Playing the Power Shift to the CMOhttp://www.fool.com/investing/general/2013/09/26/playing-the-power-shift-to-the-cmo.aspx Mark Holder
September 26, 2013
Over the next 5-years, the marketing department is expected to spend more on technology than the IT department. This dynamic could create a shuffle in the C-suite during this time period that might impact the decision making process for software developers.
The forecast by research firms such as Gartner that the chief marketing officer, or CMO, will become more important than the chief technology officer, or CTO, by 2017 is already starting to impact the development plans of software firms. The very real possibility exists that CMOs will seek alternative ways to buy technology, such as partnering with outside vendors rather than with the CIO. Software firms must adapt to not only the marketing department needing advanced analytic technology, but also the CMO might lead the buying decision making.
In order to prepare for that expected shift, firms from Salesforce.com (NYSE: CRM) to Adobe Systems have made large purchases of marketing firms. Salesforce.com spent a significant $2.5 billion on ExactTarget and Adobe bolstered its position with a $600 million purchase of Neolane, which sells ad-campaign software. So while some of the bigger firms have been bought out, a couple of interesting stocks remain: Responsys (NASDAQ: MKTG) and Marketo (NASDAQ: MKTO). These marketing cloud software firms offer huge potential rewards, but major risks exist after the stocks have made large runs this year.
Best of breed solution
The products are clearly drawing customer attention leading to 62% revenue growth in the latest quarter. In addition, the advanced marketing solutions have attracted over 2,500 customers. As with most cloud software firms, the company isn't profitable yet, but the recent growth rates should have it on a solid path to long-term profitability. The only concern is that at a market cap of $1.2 billion, Marketo has a very rich valuation for a company only expecting $90 million in revenue this year.
Years of digital marketing experience