This week, software company Salesforce acquired CDP and personalization engine vendor Evergage. Alone this deal may not be noteworthy. But coupled with market growth, multiple mergers and acquisitions and predicted vulnerability of personalization investments—this latest move bears a closer look.
- What’s the common thread between these deals?
- What is implied about personalization engine and CDP markets?
- What does this mean for marketing leaders?
The pieces of the puzzle
In early 2019, McDonald’s bought personalization engine vendor, Dynamic Yield. In a seemingly benign move, Dynamic Yield continues to operate, just restricted from serving McDonald’s competitors. Taken alone this raises questions about the rationale for the acquisition. Maybe McDonald’s saw the long-term benefits of owning a key martech capability. But it didn’t seem to signal anything major—until, of course, it did.
This would prove to be the first of many deals reshaping the vendor landscape:
- In May, 2019 e-commerce search and merchandising vendor Attraqt acquires personalization platform Early Birds. This move from partnering to purchasing suggests providers see the value of an integrated solution that applies machine intelligence to optimize all aspects of an online shopping experience.
- By year-end, CMS and personalization engine vendor Acquia announced plans to buy CDP, Agilone. This news reinforces a trend in Gartner’s 2019 Magic Quadrant for Personalization Engines. CDPs and personalization engines increasingly overlap. Both can integrate customer-level data from multiple sources—retail POS, e-commerce and more. A personalization engine uses this data strictly to optimize campaigns, commerce and CX across touch points. Yet a CDP applies a marketing lens and supports various use cases.
- Kibo, an e-commerce platform owned by Vista Equity Partners, which already owned Certona, a leader in past years’ Magic Quadrants for Personalization Engines, bought Monetate, another market leader and Certona’s key competitor.
- Barely a month into 2020, Salesforce completed its acquisition of Evergage.
This deal reinforces what Gartner has long known. Personalization is both a stand-alone tool and an embedded capability, as pointed out in Gartner’s Magic Quadrant for Multichannel Marketing Hubs.
Putting the pieces together
There’s a distinct narrative behind each move.
Brands buying, rather than leasing personalization, a capability that could be an integral part of the go-forward business strategy
Combining a personalization engine and CDP to aide in data integration, possibly increasing “stickiness” and yielding better personalization results
Acquiring competitors—possibly in a defensive move to eliminate a competitive threat, while also filling strategic gaps in a vendor’s own solution
The true intent behind each movement may never be unknown, but the external market forces are evident.
Marketers have been investing an average 14% of their marketing budget into personalization. It’s estimated 44% of personalization spend goes toward technology. Amid pending economic downturns, marketers must brace for budget constraints and heightened ROI expectations. In this environment, double-digit spending on a personalization is risky business. This is especially true if that spend fails to make a measurable impact on revenue growth.
Gartner predicts by 2025, 80% of personalization efforts will be abandoned due to lack of measurable ROI or the costs and challenges of data privacy and data ethics.
Technology alone won’t solve marketers’ data problems. Yet, deeper integration of first party customer data:
- Raises the switching costs of moving between personalization engines, and
- Sharpens marketers’ ability to deliver measurable ROI in personalization
These outcomes benefit marketing leaders facing pressure to prove results from their MarTech spend. But they also help software sellers looking to acquire and retain clients in an increasingly homogeneous market.
There’s another possible benefit to providers.
The market for personalization engines has been largely funded by private equity. As investors look to recoup their investment ahead of any economic downturn and decreased access to capital, it makes sense to solidify the market position of the software. Buying a CDP can strengthen their offering, readying them for acquisition. Lining up a buyer, such as a major brand and client or an enterprise platform provider looking to fill gaps it in its offering, can give investors an exit strategy.
Making sense of the puzzle
What does this all mean for marketing leaders?
If you’re currently using one of the platforms that’s been bought, in the near term, it seems to be “business as usual” for most vendors.
But, it’s important to ask:
- What capabilities will remain or be shared across their solution?
- Will the personalization engine operate standalone or will it be consolidated?
- If you’re adding a CDP, will it be operable with third-party personalization engines?
- If you’re licensing a personalization engine, will it work with third-party CDPs?
- What cost savings and efficiencies are available through the combined solution?
- How will integration into a larger platform impact data and consent management?
- Regardless of the solution selected, how is the vendor supporting client success?
If you’re considering one of the platforms involved in these acquisitions:
- Consider if and how a personalization engine fits into your martech stack.
- Use your personalization strategy—you should have one—to identify tech needs.
- Fill tool gaps based on capabilities your team will use in the next 12-18 months.
- Allocate people to the process of finding and using the tool, including training.
- Be aware of content needs. Tools alone won’t deliver personalization.
As martech providers make “boss moves”, equip yourself and your team to make a smart decision. That decision is often less focused on which personalization solution you need and more focused how you’ll drive the greatest, measurable return from that investment.