Adobe gets its company, snaring Marketo for $4.75 billion

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A week ago rumors were flying that Adobe would be buying Marketo, and lo and behold it announced today that it was acquiring the marketing automation company for $4.75 billion.

It was a pretty nice return for Vista Equity partners, which purchased Marketo in May 2016 for $1.8 billion in cash. They held onto it for two years and hauled in a hefty $2.95 billion in profit.

We published a story last week, speculating that such a deal would make sense for Adobe, which just bought Magento in May for $1.6 billion. The deal gives Adobe a strong position in enterprise marketing as it competes with Salesforce, Microsoft, Oracle and SAP. Put together with Magento, it gives them marketing and ecommerce, and all it cost was over $6 billion to get there.

“The acquisition of Marketo widens Adobe’s lead in customer experience across B2C and B2B and puts Adobe Experience Cloud at the heart of all marketing,” Brad Rencher, executive vice president and general manager, Digital Experience at Adobe said in a statement.

Ray Wang, principal analyst and founder at Constellation Research sees it as a way for Adobe to compete harder with Salesforce in this space. “If Adobe takes a stand on Marketo, it means they are serious about B2B and furthering the Microsoft-Adobe vs Salesforce-Google battle ahead,” he told TechCrunch. He’s referring to the deepening relationships between these companies.

Brent Leary, senior analyst and founder at CRM Essentials agrees, seeing Microsoft as also getting positive results from this deal. “This is not only a big deal for Adobe, but another potential winner with this one is Microsoft due to the two companies growing partnership,” he said.

Adobe reported its earnings last Thursday announcing $2.29 billion for the third quarter, which represented a 24 percent year over year increase and a new record for the company. While Adobe is well on its way to being a $10 billion company, the majority of its income continues to come from Creative Cloud, which includes Photoshop, InDesign and Illustrator, among other Adobe software stalwarts.

But for a long time, the company has wanted to be much more than a creative software company. It’s wanted a piece of the enterprise marketing pie. Up until now, that part of the company, which includes marketing and analytics software, has lagged well behind the Creative Cloud business. In its last report, Digital Experience revenue, which is where Adobe counts this revenue represented $614 million of total revenue. While it continues to grow, up 21 percent year over year, there is much greater potential here for more. – Read More

 

The 10th Sale is The Hardest Sale to Make in SaaS

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Is the first customer sale the hardest?  It’s hard — but not usually the hardest in SaaS.

The 7th or 10th or so sale is usually the hardest to make.

Why? The first few tend to be from highly unscaleable techniques. An ex-boss or friend that runs a company. A crazy cold call that would never work again. A random meeting or happenstance. And if you are crazy driven enough to be a founder, you often somehow find a pilot “customer” or two from your own extended ecosystem.

Put differently, in my SaaS ecosystem at least, I’ve met with tons of founders with 2 or 3 customers (and especially, 2 or 3 “beta” customers or unpaid trials) … that then end up really struggling to get to 10. But I’ve almost never met anyone that got to 10 unaffiliated, paying customers that dropped to 0.

Once you get to 10, you’ve generally found some way to get more customers. This is the hardest part to me, the breakthrough moment.

By 10, you’ve generally found some way to do marketing that at least works a tiny bit. To do outbound repeatably, at least to break through to a few customers. To do trade shows that create real leads, not just scans. To do something that will repeatedly get you more customers. Not repeatedly enough — 10 is almost never enough. But by the time you get to 10, you generally know how at least to get to 12, 13, 18, etc.

In some ways, the “hardest” sale to make is the one that finally comes in through the ether. That just signs up and pays for your product without you having met them or known why. Once you close that “customer from the ether” — you can find and close 10 more.

The first few sales can be a chutzpah illusion, however. Hard yes, but sometimes just a force of sheer will. That matters, and gets you going. But it isn’t the seed of an engine. – Read more

Are consumption-based SaaS business models becoming more prevalent?

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They are, and it’s worth thinking about.

We actually sort of started there. The first big SaaS success wasn’t Salesforce, it was WebEx before that. Salesforce learned from WebEx, just like many of us learned from Salesforce.

And WebEx started off with a consumption-based model. It made sense, because back then, “minutes” had a high variable cost.

From 2003:

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$0.45 a minute for video, plus $43.20 just for the audio portion of a one-hour meeting with 6 participants! Woah!

It took falling network prices (and competitive pressures) for WebEx to gain the confidence to move to semi-consumption and then flat-rate pricing. – Read more