February 8, 2014 By Scott Brinker 27 Comments What if 1,000+ marketing technology vendors were the new normal? And the truth is that this graphic, even with nearly 1,000 companies represented, was far from complete. There will still be some large marketing technology vendors — especially platforms and middleware that simplify integration — but they will also accelerate diversity. What would previously have taken millions of dollars, armies of operations experts, and months or years of intensive labor can now be orchestrated by someone on a laptop in a coffee shop before they finish their latte. On top of that, consider all the APIs that are available free or cheap to developers: Twitter. Companies like 37signals — now known simply as Basecamp — are the prototype for this new kind of software venture. Engineering Complexity: As a code base gets larger and more intertwined, it becomes more difficult to update and extend, especially with backwards-compatibility constraints.
The one that’s different from the others is infrastructure, which still benefits from physical economies of scale. Network effects are also the key to creating giant platform and middleware companies in the marketing space. Platforms almost have to become big companies, because once critical mass is established in third-party ecosystems, there can only be so many platforms that harness this dynamic. What makes them platforms, however, is that they allow other marketing applications to tap into their data repositories — both contributing to and reading from them — through open APIs. Today, the marketing technology industry is primarily held back by the technical challenges of integrating different components and dealing with disparate data silos — most painfully, fragmented customer data silos. A small number of platforms — each competing to provide a better, richer environment for third-party applications — will catalyze an explosion of new marketing software on top of them. We’ve discussed the supply-side rationale for a large marketing technology landscape, but what about the demand-side? Sure, there are concerns in picking vendors that go beyond their functional capabilities today.
Both of these concerns can be significantly reduced if you choose open platforms for key systems that are actively growing their third-party ecosystems. Integration challenges are dramatically reduced if platform vendors and third-party applications have already established out-of-the-box interfaces for connecting to each other.
Third, the third-party applications that you adopt may still have some volatility, but your risk there is now limited. While open platform ecosystems in marketing are still relatively young today, they’re gaining momentum. While the future of agencies and marketing service providers is definitely beyond the scope of this article, there is one aspect of their evolution that is highly relevant to this discussion: agencies and marketing service providers will increasingly build software for their clients. For a growing number of service providers, software capabilities are now an integral part of their value proposition. Given that the world becomes more digital by the day, that marketing is increasingly about delivering impactful customer experiences across digital touchpoints, and that everything digital is powered by software, software is only going to become more central to these businesses. Second, while integration challenges are hurdles to this today, the consolidation of open platforms and middleware will make this easier. Three, the blending of software into creative will demonstrate why marketing software will never consolidate down to a handful of big companies. In the days of mainframes and minicomputers, there were only a handful of software vendors (usually the same ones selling the hardware).
I also appreciate the motivation of IT departments to limit the number of hardware and software variables in their environment. This is a fantastic post, it articulates what has been happening around us, that we were aware of, had used, but had not considerred in such an organised way. Of course, I also mostly pay attention to marketing, so this post was written through my biased lens on the world. Advertising, and more generally Marketing, has been in the throes of transformation for decades, or what the Economist Joseph Schumpeter called ‘creative destruction’. Today, that vast bulk of content is created, bottom-up, through websites, blogs, and social platforms. Add to the proliferation of content, the exponential growth in digital interactions, and now marketing has become more data intensive than Wall Street—hence the acquisition of marketing tech firms by tech giants like IBM, Oracle, Microsoft and Adobe.
The transformation of marketing is represented both by meteoric rise in content and the ability of marketers to interact with that content. And each square, when you look at the logos in it, probably would fit in or overlap with multiple other squares. Maybe the consolidation needs to be more in narrowing down the map… because the market is only going to get more complex.
Then again, every time I think I should really narrow down my own interests to a subsection of what’s going on, I branch out again. Of course, as described above, I also believe that such open platform consolidation will trigger even more third-party software development that will be better able to plug in to those backbone environments.
That being said, I do think it’s important for us to keep in mind that all these amazing technological combinations are still just a means to an end.
As an aside, vendors will see less churn when buyers are more closely matched the first time. The critical piece is that the convention notions around economies of scale no longer apply. As much as this interests me as a member of the industry you analyze, I’m also fascinated by how this might apply more broadly. I’d love to learn more about the changes these forces are triggering in industries beyond marketing.
I really like what Segment.io is doing to bring order to some of this via a middleware tool that makes it easy to add new services. If you have followed FamilyFarms Group at all, you know that strategic planning for the farm is a major focus area for us.


