ExactTarget Rides Email Marketing Wave

According to a Forrester report, U.S. Interactive Marketing Forecast, 2011 to 2016, total advertising spend in the U.S. is expected to grow to $77 billion. In 2011, spending on interactive channels, which includes display advertising, search, email, mobile, and social media advertising, accounted for 16% of advertising spending. These channels’ contribution is expected to grow to 26% by 2016. Online marketing services provider ExactTarget is working to capitalize on this growth as it gets ready for an IPO.

ExactTarget’s Financials
ExactTarget was founded in 2000 by Scott Dorsey, Chris Baggott, and Peter McCormick as a small email marketing provider. Today ExactTarget provides SaaS based on-demand email marketing software solutions. Their suite enables enterprises to send both business-critical and event-triggered mailers to help improve sales and optimize marketing investments. Their products also help businesses connect with their consumers through social media marketing, which includes services such as connecting through Facebook and Twitter, and integrated text and voice messaging. They have more than 4,600 clients, and the list includes new-age companies such as Angie’s List and Groupon and more traditional companies such as HomeGoods and Fairfax Group. ExactTarget earns revenues in the form of annual and multiyear subscriptions.

ExactTarget has reported strong revenue growth over the past few years. Revenues grew 41% over the year in 2010 to $134.3 million. In 2009, revenues grew 32% to $95.4 million. According to their recent reports, for the nine months ended September 2011, revenues grew 55% over the year to $148 million. During the same period, the company reported a loss of $29 million compared with a net loss of $12 million reported for the year 2010.

The company began with co-founder investment of $200,000 and since then has raised venture funding of $208 million from investors that include Insight Venture Partners, Montagu Newhall Associates, Battery Ventures, Scale Venture Partners, Technology Crossover Ventures, and Greenspring Associates. After filing for an IPO in 2007, ExactTarget withdrew their application in 2009 as at the time management believed their business would be better managed if they were private. However, at the end of 2011, they refiled for an IPO that is expected to raise $100 million during the year.

ExactTarget’s Acquisitions
The Forrester report estimates that the U.S. market for email, mobile, and social media marketing spending will grow 26% annually to $15.7 billion in 2016 from $4.8 billion in 2011. Growth is expected in other regions as well. According to an ExactTarget study, 93% of U.K. consumers have signed up to receive e-mail promotions from at least one company. On Facebook, 45% of consumers have ‘Liked’ at least one brand and 7% of the U.K. Internet-using population ‘follows’ an organization through Twitter. ExactTarget expanded in the U.K. and Europe through the acquisition of their U.K.-based reseller, KeyMail Marketing. In 2010, they established a presence in Australia through the purchase of another exclusive distributor, mPath Global. More recently, they set up operations in Latin America through the purchase of email marketing provider Frontier Digital. São Paolo–based Frontier has been ExactTarget’s exclusive Latin American reseller since 2010 and has become Brazil’s leading provider of email marketing, mobile marketing, and social media marketing solutions. The acquisition will help ExactTarget build on this lead in the region.

Besides acquiring for international presence, ExactTarget has also been acquiring to build up on their offerings. Last year, they acquired social media management company coTweet. CoTweet was a provider of marketing solutions focused on using the Twitter platform. Their Web-based collaboration platform provides a single dashboard that lets users track conversations, assign roles, and create follow-up tasks through workflows and case management.

With a 26% annual growth rate projected for interactive channel ad spending in the U.S., ExactTarget is looking at a big market opportunity. The market believes that their widening loss also may not be such a concern, given that the increase is justified as the result of additional investments made to expand market share within the U.S. and overseas.