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Why are marketing automation platforms getting so much VC funding?

Philip Kushmaro | Dec. 8, 2016
Software that aims to automate specific touch-points of the customer acquisition and retention processes have evolved into ubiquitous enterprise tools employed by marketing departments of virtually every size and industry.

With Optimove's recent $20 million raise from Israel Growth Partners, industry experts are asking what it is about marketing automation platforms that makes them such magnets for VC funding.

Since HubSpot's founding in 2006, marketing automation platforms — software that aims to automate specific touch-points of the customer acquisition and retention processes — have evolved into ubiquitous enterprise tools, employed by marketing departments of virtually every size and industry.

The long tail of providers

According to marketing research firm Asend2, a full 42 percent of firms now use such tools. And while the majority of those have adopted platforms that are household names (at least to CMOs) such as HubSpot, Eloqua, and Marketo, the rest of the market comprises a panoply of offerings often differentiating themselves through targeting specific niches within the marketing software market.

But why such a long tail in the first place?

As a recent review of the marketing automation software illustrates, although certain functions remain core to the marketing automation toolkit (these include fine-tuning landing pages and email marketing campaigns), other martech offerings include features that straddle the divide between CRM systems, or incorporate functions from entire separate areas such as web analytics and even project management.

The result is a surprisingly fragmented landscape of competitors competing under a rubric that is still far from standardization.

Unfulfilled expectations

Despite this preponderance of systems, however, one thing is clear.

Whether through typical feature-bloat or the sheer unwieldiness created by a well-intentioned effort to merge various enterprise silos into one 'do it all' software package, the majority of systems are fundamentally failing to provide the solution that marketers are seeking when turning to these tools.

According to industry expert David Raab, a full 70 percent of marketers are either dissatisfied or only marginally happy with their present marketing automation package. Worse, and to the undoubted displeasure of the accounting department, only 7 percent are seeing tangible ROI from their use of the systems.

Today's marketing automation softwares have successfully bulked up with features — but users report the bulk to be cumbersome. Tomorrow's generation of solutions will focus instead on instead predictive modeling and set delivering a sleeker, more powerful, solution to the user as their top priority.

Investor appetite remains undiminished

Given the above, it is perhaps understandable how a search within the marketing automation category of Angel.co turns up over 200,000 users following the space, 18,000 investors listed as investing in it, and affords an average valuation of $4.3 million to its startups.

 

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