80:20 Rule – Have you ever heard that 80% of your success comes from 20% of what you did? Know Your Groups – What could make you work better with your employees, your lenders, your suppliers, and your buyers? Trying to navigate through the various new social media categories, blogs, sharing sites, and social media firms is an absolute mess.
This depiction of the digital marketing landscape was shown at a Buddy Media event marking the launch of the social marketing software agency's new suite of measurement tools. How can so many of these marketing technology ventures afford to build these products, launch them, find customers, and stay in business — even if they’re relatively small?
But compared to the overhead of on-premise installations, it’s relatively easier to adopt and operate for a wide range of marketing applications. SaaS tools, video conferencing, screen sharing, and ubiquitous connectivity enables people to effectively work remotely. While their revenue is surely much greater than $10 million, they’re just 43 people at the time of this writing. It’s hard to manage all the interaction effects, keep up with the rapid changes in the broader digital marketing ecosystem, and still deliver something usable by regular people. When people are evaluating specific capabilities, questioning how you stack up to alternatives and substitutes, and — most importantly — learning how to use those capabilities to produce brilliant marketing, a massive footprint can be unwieldy.
But I do believe they’re harder to manage successfully than other large software businesses were in the past.
Although, with high churn among the Fortune 500 and the fact that individual products in their portfolios can still fall behind or be discontinued, size is not a long-term guarantee. The proposition that if you buy everything from one vendor, and it’s all interconnected out of the box (more or less), is a benefit. Prices continue to be driven down here: the biggest provider becomes the lowest-cost provider, a reinforcing feedback loop. But they must be genuine platforms in the sense that they’re open environments that promote third-party developers to build on their foundations.
Platform providers don’t have to keep up with every new feature, tactic, and technology out in the broader marketing world — which is evolving at a blinding pace. The more third-party applications you support, the more attractive you are to customers, which in turn attracts more third-party developers, and so on. Unless there is an open industry standard for integration — which we don’t have here, yet — third-parties can only afford to maintain so many platform-specific integrations.
They enable a whole range of customer-facing marketing experiences and back-office marketing analytics to easily plug into their backbone. But once there are a manageable number of platforms, providing data centralization, with well-defined interfaces for third-party applications, the biggest barriers to deploying new marketing applications will be torn down. Simply put: they want to reach the largest number of customers, deliver amazing experiences to them, differentiate their brand, and do that as cost-effectively as possible. But what if there isn’t just one perfectly right set, but rather many, many different products that would satisfice? Psychological pressure rises with the paradox of choice — but we face that in many contexts beyond marketing technology these days. Competition among all these companies drives new innovation, better pricing, and more specialized solutions that are better tailored to a marketer’s needs. Agencies build sophisticated web sites that include custom software extensions programmed in Javascript, PHP, Ruby on Rails. Agencies and marketing service providers will become, by far, the largest cluster of third-party developers in these ecosystems. The most exciting kinds of marketing software ahead will be invented to deliver unique and spectacular customer experiences. The blending of these two worlds will, I believe, help marketers become more comfortable, relatively quickly, with the explosion of software choices.
Mobile devices triggered another wave of software expansion: both the Apple and Google app stores now offer millions of apps. I wasn’t sure if 4,000 words was tremendous overkill or failed to do enough justice to these tremendous forces that are colliding — glad you found it helpful! I’d love to hear from people with more domain expertise than me in other functions and professions.
The primary challenge of marketing today—and the focus of many of today’s marketing technology firms—is managing the proliferation of content and interactions, and harnessing this data to put relevant content in the hands of customers and prospects so that products can sell themselves, or, in the case of B2B, at least do the bulk of the selling work before a hand-off to sales people is made.
The reality, of course, is that it will keep getting more complex and more diffuse as we go along. The lines between services and software are blurring: software is just a ready-made set of rules for you to use.
However, I’d also point out that it demonstrates that this future is not incompatible with having big marketing technology companies. As an industry, we’ll have to constantly work to maintain the balance between taking advantage of the technology but not letting it take advantage of us. The critical premise used to be that software all needed to work well with its related components and that couldn’t happen unless one vendor bought all of those up and stitched them together.
I think that many of the trends you mention around SaaS foretell dynamics that will go into most industries.
Keeping the products in their portfolios loosely-coupled and, to some degree, even operating as stand-alone brands, definitely seems like it has advantages.
