understanding of how to consume data voraciously about buyer behavior and the data that comes out of a big data analytics application and turn that into marketing tactics and strategy. The “demand” professional becomes a major category in marketing. We’re starting to see marketing get connected much more thoroughly to revenue, and so there is the emergence of a Chief Revenue Officer – an individual who thinks about everything that marketing does in the context of how it affects revenue rather than how it affects stuff along the way. In five years, we’ll see every company have a Chief Revenue Officer.

What are some key milestones that you would like the company to accomplish in the next 12 to 18 months?

The number one key milestone is to double the revenue again, which would put us at as fast a pace for growth as anybody ever in the business app space. Another milestone is a strong push towards the consumer side and the social marketing side that I alluded to earlier. Another milestone that you’d expect to see from us in a year is top, familiar brands that you’ve never seen associated with our space [working with us]. So deep integration of social and other online digital marketing in ways that really haven’t come together yet. You’ll probably see us having bought and integrate a couple of companies to show that we can be a consolidator in the space.

Finally, we’re already operating, broadening in Europe. You’ll see us operating throughout Asia and Latin America in a year. So, a strong push towards global reach.

By John Ebbert

Follow Phil Fernandez (@philf1217), Marketo (@marketo) and AdExchanger (@adexchanger) on Twitter.