It’s clear from the latest quarterly numbers out of Marketo that the company is sitting in the sweet spot of engagement marketing. Revenue in the third quarter rose 54 percent, billings advanced 50 percent and the addition of 140 new customers brought the company’s installed base up to 3,499.
More organizations are turning to San Mateo, Calif.-based Marketo after realizing that it’s now much more important to develop relationships with their customers instead of simply talking at them through advertisements.
Happy Customers, Happy Company
Marketo was founded in 2007 and went public in 2013. It handles clients in both its core business-to-business (B2B) market as well as those focused on the business-to-consumer (B2C) segment.
In B2B, Marketo, considered a leader in lead nurturing, is adding new customers and expanding relationships within its largest accounts.
On the B2C side, the company continues to build out its base, as more clients seek to improve engagement with their own customers.
At the JMP Securities tech conference in early March, Fernandez said lead management is considered a top function in marketing automation because it helps marketers build personal, long-term relationships with buyers, something that’s critically important in both the B2C and B2B markets.
Marketo’s cloud-based marketing automation solutions are increasingly being placed in the center of a client’s revenue-generating activities, according to CEO Phil Fernandez. For example, Marketo’s Revenue Cycle Analytics solution provides critical data to top management, including the percentage of an organization’s deal pipeline being generated by marketing activities and the average deal velocity across various sales teams.
In the third quarter, revenue of $39.3 million topped the Wall Street consensus estimate of $37.4 million as well as the high end of the company’s guidance range of $36.5 million to $37.5 million. Deferred revenue was up 74 percent year over year to $53.2 million.
A clear sign of happy customers: Marketo’s subscription dollar retention rate in the latest quarter hit 108 percent, up from 105 percent in the second quarter.
Appealing New Products
Marketo’s newest product offerings, including Real Time Personalization (RTP), continue to gain traction. With RTP, a client can interact with targeted individuals via personalized communications through email, mobile and the web to drive up content consumption and conversion rates. For example, an organization can come up with a loyalty behavior scorecard (separating customers likely to make additional purchases from those more likely to churn off) and then send various types of personalized messages to individual accounts.
Marketo’s latest solution, Marketing Calendar, debuted in the third quarter. It allows marketing teams to plan and launch campaigns from a single platform. With Marketing Campaign, clients are better able to coordinate the schedules of individual components of various marketing efforts across multiple channels.
As Marketo gets bigger and a greater number of larger organizations see the need for marketing automation, the company is adding more enterprise accounts. In the third quarter, enterprise business represented 28 percent of Marketo’s subscription revenue.
The recent hiring of Steve Winter as executive vice president of worldwide sales is intended to help Marketo extend its presence to new global markets (international revenue currently represents about 16 percent of total revenue) and expand its reach into more global enterprises. Winter has more than two decades of experience in the software industry. Before joining Marketo, Winter spent nine years in various leadership positions at SAP, where his last role was global head of Customer Line of Business Organization.
When it comes to battling it out for larger deals, Oracle is the only real competitor on the B2B side, mainly through an enterprise licensing strategy, according to Fernandez.
In larger B2C deals, Fernandez said Marketo is seeing Salesforce.com’s ExactTarget (renamed as Salesforce Marketing Cloud this month) with increased frequency, particularly in certain verticals such as consumer goods. Marketo is also starting to run up against IBM Unica and Teradata Aprimo. As for smaller deals, Salesforce’s Pardot unit continues to be the main competition.
For 2014, Marketo expects revenue to come in at $147.9 million to $148.4 million, representing growth of 54 percent year over year at the midpoint.