Software that merges into the platform layer will be immensely valuable to the big platform companies. Big companies can still benefit by having strong portfolios of loosely-coupled marketing applications.
In particularly hot categories within marketing experiences and marketing operations, there will still be opportunity for relatively big leaders (even if they face an ongoing long tail of competition). The good news is that there’s tremendous development resources going into addressing that pain.


Contact FamilyFarms Group today to get your farm on the right track and start some farm strategic planning. I believe the answer is simple yet profound: marketing technology is the first major business market to be born in the age of cloud computing. Thanks to Amazon Web Services (AWS) and competing offerings from IBM, Microsoft, Rackspace, etc., any entrepreneur in their garage now has state-of-the-art computing infrastructure at their fingertips. These simplifications generally make life better for customers — but they also reduce the overhead for vendors, especially if they’re able to provide good self-service options.
What IaaS did for the economics of hardware infrastructure, this trio had done for software infrastructure.
For many kinds of products, you can be a $10 million company that is profitable and sustainable, with loyal, happy customers and a passionate team that loves their work. But the cloud has diminished some economies of scale in software ventures, while the diseconomies remain — and, arguably, have been accentuated by the accelerating pace of change and the explosion of direct feedback loops among customers in a cloud-connected world.
But it’s worth noting that some of the most successful companies there have harnessed network effects. They can let their ecosystems of third-party developers address the far majority of these innovations, competing with each other in a true evolutionary fashion. Once that engine is in motion, it’s immensely powerful — and becomes highly defensible against new platform contenders. It may not be a pure winner-take-all market, but there will be a limited number of winners.
Marketing technology has become important to them — but only because it’s a means to that end. As long as the marketer chooses a set that enables them to achieve their objectives, does it matter if many other technologies were never even considered? And it’s easy to see that the Internet of Things will inspire yet another surge of software growth too. This may need to come from one of the major vendors, such as Salesforce, which has done just that for CRM via their AppExchange. As a set of dominant platforms and middleware products emerge from the primordial soup, this pain will be significantly reduced and the power of choice will be a lot more enjoyable. You need to understand what will actually help your business to be successful and put your emphasis there.
Across the history of business software, that narrative of consolidation has played out again and again. And since big company job security isn’t what it used to be, more people are now willing to work for small companies, where they can make a larger impact and have greater freedom.
The more tightly coupled everything is, the harder it can be to substitute or extend individual components. There’s no definite status quo to analyse and neatly categorise in an encyclopaedia of marketing tools. Now, also understand that not all of those things will have an impact…you are doing something with the rest of your time!
So it’s natural to linearly extrapolate the pattern and predict that the same will happen with marketing technology too. Vendors have direct, real-time visibility into customer usage, which significantly facilitates technical support. Any developer can use these technologies to inexpensively stand on the shoulders of giants. Free communities of knowledge from Stack Overflow to Quora — to anything you can find with a Google search.
You need a great product, promoted with great content marketing and engaging digital touchpoints. Your sales and support people can have a difficult time representing the many facets of your portfolio.
Many have written their own software applications for specialized campaign management, workflow coordination, marketing analytics, social games and contests, and more that are used across multiple clients. But the genie of marketing software is out of the bottle, and it’s not going back in. We can help buyers use technology to sift through the rapidly growing set of data out there, and focus their time on evaluating that short list and what the real trade offs are vs trying to figure out what each vendor really means with their marketing speak.
Developers gain much deeper insight into how customers are really using their products, which helps them improve them.
Regardless of where a new marketing technology vendor is located, they can tap into first-rate skills and knowledge from around the world, pretty much on-demand. This may be a Faustian bargain worth making, but we should acknowledge that there are non-trivial trade-offs involved. Google (and others, of course) have transformed marketing from what was largely a top down, indiscriminate, push of content from a few companies…to a much more efficient, bottom up, pull from 100s of millions of consumers via Internet search.
Scaling up or down is often as easy as turning a dial — without complicated capital budgeting issues — making free trials and low-risk pilot projects feasible. That’s how Google has gone from Start-up in 1998 to a $400 billion (last I checked) company 16 years later. It’s not all about something you need to start, and is sometimes about something you need to stop. But you can target those efforts towards the right prospects with incredible precision now — reaching the right people at a fraction of the scale previously required. You can provide redundancy and continuity options that rival almost any private data center. Imagination, talent, passion, daring, perseverance — these are the most valuable assets in modern marketing, and they’re not a function of size.



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