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Salesforce Looking to Bridge CRM and Ads

Posted on Monday, May 27th 2013

Gartner recently published their report on the CRM industry, Market Share Analysis: Customer Relationship Management Software, Worldwide, 2012. The report reveals that the worldwide CRM market grew 12.5% last year to $18 billion. The biggest consumers of CRM technology reside in North America and Western Europe which commanded nearly 80% of the global market. But, emerging markets are picking up. China and Latin American markets reported some of the highest growth in the sector with 26% and 24% respectively. According to the report, Salesforce.com (NYSE:CRM) was the leading CRM services provider globally with over 14% market share, accounting for over $2.5 billion in annual sales.

Salesforce’s Financials
Salesforce.com’s Q1 revenues grew 28% over the year to $893 million, ahead of the market’s projections of $887 million. EPS of $0.10 was also in line with the Street’s projections for the quarter.

By segment, revenues from subscription and support services grew 29% to $842 million. Professional services and other revenues grew 25% over the year to $50 million.

For the current quarter, Salesforce projected revenues of $931-$936 million, compared with market projections of $935 million. Their estimated EPS of $0.11-$0.12 was in line with the Street’s estimates of $0.12 for the quarter. Salesforce increased their outlook for the current year and now expect to end the year with revenues of $3.835-$3.875 billion and EPS of $0.47-$0.49. The Street was modeling an EPS of $0.49 for the year.

The market normally expects a stronger performance by the CRM leader. Salesforce though disappointed them because of the increased investments in sales and marketing efforts as they continue to push their online software products.

Salesforce’s Product and Talent Expansion
Like many technology giants these days, Salesforce is also pursuing the strategy of acquiring startups for their talent. Earlier this month, they announced the acquisition of Clipboard, a web clipping services start-up. Clipboard lets users select content on the Web and keep it on their cloud storage space to refer to at a later time. Since its launch in late 2011, the service had a following of over 100,000 users accessing more than 1.7 million clips. They had received venture funding of $2.5 million from Andreessen Horowitz, Index Ventures, CrunchFund, SV Angel, Betaworks and DFJ. Clipboard’s financials are not known, but it is estimated that Salesforce acquired them for $12 million. Salesforce plans to shut down Clipboard’s service by the end of June this year and will fold their team into Salesforce’s design and engineering team.

Salesforce also launched several new products during the quarter. Recently they announced new mobile solutions for the Government agencies. Through the new services, government agencies can connect with and respond to citizens on any device and any channel. The services are aimed at reducing government spending on legacy IT systems while adding the ability to connect with citizens. Rapid Response 311 will be based on Salesforce Service Cloud and will help local agencies resolve citizen issues and even connect with other departments, agencies and external partners.

Salesforce is working to get a bigger share of the social advertising market. According to a BIA Kesley report, social advertising is projected to grow from $4.7 billion in the previous year to $11 billion in 2017. They recently launched Salesforce Social.com, a social advertising tool that integrates social ads with CRM. Through the service, marketing professionals will be able to power ad campaigns on social media such as Facebook and Twitter using real-time customer and social listening data. The integration will help the advertisers increase the returns on their advertising dollars.

Salesforce’s stock is trading at $45.69 with a market capitalization of $26.76 billion. It touched a year high of $47.58 in May last year.

 

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