Adobe's announcement that the company will acquire Neolane comes nearly on the heels of Salesforce's acquisition of ExactTarget. Even at $600 million, the deal size won't draw attention like Benioff's blockbuster, but it shouldn't be downplayed. Adobe's reach across the marketing technology landscape — and campaign management's central position within it — means it will have an outsized effect on marketers. On it's face, the acquisition:
- Addresses a market that Adobe previously ignored. Neolane closes Adobe's strategic and longstanding gap in campaign management. Whether you call it a marketing platform, suite, or cloud, Adobe now offers a broad spectrum of products to marketing departments, and now extends into offline. It is now also a much more serious competitor to the large, enterprise marketing providers: IBM, Oracle, SAS, and Teradata.
- Offers a moderate extension of Adobe's marketing cloud. Neolane offers its products through a mix on-premises, hosted, and multi-tenant cloud delivery, though most clients opt for on-premises. While Neolane doesn't immediately transform the marketing cloud, Adobe's success with CQ5 shows that it's comfortable with hybrid delivery. Over time, however, Neolane's unified architecture and Adobe's SaaS-bonafides will allow it to shift more and more clients into campaign management as a subscription.
- Creates a ripple in the email space. While Neolane offers email services, the majority of the company's revenue derives from technology licenses, so this deal shouldn't be viewed as a direct response to the Salesforce/ExactTarget acquisition. Adobe has many partners in the email and messaging world, and it will continue to support them and their marketing customers through the Genesis program.
On face value, the deal offers good incremental value for B2C marketers already heavily invested heavily in Adobe. Neolane's campaign management offering is already quite robust, allowing Adobe to focus initially on scaling the technology, especially for on-premises or hosted licenses.
Yet, Adobe's move portends of bigger consequences for the vendor landscape. While Adobe frames the deal as strengthening the overall ecosystem of its own products and its alliances, this step into messaging will reshape the industry more than any other acquisition in recent memory. Why? Beyond focusing on sales, if Adobe continues Neolane's investments in technology, it can:
- Leap from campaigns to interactions. Neolane's rapid entry into interaction management through orchestrated, personalized, cross-channel experiences offers Adobe the opportunity to build for the post-campaign future. If Adobe shifts Neolane further into a SaaS offering, it can accelerate past traditional enterprise marketing management, it can more quickly incorporate the blindingly fast developments in open source data management technologies, particularly for managing anonymous and known customer profiles. Further, it can monetize a NoSQL stack because a) it doesn't need to defend a particular database technology, and b) Neolane's unified application code and data model agnosticism can be adapted relatively quickly to an unconventional architecture.
- Create a disruptive pricing dynamic. The most interesting aspect of this deal is that it offers the 25-year-old company the opportunity to be a disruptor. Because it now monetizes data and orchestration, it could afford to shift the marketing value chain in messaging away from the existing incumbents. By scaling Neolane's existing email offering, effectively driving the price to a super low or free CPM, Adobe could dramatically reduce the number of email providers. Adobe's pitch to its customers is that it alone is uninterested in sending more email. Instead, using data, analytics, and real-time orchestration, it can send the right amount of email, improving revenue lift and the customer experience.
- Accelerates email and campaign management consolidation. Regardless of its long-term strategy, expect investors to begin to lose taste for pure play email providers above the low cost transactional providers. The market will further consolidate on those, like Responsys and Experian, with strong customer lists and non-messaging assets. But the mid-market is now a no-man's land, especially for those (Bronto, What Counts, etc.) squeezed between the now supersized players and the transactional email services.
But it's not all strawberries and cream. Unfortunately, Neolane will operate as a sixth division of the marketing services, separate from Target, Experience Manager, Media Optimizer, etc. And this move is troubling because:
- Adobe must prove it can handle integration better than past acquisitions. Adobe can concentrate only on sales and still capture value from Neolane: the existing integrations between Adobe Analytics and Neolane service many customers well. Yet the deal won't drive large gains in subscription revenue until Adobe exerts the effort to take Neolane from the campaign world into the real-time world. The danger for Adobe is that it will be complacent, seeing decent revenue in campaigns, allowing a competitor to, say, acquire Responsys and build an offering that goes well into an interaction-based offering.
- Global development will be trickier than it appears. Adobe now has product development resources scattered in multiple time zones, all working on specific and independent components. Lest it become another IBM, Adobe must exert a Herculean effort to corral teams that literally don't speak the same language, streamlining and unifying the acquired portfolio into a true platform. Marketing technology continues to evolve quickly, despite the consolidation, and few marketers value vendor loyalty above revenue lift or new capabilities.
- Adobe will need to target experience more than marketing. If Adobe does want to be the central hub for managing customer interactions, it will ultimately need to expand its offerings to address usage, service, engagement, and other customer touchpoints. Isn't integration with established vendors enough? In the near term, yes, but integration will impede Adobe's access to raw customer data, the marketing cloud's source of product and pricing strength. I will be watching for Adobe to make additional acquisitions to secure its access, perhaps initially in the ETL/cloud integration/data quality space.
As for the overall marketing technology space, the next big surprise will come from the ad tech world. Adobe's ability to extract revenue from data and analytics, and it's now even longer reach into marketing means that the deal will awaken others that similarly want to capture revenue from marketing data. Although Google, Facebook, and much of the ad tech world have to date barely acknowledged the enterprise stack players' (IBM, Oracle, Teradata, etc.) moves into the marketing department, expect Adobe's move to initiate a new wave of consolidation and competition in the future.