Let me start by saying that the 50% revenue increase I’m projecting for B2B marketing automation in 2013 is a very healthy one. In actual dollars, the $250 million gain is much larger than the $175 million growth in 2012. So if you’re working in the industry, don’t circulate that resume just yet.
But still, as I noted last week, the growth rate is slowing – and for some vendors seems to have fallen considerably in the second half of 2012. The most notable is Eloqua, which as a public company has to report its results. Its year-on-year revenue was up 42% in first half of 2012 ($45 million vs. $31.7 million) but just 28% in the second half ($50.7 million vs. 39.6 million). That means even the absolute increase was down: $11.2 million vs. $13.3 million. Figures for other vendors are not publicly available but I’ve seen hints that several have slowed as well.
What really got me thinking about this was prepping for a Webinar I’ll be giving next Wednesday on the future of marketing automation (register here). I had figured to start off with my industry growth figures, but this led naturally to a question about long-term potential, which in turn leads to thoughts of market penetration rates.
We’ve recently been seeing surveys that suggest something close to 50% adoption of marketing automation. For example, LoopFuse reported 42% of respondents had marketing automation in place (2012 Marketing Outlook Survey); Forrester reported 45% of B2B enterprise marketers had marketing automation (The State of Lead-to-Revenue, July 2012); and Lenskold Group reported 70% marketing automation usage (2012 Lenskold Group / Pedowitz Group Lead Gen Marketing Effectiveness Study)
If true, these figures would actually be bad news for marketing automation vendors. They suggest the market is at least half way to saturation, after which growth would slow dramatically.
But most people in the industry are confident the potential is much larger than double the current market. The raw numbers suggest as much: according to data compiler Manta.com, there are nearly 1 million U.S. companies with $5 million or more revenue. Of these, about 300,00 fall into B2B categories. Raab Associates’ VEST report shows about 20,000 B2B marketing automation systems at those companies, yielding about 6% penetration. Not surprisingly, the rate is higher among larger firms. (See the end of this post for a detailed table. I’ve excluded business under $5 million revenue from this analysis because that’s a very different market.)
What accounts for the discrepancy between actual data and survey results? One answer is that people who answer surveys about marketing automation are disproportionately likely to be users. So the untapped market is indeed much larger than surveys would suggest.
But here’s another, less comforting explanation. It’s a safe bet that at least half of current marketing automation users are in tech industries – call that 10,000 of the total. The Manta figures show 21,000 companies in the tech categories – computer hardware and software, ecommerce and IT outsourcing, electronics, and information technology. I know you can do this one in your head, but 10,000 clients among 21,000 companies means the tech sector is just under 50% penetrated. This is pretty much what the surveys are telling us. And, yes, survey respondents do tend to be concentrated among tech companies.
Why is this worrisome? Well, it suggests is that most B2B marketing automation growth is coming from mid-to-late adopters within the tech industry, not early adopters across a much larger universe. That’s scary because everyone has expected a huge take-off when marketing automation finally transitions beyond the early stages of market development. If the transition has already happened in tech and never gets started anywhere else, we’ll never see that hyper growth.Quite the opposite: the tech pool will run dry in a year or two and growth will slow to a modest replacement rate.
A more tactical consideration is that mid-to-late buyers have different purchasing styles (more risk averse, more support oriented, more price sensitive, more brand driven) than early adopters. There’s some evidence that B2B marketing automation vendors are moving their sales and marketing in this direction. This makes it even harder for them to sell to pioneers in other industries, who need the original missionary approach.
If you want another hint that the sky may be falling, how about this: a recent Econsultancy survey found that marketing automation is now lower priority among marketers than a year ago (top three for 11% vs. 15%). Since priority presumably translates to purchase intent, that seems to foreshadow a decline in new sales. I don’t want to make too much of this – the survey was among UK marketers and it also showed a sharp increase marketers who ranked marketing automation among their most exciting digital opportunities. Econsultancy’s explanation for the apparent contradiction was that most marketers already own a marketing automation system, so now they’re turning to exploiting it. But while that’s comforting on some levels, it still suggests lower future sales.
To be honest, I was less concerned about the year-to-year change in percentages than about marketing automation’s low rank in both years – next-to-last in 2012 and ninth of twelve in 2013. An IDC report from 2012 had similar results, ranking marketing automation seventh on a list of nine.
I have my own little theory about the low priority, which boils down to the fact that marketing automation only handles a fraction of marketers’ total activities. Specifically, it supports email and online events, which a 2011 MarketingSherpa study found account for just 20% of program spending. Even with direct mail and marketing automation itself, the total reaches only 37%. My theory is that marketing automation has a low priority because it is far from a complete customer management solution – or even a complete customer acquisition system.
