Despite what seems like one acquisition after the next in the marketing automation space and the fact many analysts consider Marketo a likely buyout target in the group, the cloud-based solutions provider remains independent.

It’s not like the company isn’t delivering strong results: revenue last year jumped 64 percent to $95.9 million. The customer base now totals more than 3,000 and Marketo boasts a subscription dollar retention rate of 100 percent during the past four quarters.

There are also signs Marketo has plans to grow its business even more.

At the JMP Securities tech conference in early March, Marketo CEO Phil 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 the business-to-consumer (B2C) market in addition to in Marketo’s core business-to-business (B2B) market. 

Shifting Focus

While emphasizing that there is no pivot involved, Fernandez said Marketo going forward would increasingly focus on the B2C segment. Last fall, Marketo introduced its Dialog Edition, which is targeted at B2C marketers.

B2C in the fourth quarter accounted for only 12 percent of the company’s bookings, but that was up from virtually zero in the year-ago quarter. Fernandez sees B2C representing as much as 75 percent of the company’s total addressable market. He even speculated that by 2020 B2C-related revenue could represent 60 percent of Marketo’s total revenue.

The B2B market is almost entirely a greenfield opportunity (with various emerging players), while the B2C side almost always involves replacing an incumbent email tool from the likes of ExactTarget (, Silverpop (being bought by IBM) and CheetahMail (bought by Experian in 2004), according to Fernandez.

Valuation must be a key sticking point for any potential buyer of Marketo. At the stock’s all-time high of $45 in mid-January, Marketo’s market cap hit $1.8 billion, more than 13 times the 2014 consensus revenue estimate of $134.6 million. Oracle’s recent purchase of Responsys, even with a 38 percent buyout premium in the deal, valued one of Marketo’s main competitors at a revenue multiple of roughly 5.7.

Granted, Responsys is growing more slowly than Marketo, but that’s still a sizable valuation discrepancy. In the recent market correction, Marketo shares have fallen nearly 32 percent to $30.75, bringing the market cap down to $1.24 billion, still 9.2 times the forward revenue estimate.

More Revenue, Customers, Billings

Marketo’s business picked up steam into the end of last year, with fourth quarter revenue growth of 67 percent showing acceleration from growth of 65 percent in the third quarter and 62 percent in the second quarter. Marketo in the fourth quarter added 241 new customers, up from 160 brought on in the previous quarter. Calculated billings growth was impressive at 65 percent.

Learning Opportunities

In the fourth quarter, gross margin on subscription and services revenue of 76 percent advanced 300 basis points sequentially, helping boost overall gross margin to 65.3 percent versus 56.5 percent in the year ago period. Deferred revenue at the end of 2013 stood at $41.4 million, double the year-ago level and up 35 percent sequentially.

Looking ahead, the company’s 2014 revenue guidance of $130 million to $135 million indicates growth of 38 percent at the midpoint. Toward the end of last year, analysts on average were looking for Marketo to come in with 2014 revenue growth of around 32 percent; the expected growth rate today, using the recent consensus, is up to 40.4 percent.

Strategic Buys

Marketo itself might be too pricey to be acquired. But it has been doing some M&A of its own, including the December purchase of Insightera, a real time personalization platform for websites and mobile apps. To increase engagement and conversions, the platform identifies visitors and customizes their experiences (either online or mobile) with personalized content. In April 2012, Marketo made its first acquisition, picking up Crowd Factory, a social campaign management platform.

Based on its product innovations and growth, analysts think Marketo is the next big marketing solutions company ready to be acquired. Companies like SAP and NetSuite, which could benefit from Marketo's cloud computing offerings, have been mentioned as possible buyers.

Marketo has been called the last standalone left in the space. Although Fernandez has said he is committed to staying independent, he has also acknowledged his company could be sold at the right price

So despite the challenges of integrating one company's platforms into another, an acquisition may be inevitable.