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Karen Schwartz Eloqua IPO and its Impact to a Fluid Marketing Software Industry

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By Karen D. Schwartz

Will The First Lead Management Software IPO Trigger Competitors to Follow?

What does Eloqua's public announcement that it is working toward an IPO really mean for the marketing software industry, and for Eloqua itself, for that matter?

Eloqua gets a lot more than a news lead from its announcement. In addition to letting potential buyers, customers, and competitors know where it wants to go, Eloqua gets to promote its product suite, help stave off competition from chief competitor Marketo, and surreptitiously advertise its availability to be acquired.

"You could easily see this as a 'momentum release' after coming off what they thought was a good year," says Jeff Ernst, a principal analyst at Forrester Research. "It's partly about getting their name out there and partly an effort to speed things up. They may be trying to create a sense of urgency and legitimacy in the marketing software market, especially because Marketo has been very aggressive in the marketplace."

If Eloqua is serious about wanting to go public, it's probably premature to make the announcement, Ernst says, since CEO Joe Payne indicated that he wants the company to be reach $100 million in annual revenues first, and the company was at about $50 million in 2010. Payne has to know that even if the company's current upward trajectory continues, it won't hit $100 million until 2013 at the earliest, Ernst says.

"Financially, I think they are posturing," he says. If they hit $100 million and could get a half billion valuation, the math would work—investors would think that was a good return."

One reason for the timing of the announcement might be Eloqua's desire to get to IPO before the current financial bubble bursts, says David Raab of Raab Consulting.

"Eloqua isn't the only company that wants to go public. You could argue that Marketo and HubSpot are also moving in that direction," he says. "We're in the middle of a bubble right now and they don't want to miss that bubble. But they are all at least a year out from an IPO and the bubble might not last that long."

If Eloqua does succeed in going public, however, it would make the marketing automation software company more attractive to its target audience—large companies. Large enterprises like the transparency that comes with public companies, such as the ability to see the books and how the company's processes work.

The question seems to be how Eloqua's move might affect the rest of the marketing software market. If Eloqua's IPO is successful, it might prompt others to follow. But much of that will depend whether other likely candidates are ready to go public. Marketo, for example, only has about $14 million in revenue and has raised $58 million in venture capital. To go pubic, it would have to get a $70 million valuation on top of $58 million in venture capital—something that isn't likely any time soon, Ernst says.

It's about as likely that Eloqua is angling to be acquired as it is to actually make it to an IPO. The question is, however, who would buy the company. At first blush, the options are wide, with ERP and CRM software vendors, marketing service providers, platform players or analytics vendors all possibilities. That could mean everybody from SAP and Microsoft to Oracle, NetSuite, Adobe and Salesforce.com.

By dissecting the possibilities, however, the field narrows. IBM, of course, has already purchased Unica, and Teradata bought Aprimo. Oracle bought the intellectual property (not its customers) of Market2Lead last May, but both Ernst and Raab think it's not out of the question for Oracle to consider buying Eloqua. Another possibility is Adobe, which is very web-focused but missing lead management functionality. Still another option is Salesforce.com, which in March bought Radian6 and seems to be in a buying frame of mind.

In the end, it might come down to practicality and technology alignment. While Marketo is tightly integrated with Salesforce.com, Eloqua tends to be more tightly integrated and aligned with Oracle. That just might make the difference.

A year from now, Ernst expects Eloqua to have been acquired.

"They are only an acquisition target before their valuation gets too high, and if they raise another round of funding, it will boost their valuation and put them out of reach of some of these potential acquirers," he says. End

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Comments (3) — Comments for this page are closed —

Guest Chris Nichols
  Eloqua is the largest, privately-held marketing automation software company, and by IPO and public market terms, even they are not that large. The similar sized marketing automation software comparables of Aprimo and Unica have already been gobbled up, by Teradata and IBM. The remaining competing lead management and marketing automation software vendors such as Marketo, Pardot, Manticore, Neolane or HubSpot are growing but will remain far too small for an IPO anytime soon. It seems like these smaller lead management software companies are more likely to follow the paths of Aprimo and Unica and be acquired, probably by CRM software vendors, than ever going public.

Guest Mimi Sasen
  I'm concerned about customers when companies like Eloqua, Marketo, HubSpot and others have their IPOs. Too many tech valley companies look at IPO's as their ultimate badge of success. Once they go public, their focus changes from building the great products necessary to acquire customers, to implementing short term tactics that may influence the stock price, and subsequently their newfound wealth. Even employees often become obsessed with the price of the stock and the value of their stock options, instead of being obsessed on customers. Once the founding owners who made the product great no longer control all the decisions, and are suddenly reporting to others, they often find the hassles and loss of autonomy a drag and might as well take their new money and cruise after the lockup period to some time off or the next start-up. Few tech companies of the small sizes such as Eloqua, Marketo and HubSpot could continue their passion and pace of innovation or customer support without their founders. Bringing in a new crew of executive managers comes with a host of new learning curves and issues – none of which are good for customers.

Guest Alan Walker
  I wonder if the Eloqua IPO is more about publicity and promotion than raising money. While Eloqua is one of the largest, if not the largest, independent marketing automation software vendor in its class, its still a very small company trailed by even smaller companies such as Marketo and Pardot. Frankly it seems to me these software vendors would achieve greater and simpler liquidation events for their venture capitalists by being acquired (like Aprimo and Unica were by IBM and Teradata). While an IPO seems to come with more publicity and bragging rights, it also creates significant administrative and governance requirements which can be exhausting for small companies.
 

 

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