CDPs in 2020: Independent CDPs are likely to diversify their offerings or will be acquired within the next 3 Years

Earlier this month, Gartner published an updated Market Guide for Customer Data Platforms (subscription required). Marketer interest in CDPs has been steady for the past 18 months. Meanwhile, the landscape of providers has become more crowded with different providers emphasizing different capabilities under the same umbrella term.

We predict that by 2023, 70% of independent CDP vendors will be acquired by larger marketing technology vendors or will diversify through M&A of their own to enter adjacent categories such as personalization, multichannel marketing, consent management, and/or MDM for customer data.

The drivers of this consolidation and diversification in the CDP landscape include several underlying trends:

• Fundraising frenzy, with unrealized returns to date  Companies selling CDP technology have received more than $1.8 billion in venture capital investments, compared with $650 million as of June 2018. Still, the revenue of many companies marketing CDPs have yet to exceed the $30 million mark.   
• Entry of incumbent enterprise software firms: Enterprise software companies have announced or launched CDP solutions for marketing, rather than buying a startup. This is a reflection in part of the low barriers to entry in CDP development as storage and compute costs have plummeted. 
• Plateau in planned adoption, market reaching maturity.  In Gartner’s 2019 Marketing Technology Survey, just 12% of respondents planned to adopt a CDP within the next two years (compared to a base of 74% who say they already have or are in the process of deploying). 
• Use cases – and users – coming into closer view: Some customer data platform solutions thrive as enablers of customer data in the enterprise, but aren’t an ideal solution for marketing business users. Buyers must be clear on which analytic, execution or orchestration systems, and which users (IT, marketing, or both) will access the CDP.  

Further exploration of how Customer Data Platforms differ from other technologies can be found in the (also updated) “A Guide to What is – and isnt – a CDP” (Gartner subscription required). 

One of the most interesting developments of the last 6-12 months has been the increasing overlap with master data management.  As my colleague Malcom Hawker points out, it’s unlikely that CDPs can fulfill all MDM use cases for customer data, but neither can MDM solutions address the most demanding digital marketing and activation use cases, leaving ample room for coexistence. 

In light of the enhanced pressure for cost-optimization in the current COVID-19 environment, some demand could be postponed, but other buyers may be rushing in from the sidelines as their business requirements for collection, management, and activation of customer data germinate seemingly overnight.

The forces buffeting the independent CDPs are already substantial.  The race is on, however, to see if the installed base of the large marketing cloud solutions will look to Smart Hub CDPs and a hub-and-spoke architecture or negotiate for beneficial terms and migrate to the new Marketing Cloud CDP offering -or migrate to a new multichannel marketing hub entirely.
If you are interested in further discussion of our view of this market or looking for opportunities to assess your martech stack, please contact your account manager to schedule an inquiry.  Gartner clients can view the Market Guide for Customer Data Platforms and its sometimes companion, “A Guide to What Is — and Isn’t — a Customer Data Platform”, on Gartner.com.