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Will Adobe's $600m Neolane acquisition "reshape the industry"?

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28th Jun 2013
Managing editor MyCustomer.com
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Hot on the heels of Salesforce.com’s acquisition of ExactTarget comes the announcement that Adobe is to acquire cross-channel marketing vendor Neolane.

In the latest demonstration of how the marketing automation sector is really heating up, Adobe will stump up $600 million in cash for the French vendor.

A “conversational marketing technology” provider that develops marketing automation and cross-channel campaign management software, Neolane’s tools will become the latest solution in Adobe’s Marketing Cloud.

In a blog post, Brad Rencher, senior vice president and general manager of Adobe’s Digital Marketing business, explained why the acquisition was a boon for his firm and its customers.

“With this latest acquisition, we are extending our leadership in digital marketing and taking a major step forward in becoming the standard for how marketing is managed, measured and optimised,” he wrote.

“Neolane adds cross-channel campaign management technology to the Adobe Marketing Cloud. This is a critical addition to our complete set of analytics, targeting, social, content management and media optimisation solutions. Neolane will integrate with our solutions to empower cross-channel and highly personalised campaign management across the web, email, social, mobile, point of sale, direct mail, call centre and other emerging channels.

"The combination of Adobe and Neolane will give customers richer customer profiles, greater activation of social and mobile data, better definition of highly valuable customer segments, and more sophisticated automation and execution platforms.”

That’s the view from within the Adobe camp, but what do the analysts make of the move?

Gerry Brown, senior analyst at Ovum, notes: “Clearly a catalyst for this acquisition was Salesforce.com’s recent $2.5Bn purchase of Exact Target. Industry talk suggests that both Exact Target and Eloqua (which was acquired by Oracle in December 2012) were acquisition targets for Adobe, and Adobe was likely compelled to act before all the their campaign management best-of-breed vendor acquisition options evaporated.”

He adds: “An acquisition of this type has been a long time coming for Adobe – its lack of a campaign management platform has been a glaring hole in its digital marketing platform proposition.”

Gavin Heaton of Constellation Research suggests that the acquisition will provide Adobe with a stronger route to market in EMEA thanks to Neolane’s strong client base, and “connect the dots” in its Marketing Cloud crusade.

“Powerful segmentation, cross-channel segmentation augments the Adobe Marketing Cloud,” he notes. “The consumer master data record was one of the major benefits of the Neolane platform. Combining anonymous and known data will connect the dots between customer data, activity in channel and behaviour which is where the Adobe Marketing Cloud’s sweet spot lays.”
 
And while Forrester’s Rob Brosnan believes that it may only offer a “moderate extension” to Adobe’s Marketing Cloud it will address a market that it has previously ignored – 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,” he writes. “It is now also a much more serious competitor to the large, enterprise marketing providers: IBM, Oracle, SAS, and Teradata.”

Wider implications

Heaton forecasts that one of the biggest benefits for customers will be the consolidation of the various social, digital, service and sales profiles into a single view - “The use of a customer master data record opens the door to the “whole of customer” view which is not just an aspiration - but is like the marketer’s ring of power.”

Other benefits could include optimising marketing programs thanks to the combination of the strengths of Neolane and Adobe Analytics – “Reducing funnel leakage through automated scoring of prospects against customer segmentation data and audience profiling provides light touch marketing that can increase lead quality and improve yield on marketing campaign investment over time.”

However, Brosnan does also note a few “troubling” issues surrounding the acquisition. Firstly, Adobe must prove it can handle integration better than past acquisitions (“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”). And he also adds that the move means that Adobe has product development resources scattered across even more timezones – “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.”

But importantly, both Heaton and Brosnan believe that the acquisition could have wider ramifications for the industry.

Referring to the purchase as representing “a powerful change in the industry landscape”, Heaton says: “Combine this acquisition with the recent Marketo IPO and Oracle’s purchase of Eloqua, and it shows not only consolidation across the market but a strategic strengthening of the offerings in the marketing platform space. With this deepening will also come a maturing in the market both in terms of platform buying and process automation.”

And Heaton adds that the move could even “reshape the industry more than any other acquisition in recent memory” because of the implications for pricing (“Because it now monetises 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”) and the consolidation of the email and campaign management sectors (“expect investors to begin to lose taste for pure play email providers above the low cost transactional providers”).

Brown concludes: “This was an expensive acquisition at over 10X Neolane’s previous year’s revenues, but it should be worth it. The deal has the potential to propel Adobe into the market leadership with both its existing digital (website-centric) offer, plus Neolane’s enterprise campaign management offer. These are the two driving forces of strategic enterprise purchasing of digital marketing platforms today, and so puts Adobe in a strong market position.”

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