This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Marketo Marginalization Concerns Rise

Stocks in this article: MKTO CRM SAP MSFT ADBE

NEW YORK ( TheStreet) -- Marketo (MKTO) shares have soared about 69% since its debut on the Nasdaq on May 17 to reach a new 52-week high of $39.80 this week. However, the underlying conviction among funds appears to be weakening as the average daily volume over the past 10 days amounts to just slightly more than half that of the three-month average volume.

The cloud-based marketing software platform reported blowout second-quarter revenue results in July as its customer count increased to 2,592. Despite this, the marketplace's enthusiasm about the future growth of the stock appears to be giving way somewhat to the worries surrounding the company's ability to meaningfully reduce its heavy dependence on the salesforce.com's (CRM) ecosystem.

Salesforce.com, the largest maker of customer-management software, in July finished acquiring the email, social and mobile marketing specialist ExactTarget, a competitor to Marketo in the lower-end marketing automation market. It was salesforce's biggest push yet to expand into online marketing, and a deal that was sealed after software giant Oracle (ORCL) in February completed the buyout of one of Marketo's biggest rivals, Eloqua and announced later in June that it has locked in a nine-year cloud computing partnership with salesforce.com in all three tiers of the cloud: applications, platform and infrastructure. Investors have been worried that Marketo will be gradually be pushed aside by salesforce.com given these latest developments and will suffer a diminished relevance.

"They need to diversify away from salesforce.com actively and aggressively," Byron Deeter, a partner at global venture capital firm Bessemer Venture Partners cautioned of Marketo. And if Marketo can move up-market, the company can still do well, he added. Spreading out its risks by branching out its partnership and business market options, even if it means expanding into the higher-end enterprise marketing automation space where Eloqua has historically been stronger, are the best courses of action from here.

" SAP (SAP), Microsoft (MSFT), and Adobe (ADBE) are the most likely acquirers left," Deeter continued. Though "Adobe is a longshot given their other semi-competitive offerings, and SAP (enterprise) and Microsoft (small or medium businesses) are somewhat at odds."

"My guess would be that they Marketo are too expensive and too stubborn to be bought in the short term, so they move up market and focus on partnerships with SAP (SAP) and large enterprises in the medium term -- I suspect they'll scramble to get closer to every other CRM (customer relationship management) vendor including Microsoft (MSFT)" even though the costs of sales could increase and growth rates could go down over time in the process of ramping up these connections.

All in all, it's unlikely that those salesforce.com developments will show up negatively in Marketo's financial results any time soon given that it typically takes a couple of quarters for bookings changes to trickle down to financials in the cloud business, and there is still a large, non-salesforce.com ecosystem rallying around Marketo. However, by 2014, the "clear negative" pressure that the ExactTarget acquisition is having on Marketo should begin to become self-evident.

For Marketo, the hit from ExactTarget will likely prove to be most painful in the low end of the market automation market, where email marketing from ExactTarget may end up being sufficient for certain historical Marketo-Salesforce.com joint customers, leading them to later drop Marketo's services.

"They salesforce.com will certainly try to play nice as long as possible, but salesforce.com will try to build out more marketing automation capabilities into ExactTarget and marginalize Marketo," said Deeter.

-- Written by Andrea Tse in New York

>To contact the writer of this article, click here: Andrea Tse.>

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs