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Marketo’s Successful IPO

Posted on Monday, Jul 1st 2013

According to the 2011 State of Marketing, a report by CMO Council, worldwide organizations spend over $1.5 trillion on management and communication charges. Marketing spend, and the use of IT on marketing is projected to increase over the years. Gartner estimates worldwide spending on marketing-related software to be $32 billion this year. This spending is projected to grow to $41 billion by the year 2016. Recently listed Marketo (Nasdaq:MKTO) is seen to have bright prospects in this high growth market.

Marketo’s Financials
Marketo offers cloud-based marketing solutions to help organizations with relationship marketing to enable new customer acquisition and improve sales effectiveness. Their Lead Management tool helps with automation of demand generation campaigns to deliver improved leads. The Social Marketing tool helps customers deliver social marketing campaigns more effectively. Marketo charges a subscription fee for access to their software. Their products are being used by more than 2,000 customers worldwide.

Revenues have grown significantly from $14.0 million in 2010 to $32.4 million in 2011. Last year, their revenues grew to $58.4 million. But losses have also been increasing. Losses for the year increased from $11.8 million in 2010 to $22.6 million in 2011. They ended the previous year with a loss of $34.4 million due to increased investments in growth.

Prior to listing, Marketo had raised $108 million in venture funding from investors, including InterWest Partners, Storm Ventures, Mayfield Fund, Institutional Venture Partners and Battery Ventures. Last month, they sold 6.1 million shares at $13 each to raise $75 million. The IPO was well received by the market and the shares soared 78% on the day of listing.

Marketo’s Product Expansion
Marketo recently launched a one-to-one marketing tool that will allow marketers to automatically customize marketing messages based on the individual customer. The tool uses built-in rules and machine-learning algorithms to keep learning and add details about the customer’s history of engagement to deliver messages that are customized to the individual customer and thus create a more active and positive engagement. The tool also comes with metrics to allow the marketer to align the campaign’s content to make it most appealing to the customer.

Last month, they released Marketo Financial Management, their financial tool for marketing departments. Marketo Financial Management gives the marketing teams an updated view into marketing spend so far so that the teams can plan spend on marketing programs accordingly. The teams can track spend with regards to marketing budgets by using the web-based, automated tool.

Earlier this year, Marketo’s competitor, Eloqua was acquired by Oracle for $871 million. Another player in the segment, ExactTarget, was bought over by Salesforce.com for a whopping $2.5 billion recently. But Marketo is not worried about being acquired. They claim that they want to be an “independent innovator” in the segment. I would still keep an eye out, as I wouldn’t be surprised if Oracle continues to build their cloud operations by acquiring Marketo.

For now, their stock is trading at $23.11 with a market capitalization of $827.15 million. It touched a 52-week high of $26.77 soon after listing.

 

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