Is Marketo Next on the Acquisition List?

According to a report by research firm Custora, e-mail as a medium of customer acquisition grew from 0.88% in 2009 to 6.84% in 2013. Email marketing is on the rise due to its significantly low cost and ability to reach out on a massive scale. However, the media faces several challenges. Not only does it have weaker customer engagement metrics, but the increased use of smartphones is also hurting its already low click-through rates. Marketers believe that as email marketing campaigns improve, the opening rates will improve as well. Recent reports reveal that opening rates are now hovering around 30%. The increasing importance of email marketing campaigns has also led to product innovations and acquisitions in the space.

Marketo’s Financials

Marketo’s (Nasdaq: MKTO) third quarter revenues grew 65% over the year and 13% over the quarter to $25.5 million. They ended the quarter with a loss per share of $0.21. The Street was looking for revenues of $25.5 million with a loss of $0.25 per share.

By segment, revenues from subscription and support services grew 60% to $22.50 million. Professional and other service revenues grew 120% to $3 million.

Marketo projected current quarter revenues to be in the range of $26.2 million-$26.7 million with a net loss per share of $0.25-$0.27. They expect to end the year with revenues of $93.9 million-$94.4 million with net loss of $1.43-$1.46 per share. The market was looking for Marketo to end the current quarter with revenues of 24.64 million and a net loss of $0.23 per share.

Marketo’s Product Growth

Marketo continued with product innovation and recently announced the release of Dialog Edition, a new offering to simplify the transition from traditional email marketing to automated email campaigns. It creates automated campaigns that help build long-term customized conversations with the consumer. Advertisers can now define campaigns to deliver relevant content whenever a new email address is identified and then transition messages between various content streams based on the consumer’s behavior. Additionally, the tool helps avoid spamming of the consumer’s mailbox with duplicate mails by tracking the content sent and the address used .

Globally, online marketing services companies are in great demand. Tech giants like Oracle and Salesforce have been picking them up at billion dollar prices. Last year, Oracle bought Eloqua for $871 million and then ended the year with a $1.5 billion acquisition of email marketing services provider, Responsys. Not to be left behind, Salesforce.com announced a $2.5 billion acquisition of ExactTarget. Analysts believe that Marketo is the next big marketing solutions company ready to be acquired by the likes of SAP or NetSuite, which could benefit from their cloud computing offerings. Since the acquisition of Responsys, Marketo’s stock price has increased. It is trading at $42.28 with a market capitalization of $1.63 billion. It touched a year high of $45.00 earlier last week.