Marketo Should Roll-Up Their Category, Acquire On24

Earlier this year, Experian Marketing Services released their 2013 Email Marketing Study. The report found that personalized promotional emails had a 29% higher unique open rates and 41% higher unique click rates. In fact, the study claims that personalized promotional emails improved transaction rates and revenue per email by six times compared with non-personalized emails.

Marketo’s Financials

Marketo’s (Nasdaq:MKTO) Q1 revenues grew 64% over the year and 15% over the quarter to $32.3 million. For the quarter, Marketo reported a net loss of $0.18 per share.

By segment, revenues from subscription and support services grew 63% to $28.61 million. Professional and other service revenues grew 69% to $3.7 million.

Marketo projected current quarter revenues to be in the range of $33-$34 million with a net loss of $0.30-$0.32 per share. They expect to end the year with revenues of $138-$141 million and a net loss of $1.00-$1.06 per share. The market was projecting a loss of $0.30 per share for the quarter and a loss of $1.02 per share for the year.

Marketo’s Regional and Product Expansion

To continue to expand their market presence, Marketo has been adding to their product and geographical footprint. Recently, they tied up with PrintingForLess.com (PFL) to allow their customers to use Marketo’s capabilities. Post the integration, PFL’s clients will be able to send send tactile marketing materials such as direct mail, postcards and promotional items based on customer behavior tracked over Marketo’s platform. Marketo has also integrated delivery status tracking for such promotional material on their platform so that when PFL’s marketing mails are delivered, Marketo can alert the sales team to make relevant follow-up calls.

They also released a more advanced customer engagement platform that helps marketers to automate and oversee the digital marketing campaign real-time. The upgraded platform encompasses processes required to find new prospects, acquire new customers and to establish lasting customer engagements. It helps track customer behavior across digital, social and mobile channels along with the ability to deliver and manage personalized communication campaigns with the customers. Advanced analytic tools help measure and optimize marketing ROIs.

As part of their regional expansion, Marketo opened a new subsidiary in Japan through a joint venture with Dentsu eMarketing One and SunBridge. Dentsu eMarketing One is a strategic digital marketing consulting service provider. Marketo plans to leverage the subsidiary to gain more traction in the Japanese and North Asian markets. They have already released a Japanese language version of their digital marketing platform for the country.

Marketo’s stock is trading at $23.93 with a market capitalization of $969.7 million. It touched a year high of $45.00 earlier this year.

As part of its product diversification effort, Marketo should acquire another San Francisco company, On24, the leader in webcasting technology, a key piece of the lead generation budget of enterprises. It would easily add over $75 million in revenue to the company, and with channel consolidation, a faster path to profitability. In general, I’d like to see Marketo use its strong market position to do a roll-up in its segment, acquiring adjacent capabilities.