Adobe buys Marketo -“Sometimes 1+1= 0.5”.

From a takeover, many companies promise that a solution is created, this is further developed and is easy to integrate. But what about partners and customers? They often perceive a takeover as a negative impact. Congratulations to Adobe for the $ 4.8 billion purchase of Marketo. This is big news for the marketing automation area. Marketo was trading for about $ 1.8 billion when Vista Private Equity acquired the company, only to sell it at more than two and a half times that value a few years later.

With this, Adobe has impressively continued to build high-quality assets in its portfolio – Omniture, Day Software (now Adobe AEM), Neolane (now Adobe Campaign), TubeMogul, and most recently Magento. These acquisitions clearly mark Adobe as a leader in customer experience – as reflected in the share price.

With the acquisition of Marketo, Adobe increases the pressure on its competitors, including Salesforce (whose B2B marketing solution Pardot is much less mature), Oracle (whose Eloqua acquisition most closely competes with Marketo), IBM (with Unica and Silverpop, the no longer up-to-date) and SAP (which, apart from Hybris Marketing, has no other solutions for marketing automation). Adobe has been very effective in taking over high quality assets, adjusting the portfolio and expanding its Total Addressable Market (TAM). For Adobe, 1 + 1 has often yielded> 2.

But what about partners and customers? For them it often meant: 1 + 1 = 0.5. And the Marketo takeover only reinforces this trend. It is therefore important to understand that what is in the best interest of the buyer is not necessarily in the best interests of customers or partners. The following should be noted:

1. Do not believe in the hype of “stronger integration”

From a takeover, many companies promise that it creates a solution and is further developed, which is easy to integrate and in which all data is included. But how difficult is it – almost ten years after Adobe’s acquisition of Omniture – to do something really simple, like doing a web analytics or a personalized advertising campaign? Or an e-mail campaign? One can argue that this is no easier than ten years ago, when Omniture was still independent. And that’s no surprise. What incentive does an acquirer have to reshape his cloud platform to drive integration when he’s making all his money selling a new application to businesses? It should be remembered that it is very difficult to integrate independent cloud systems.

2. “cost synergies” = worse customer service

A business case like that of Marketo – a sale that is ten times more than Marketo’s turnover – undoubtedly involves significant cost synergies. In other words, costs should be saved in the company to create value. What does this mean for partners and customers? Typically, this results in fewer account managers looking after them, fewer developers developing, and fewer support staff picking up their calls. All in all, this means a worse customer experience for partners and customers.

3. Loss of entrepreneurial DNS

With this acquisition, partners and customers can expect many key employees to receive their bonuses and then leave the company. And that means that the people who have been most concerned about the brand and its promise so far have invariably disappeared in no time – one, two, three years at the most. In the meantime, you will find that employees will be distracted by a plethora of internal voting and corporate policies. And employees who remain paid to continue to care for the system usually have few incentives to drive innovation.

4. Crazy sales incentives and bundling – For Adobe Partners.

One of the first things an acquirer like Adobe will do is build its own sales team and create significant sales incentives to drive market uplifting. What does that mean for customers and partners? It means that Adobe will initially increase the price of the software and then offer discounts as companies purchase additional software from Adobe. Adobe will do anything to help partners or customers buy a new tool, whether they need it or not. It will also push Enterprise Licensing Agreements (ELAs) to try to tie them to their software (good for Adobe, bad for business).

5. To exploit the ecosystem

With the expansion of the Adobe portfolio, the share of revenue from the service business is growing to around 20 to 25 percent of total revenue. Someone needs to integrate these assets. As a result, Adobe is no longer involved in the software business. It is rather a software and service business. Thus, Adobe competes directly with all system integration partners. Even worse, with each acquisition into a new segment, Adobe can no longer work with Independent Software Vendors (ISVs) from that ecosystem. In other words, if a company is a Marketo customer, but uses a different content management or analytics system, it probably has bad luck. To a plethora of existing island solutions so is another added.

Not all acquisitions are bad for customers and partners. Sometimes the investor invests a significant amount of new capital (but not crucial in this case, as Vista Equity also has sufficient capital). Sometimes, such companies have a clear roadmap to integrating products that allow them to address key application scenarios (again, this does not happen – marketing automation has always been easy to integrate with other systems). Sometimes the acquirer is simply the new owner of a new asset and it does not change much (this is not the case because of the tempting sales and cost synergies).

Conclusion

Companies benefit significantly more if suppliers work with them to develop an experience cloud. The Experience Cloud should be modern, open, and logical, supporting new technologies such as Artificial Intelligence or Machine Learning, and delivering extremely high speed to customers and partners. We do not believe that companies can simply buy an Experience Cloud to increase customer satisfaction. We are sure that you need to develop and build your digital experience to present your brand in a unique way. Therefore, we are happy that the elephant in our industry has now slowed down a bit by taking over another company.

By:- * Raj de Datta is the CEO and co-founder of Bloomreach .

amardeep kaushal

Blogger, Marketer & Data Analyst.

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