Why SAP and Oracle Want to Buy Responsys

Shares of cloud marketing company Responsys (NASDAQ: MKTG  )  roared 40% higher last week, after Oracle (NYSE: ORCL  ) agreed to acquire the company for $1.5 billion in cash, or roughly $27 per share.

The move caused Responsys to close last Friday at $27.40 per share, $0.40 above Oracle's acquisition price. Responsys' trading price suggests investors may be betting on a SAP (NYSE: SAP  ) counteroffer arriving soon. According to The Wall Street Journal, SAP was among the final bidders for Responsys, before the company decided to sell to Oracle. But, why do Oracle and SAP want to buy Responsys?

Source: Responsys Investor Relations

The charm of Responsys
Responsys is one of the best digital marketing companies in the industry. The company became famous for its relationship-based marketing. Its star product, the Responsys Interact Suite, allows customers to create, test, and execute digital campaigns across every interactive channel, from traditional email to mobile and social channels.

The company is also famous for giving customers the ability to create individually tailored messages. Oracle has been particularly interested in this technology, as it competes with Salesforce and Adobe Systems to assemble technology that delivers targeted sales messages.

Targeted sales messages are Responsys' specialty. The company has plenty of success stories in this field. For example, using crafted personalized emails and reminders, Responsys worked with rental car company Dollar Thrifty Automotive Group to increase bookings by 22%.

Under the name "marketing orchestration," the company is also active in promoting marketing based on full real-time interaction with potential clients across every possible marketing channel. Combined with personalization, marketing orchestration has allowed Responsys' customers to increase the percentage of digital purchases and conversion. Thomson Reuters saw a 13% increase in click-through engagement metrics after implementing Responsys' email life-cycle marketing.

SAP is also interested
Oracle is not the only company interested in owning Responsys' marketing technology and client list. SAP, which has more than 250,000 customers in 188 countries using its enterprise applications, could make a competing offer for Responsys, according to some analysts. 

Oracle has acquired several SAP competitors and aims to become a significantly competitive force in the enterprise resource planning space, which has traditionally been dominated by SAP.

To protect its market share, SAP is investing heavily in cloud applications, and at the same time adding exposure to innovative digital marketing. Simply put, the company could see a big improvement in its top line if it successfully manages to cross-sell marketing solutions to its 250,000 customers, most of whom are already accustomed to its resource planning software. This is why acquiring Responsys makes sense for SAP management.

The big winner here is Marketo
The digital marketing industry has seen plenty of acquisitions in 2013. First, Oracle bought marketing automation company Eloqua for $935 million. To remain competitive, Salesforce.com bought ExactTarget for $2.6 billion, and Adobe Systems acquired Neolane for $617 million.

The next acquisition target could be social marketing company Marketo (NASDAQ: MKTO  ) , which was up 11% after the acquisition of Responsys was announced. Founded in 2006, the company started doing business with a beta version, offering campaign optimization and landing pages for as little as $50 per month. Since then, the company has continued innovating its products, while keeping a low pricing policy. It now has over 2,300 customers across a wide range of industries, from business services to health care and telecommunications.

Final Foolish takeaway
Responsys is the latest acquisition target in the digital marketing industry. Growth in this space is expected to continue, from $25 billion in 2013 to $43 billion in 2016, according to U.S. Interactive Marketing Forecast. As this industry grows, the acquisition wave is likely to continue. Marketo, a social marketing company with more than 2,300 customers, could be the next target.

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