Cloud-based sales platform Salesforce.com (NYSE:CRM) announced on Monday that it has entered a definitive agreement to acquire the artificial intelligence-powered marketing and analytics platform Datorama. By providing marketing insights for over 3,000 global agencies and brands, including PepsiCo, Trivago, and Unilever, Datorama can help Salesforce build on its strong momentum in its fast-growing marketing and commerce cloud.
Datorama will provide Salesforce's marketing cloud with "expanded data integration and intelligence, enabling marketers to unlock insights across all of their marketing channels and data sources," Salesforce said in a press release about the acquisition.
Capitalizing on a growth opportunity
Salesforce's acquisition of Datorama comes as Salesforce's marketing and commerce cloud is seeing lots of success. Marketing and commerce cloud revenue accelerated in the company's first quarter of fiscal 2019, rising to 41% year over year -- up from 33% growth in the fourth quarter of fiscal 2018.
Though Salesforce's marketing and commerce cloud is its smallest cloud, accounting for 14% of total revenue, it's the company's fastest-growing cloud. Investing in this growth opportunity by making a key acquisition, therefore, makes sense.
Acquisitions and integrations
Salesforce has been investing aggressively in the expansion of its marketing and commerce cloud, particularly through partnerships and acquisitions. Last November, Salesforce formed a strategic partnership with Alphabet's Google Analytics 360. As part of the partnership, Alphabet provided Salesforce's marketing and commerce and sales cloud platforms with deep integration of Google Analytics technology, "seamlessly connecting sales, marketing and advertising data," Salesforce explained in a press release about the integration.
In addition, Salesforce announced the acquisition of CloudCraze in March. The acquisition of the leading business-to-business commerce company better positioned Salesforce to capitalize on the rapid growth of digital commerce, strengthening Salesforce's marketing and commerce cloud.
Finally, Salesforce's acquisition of information technology company Mulesoft, which closed in May, will play a pivotal role in helping Salesforce integrate customers' sales, service, and marketing data into a more seamless customer experience. Though MuleSoft will help Salesforce launch a new "integration" cloud, it will also indirectly support Salesforce's marketing and commerce cloud by improving data integration.
Investors are likely hoping Salesforce's acquisitions and partnerships to expand its business and bolster its fast-growing marketing and commerce cloud will help the company maintain its strong revenue growth. Marketing and commerce revenue accounted for nearly 14% of Salesforce's subscription and support revenue in fiscal 2018, up from 12% in 2017 and 10.5% in 2016.
Salesforce's acquisition of Datorama will likely fuel further growth in the company's marketing and commerce cloud.
The concern for investors, of course, is that Salesforce will increasingly rely on acquisitions to continue driving growth. For now, however, Salesforce's strong track record of integrating acquired companies into its business while building shareholder value continues to make a strong case for embracing consolidation as a growth strategy.
It's unknown how much Salesforce agreed to pay for Datorama, but Calcalist, an Israeli-based news website, said Salesforce is reportedly paying "over $800 million in cash" for the company.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A and C shares), and Salesforce.com. The Motley Fool recommends Trivago. The Motley Fool has a disclosure policy.