Salesforce.com's pending US$2.5 billion purchase of marketing software vendor ExactTarget will help it develop a new $1 billion annual revenue stream and set the company on a clear strategic course for the foreseeable future, according to Salesforce.com CEO Marc Benioff.
The ExactTarget deal, the largest in Salesforce.com's history, was announced Tuesday and is scheduled to close by the end of July.
Salesforce.com already had some marketing capabilities, especially for social media ad campaigns and associated analytics, gained through its acquisitions of Buddy Media and Radian6. But it wasn't enough to play in today's market, Benioff said during a conference call Tuesday.
"We recognized we have to get stronger in critical areas like email as well as marketing automation and lead nurturing," he said. "We wanted to make one large purchase that brought all of these things together. We can't keep making these small acquisitions. We needed to do something of consequence. We needed to do something now."
Benioff also suggested that Salesforce.com was involved in a bidding war with other, unnamed parties for ExactTarget. "This was a very competitive process and we're thrilled to be the victors here," he said.
But now Salesforce.com is going to close its wallet for a while. "I think what you're going to see is us taking a vacation from [mergers and acquisitions] for anywhere between 12 and 18 months," Benioff said. "We are going to really double down and focus on the success of ExactTarget. Now we have a clear trajectory for a $1 billion marketing product line. This is a clear product strategy for Salesforce.com to take into the future."
In buying ExactTarget, Salesforce.com is simply following the money. Gartner has predicted that chief marketing officers will spend more money on IT than CIOs by 2017.
ExactTarget's capabilities will also give Salesforce.com more weapons to battle against competitors such as Oracle and IBM, both of which have made major investments in marketing software.
Salesforce.com shares many of ExactTarget's more than 6,000 customers, and expects to have plenty of cross-selling opportunities, executives said on the conference call.
ExactTarget has also been a Salesforce.com partner, and there's already a degree of integration between their products.
Still, some market observers had expected Salesforce.com to purchase an ExactTarget competitor, Marketo, with which it has also partnered. Marketo recently launched a successful IPO.
Marketo could have been too expensive for Salesforce.com to buy, said analyst Ray Wang, CEO of Constellation Research.
Meanwhile, it's not clear how Salesforce.com's existing relationships with Marketo and other marketing software partners will change moving forward.
Salesforce.com's AppExchange, where partners can showcase their products, is "a dynamic marketplace," Benioff said during the call. "People are constantly coming and going. We understand that and you can see how it changes and evolves over time."
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