• Adobe is moving Marketo Engage up-market to match its user base in the Experience Cloud, while meeting debt obligations for its acquisition activity means higher costs for end users
• CMOs will need to increase spend to buy more Experience Cloud products with more complexity to obtain new features that were previously included in Marketo
• Marketers need a greater understanding of their Go To Market processes in order to make informed product buying decisions to pivot with the upcoming shifts in Marketing Technology and its affect on their budgets
• Mid-market vendors and new technologies are beginning to emerge to fill feature gaps within the current marketplace.
  

Your MarTech vendors' financials affect your tech stack more than you know

While shifts in the cost of capital affects the entire SaaS industry, the shifts to competition within the marketing automation industry have caused just as substantial a change for Chief Marketing Officers and Marketing Directors. Here’s how that impacts your bottom line in 2024 and 2025 and what you should do to protect the financial results produced by your marketing efforts over the next few years. 

First, some context, we’re coming up to 8 years since the founders of Marketo originally sold their company to Vista Private Equity… then only 2 years later Adobe acquired the firm for a record $4.75 billion. With the debt involved in a deal of that size, Adobe more than doubled the long-term debt on its balance sheet from 2017 onward. At the same time, with Adobe’s footprint firmly entrenched in the enterprise B2C marketplace, there’s been a real shift to move Marketo up-market to service larger and larger clients with higher ACV (or Average Contract Value for everyone not in the SaaS world) to match the user base serving the other needs within the Adobe Experience Cloud. 

But as Adobe moves its products and services network to cater to the largest enterprises, what does this mean for mid-market enterprises? The marketers responsible for firms between $30 million to $100 million still have very complicated Go To Market needs… many have different sales intermediaries like dealers or distributors involved in filling their pipeline with new and returning customers. Some have more than one CRM or Sales Enablement platform across their organization, for example. 

Yet their marketing budgets and internal capabilities to handle the sophistication required by today’s proprietary clouds is inaccessible to more and more firms in this category. They need a tool that handles complexity without the Total Cost of Ownership that only the Fortune 500 can afford. This has a direct impact on the profitability of a marketing program, and puts marketers in a difficult position to consider the initial switching costs of a migration to a more cost effective platform when a price increase isn't feasible. But what platform should they migrate to becomes the greater question? 

By the Numbers

Adobe's long-term debt more than doubled from 2017 onward, fueled in-part from acquisition costs with Marketo and Magento.

Historically, Marketo built its brand positioning as the disruptor offering a breadth of features at a reasonable price compared to Eloqua. But as time, economics, and the marketing automation industry matured, that value proposition is changing. Marketers, you need to consider these trends as you make long-term investments in your marketing technology stack. 

As a warning to mid-market CMO’s, even if you decline to buy any additional Experience Cloud products, look out for higher prices coming to your software contract renewals over the next two years. Yes, there’s always a desired growth factor in the price per seat of a SaaS product. However, now there’s now an effort to grow their share of wallet with your marketing tech spend to make additional purchases for features that used to be included.

Judging by the product announcements over the past two Adobe Summit events, you can expect to see an increasing expense of having to purchase and implement multiple products like Adobe Analytics or Adobe Customer Journey Analyzer instead of using the features that were historically included in Marketo like Revenue Cycle Analytics. 

At the time of the Marketo acquisition, Salesforce was the primary CRM used by organizations when integrating with Marketo. However, when Salesforce bought Pardot and ExactTarget, it began to almost “give away” those marketing automation licenses when renewing a Salesforce CRM contract to win market share from Marketo. Clearly this caused a rift in the relationship between the two software firms and left many CMOs with a difficult choice: justify the perceived higher costs of keeping Marketo, or pay the migration costs to implement Pardot or Salesforce Marketing Cloud. What's further challenging is that the marketers who chose the Pardot migration found their pricing return to parity with Marketo, yet they still faced reduced functionality.