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TheStreet Open House

The Deal: Megavendors Stalk Digital Marketing Tech Providers

Stocks in this article: ADBECRMORCLIBMTDC

NEW YORK ( The Deal) -- With Adobe Systems (ADBE) taking French marketing campaign management company Neolane off the market, the field of digital marketing technology companies continues to narrow.

Adobe's $600 million purchase of Neolane follows, and was likely motivated by, Salesforce.com's (CRM) $2.5 billion purchase of ExactTarget, which was announced in early June. Adobe and Salesforce.com may have felt some urgency to make a play in late December after Oracle (ORCL) agreed to pay $871 million acquisition for Eloqua.

With the sequence of deals, Ovum analyst Gerry Brown said, companies such as Marketo (MKTO), Responsys (MKTG) and Silverpop Systems have gained scarcity value and could interest larger outfits.

So-called megavendors such as Adobe, IBM (IBM), Oracle, Salesforce.com, SAS and Teradata (TDC) have been active in digital marketing and campaign management, and could look to add capabilities. SAP (SAP) and Infor Global Solutions, which Brown described as "outside bets that are flirting with the marketplace," could also make moves.

"Traditionally, most of marketing automation companies haven't been very good at account development," Brown said. They may have gotten their foot in the door at large enterprises, but not fully exploited the opportunity.

"The Oracles and IBMs are very good at that -- cross-selling, up-selling and land-and-expand kind of things," he said. Oracle has already been able to use Eloqua as a sales lead.

"Marketing automation is sexy and engaging," Brown said. "There are all kinds of sales opportunities that follow from it."

Marketo, of San Mateo, Calif., went public in a May initial public offering that raised about $90 million, including stock available to underwriters.

The stock had a massive first day. After pricing at $13 per share, the stock jumped to $23.10 in its debut. It traded at $24.80 on Wednesday, down 44 cents, or 1.7%.

Backers such as InterWest Partners, Storm Ventures, Mayfield Fund and Institutional Venture Partners maintained stakes in the company and Battery Ventures purchased stock. Counting the venture capital positions, Merkato has an equity value around $900 million.

"My view is that they have been set up to be acquired," Brown said. The company may not have been acquired yet, the consultant suggested, because it is seeking too high of a price or hasn't reached the level of maturity that buyers want.

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