announced yesterday that it will acquire Coremetrics, a leading
web analytics and marketing software-as-a-services (SaaS) company.
Before coming to Denmark to build the evidenced-based marketing
practice at Klean, I worked at Coremetrics as the Director of
Search Agency Services. Following is my view of the acquisition and
what it means for Danish companies.
It's About Time
That it should acquire Coremetrics makes sense for IBM, a leader in business analytics and
ecommerce platforms. Funny enough, IBM
had a web analytics package called Surf-Aid which it spun it off to
Coremetrics in 2006. Coremetrics took the people and the technology
of Surf-Aid and built an amazing online marketing platform which is
The Platform of Platforms
Big Blue is not known for speed, but for might. Maybe its the
$16 billion in annual revenue they could drive if they got their
act together that explains the recent flurry of activity for
marketing software and business optimization companies. IBM snatched Cognos for business intelligence
(BI) then SPSS for its predictive
analytics and data mining. Next on the docket is Sterling Commerce,
a B2B marketing collaboration company.
But IBM already has experience in
online marketing. Its platform Web Sphere Commerce (the database
platform that lets retailers create web stores) is an industry
standard. On top of that, IBM has already
been working on esoteric projects around marketing metrics such
customer lifetime value in their Zurich R&D labs. Coremetrics
will give these Swiss physicists some real data to chew on! So with
a history of building and buying, the acquisition of Coremetrics
makes sense. It's a crucial part on an entire platform and
Look at it another way. Web analytics by itself does not an
industry make. If you put all the web analytics and marketing SaaS
companies together, you have but a few billion dollars in revenue.
But if you look at business intelligence overall, the world of
Oracle, and so on, now we're talking tens, if not hundreds, of
billions of dollars. So web business needs to live within the
larger business ecosystem. This goes along with the idea of
marketing not being confined to any one channel and the move toward
integrated marketing and managing all campaigns (web, print, TV
etc) from a single platform and dashboard.
Naturally IBM could benefit by
offering a platform of platforms, but it already has an internal
business case to collect these SaaS companies just to serve its own
salespeople. Many don't realize that IBM
makes more money on services than software or equipment. So
anything that IBM can do to streamline
its process and operations is likely to have a positive ripple
effect on its bottom line.
The Knowing-Doing Gap
The trend toward business optimization and associated IT
platforms has been with us for a long-time, but it is still not
realized in most companies. This is explained most elegantly by Jeffrey Pfeffer in his book
The Knowing-Doing Gap. Even with all the data at hand, we
fail to use evidence in 60% of major decisions. Reality suggests
that other factors, not data, are driving decisions. The rise of
behavior economics supports this view.
But companies ignore rational business systems at their peril.
Business intelligence is valuable not just to increase sales, but
to stem losses. A case in point is the past year's performance of
Harrah's, which survived the economic downturn with just a 7%
decline in EBITA. Its competitor,
however, MGM/Grand, saw its EBITA cut by more than half. The story of
is a text-book example of business intelligence applied to every
part of the organization and a testament to brilliant CEO Gary Loveman, one-time Harvard professor
who turned a a sleepy casino company into the world's largest hotel
and gaming conglomerate by embracing analytics at every level of
the organization. The book to read is Tom Davenport's Analytics
IBM could offer the dream of a true
platform not just for integrated marketing, but the larger offering
of business intelligence. This acquisition of Coremetrics is great
news for enterprise customers who want intelligent systems
platforms to manage their multichannel marketing as well as their
entire business process.
Word of Caution
There is a limited supply of humans who not only can understand,
but can operate these systems. While this is good news for humans -
you are still needed in the world of IT - the deployment of these
systems can fall short of the promise for various reasons: too much
information to integrate, the high cost of the systems, and most
important, the mismatch in the culture of the organization.
The analytics vendors have attempted to address human failings
by building rule-based systems in the marketing applications, and
many companies have taken advantage of this artificial intelligence
to support marginal revenue growth. If the systems are configured
properly and maintained with the right amount of human oversight,
rules-based engines can have a powerful impact on revenue.
Cutting out the human part is not the way to go, and getting the
right service package with the software is key, whether its is
purchased from the vendor, provided by an agency, or tapped in
house. Let's not forget: IBM actually
makes more money on services than it does on software or equipment.
If it can train its consultants not just to sell the systems, but
to help companies use the systems, then things can really hum.
Pure Plays Stand to Gain
Because of the cost and complexity of these BI and marketing
platforms platforms, pure play software applications have emerged.
There are oodles of them in the online marketing world. These
companies offer a specific software application for an associated
marketing channel. Marin Software for paid search, Responsys for
email, and Dotomi for display marketing are examples. They focus on
doing one thing well, and as a result can be a compelling choice
for a customer that is focused on a specific marketing project.
Further, the pure play applications are competitively priced and
offer buy-in points for companies of any size.
The market is rewarding these companies. Marin Software became
the first paid search application (an API
that sits on top of the search engines ad platforms and pulls all
data into one place) to reach $1 billion in ad spend under
management. Many major companies are choosing pure plays in lieu of
or in addition to the business optimization platforms.
What Isn't Clear
Large scale complex systems require large scale companies. Small
and medium-sized businesses often lack the scalability and revenue
to take advantage of these platforms. As of yet, it's not clear how
IBM will package and price its offering
of Coremetrics; the deal will need another quarter to close in any
case. Long term, how Coremetrics is integrated into IBM's larger business optimization platform and
to which market segments it is marketed will likely keep the
management of both companies engaged for some time.
The acquisition may return attention to Google Analytics, which
has been the de facto free, standard and entry level tool for web
analytics. Some firms may run back to the free tool; Google has
been touting its virtues of free like a dead horse without building
enterprise capability. An enterprise platform would include not
just Analytics and AdWords, but applications for merchandising,
email, shopping cart, CRM, product
recommendations, and offline marketing. If Google coupled this with
customer service from its AdWords team, then it could truly empower
its customers. Also, it could increase the uptake of other Google
products such Google TV, the ability to buy TV advertising through
AdWords, a disintermediary way to purchase commercials and a way to
tap the world of TV which still dwarfs the web. That would be
Don't expect anything to change overnight. These announcements
may come fast, but the reality may take months or years to
materialize. The Adobe acquisition of Omniture, the previous #1 web
analytics provider, is a valid point. Adobe had the clever idea to
sell its Flash and Dreamweaver products prebuilt with Omniture
analytics, saving the costly and time consuming process of
implementing tags on websites. That acquisition was 9 months ago.
We are still waiting for the baby.
What It Means for Danish Companies
Danish companies are starting to get into the analytics game,
and Google Analytics is seen as the natural entry point. A few
companies have Omniture, and Coremetrics has localized its software
for Danish kroner. There is even a Danish company worth
investigating for its clever online marketing suite which comes
embedded with a content management system, Sitecore.
There is no question that Danish companies can make their
marketing efforts more profitable with analytics and other software
applications. But more important than any software is the approach
of the company. The company needs to develop the mindset for
evidenced-based decision making. Danes already have a rational,
evidenced-based approach to business in the offline world. Why
should it be so different online?