Big companies want to know how their customers think. They can’t do it alone.
Welcome to Protocol | Enterprise, your comprehensive roundup of everything you need to know about cloud and enterprise software. This Monday: self-driving marketing, an earnings bonanza, and the call drops at Salesforce.
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The Big Story
'Moneyball' for marketers
For the past several years, large companies have tried to build their own repositories of consumer information called customer data platforms, or CDPs. The idea was simple, if hard to execute: It's easier to sell products and services to people when you know what they want to buy.
Some were successful. Others failed miserably to piece together digital versions of individual consumers, due to the complexity of blending data trapped in different applications and databases.
Now vendors like Adobe, Segment, Microsoft, Google Cloud, Salesforce, mParticle and many more are selling CDP-related products. And it's becoming one of the fiercest battlefields in enterprise tech.
- As much as 70% of the spend on CDP is still spent on in-house application development, according to Alex Zukin and other Wolfe Research analysts. Despite that, the market potential for out-of-the-box products could reach $10.3 billion by 2025.
- "With all enterprise software, it starts with big companies doing something in a proprietary fashion they think are unique," Zukin told Protocol. But "this is potentially going to be the most important, foundational software layer for all of the front office."
The concept? Assemble data feeds from basically every major piece of technology used across a modern business.
- That includes CRM systems, enterprise-resource planning platforms, ecommerce sites, mobile applications, call-center interactions and more.
- Integrating those various applications, however, can be immensely difficult, especially when you factor in that some companies could still be running a CRM from Siebel Systems on a server sitting beneath someone's desk in an office in Colombia.
- But once that system is built, organizations can then run analytics on top of it to create personalized marketing offers, improve its sales strategies and, ultimately, make customers more engaged with the brand.
These products are becoming so important to some vendors that companies like Adobe and Twilio are completely revamping their whole long-term strategies.
- "For Adobe specifically, this is going to be the tail that wags the dog for their whole digital experience product line. Their entire marketing journey is going to be made or broken by their ability to do this," said Zukin.
- And at Twilio, which bought Segment last year for $3.2 billion, CEO Jeff Lawson "is almost refactoring the entire company to focus on this vision," he added.
- But convincing human marketers to let the machines overrule recommendations or strategies is no easy task.
- "It's a threat for them. This is just 'Moneyball,'" said mParticle Chief Product Officer Chee Chew, referring to the 2011 film about the Oakland Athletics' revolutionary use of data analytics to build a baseball team.
A pivot toward first-party customer data is helping to spur the rush toward building CDP among modern enterprises.
- That trend has only accelerated as companies like Apple enable users to have more control over how corporations track their behavior online.
- "With the changes to digital ID and third-party cookies being deprecated, the name of the game is going to be first-party data," said Jim Rivera, the head of product for Adobe Experience Platform.
- Look no further than Adobe's unveiling of its own service, one it labeled as the industry's first platform designed for that type of information. Naturally, that claim ruffled some feathers.
- Adobe's fresh focus on first-party data has "led to some pretty laughable press releases," said Segment CEO Peter Reinhardt. In reality, the company "was pretty late to the game."
Companies are scrambling to figure out how best to plug what is increasingly becoming a major hole in their data sets. But achieving the vision that Adobe, Segment and others have laid out is also a difficult task.
- For years, companies could rely on third-party cookies to help inform marketing efforts.
- Now, at least in consumer data, users have to provide consent for organizations to tap that information. And it seems that most are choosing to withhold it.
- Luckily for enterprises, they've been directly gathering information on their customers for years.
- "Companies will collect more and more first-party data, they'll realize that they have a lot more data than they're taking advantage of," said Chew.
But there's one glaring problem with efforts to work off first-party data: That information is messy.
- Oftentimes, the data is stored across different systems in wildly different formats, which can make analyzing it more difficult. There's even an open question of how reliable it is to begin with.
- According to a recent survey conducted by Forrester Consulting and sponsored by Epsilon, Adobe and Publicis Groupe, 58% of respondents reported having challenges merging all their data, while 57% said it was a struggle to keep those customer profiles up to date.
Ultimately, the vision is to create something akin to a self-driving marketing department, one that can scan the increasing massive amount of customer data housed within enterprises to build customer experience campaigns autonomously.
- That's obviously a grandiose goal. But given the companies involved in the effort and the money they have available to throw at the problem, expect the competition to get intense.
— Joe Williams
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This Week On Protocol
Finding the next Instagram: Andreessen Horowitz is launching a big $400 million seed fund. The goal is to help nascent startups with their first hires and early marketing strategies, reports Protocol's Biz Carson.
Last week was a big one for enterprise tech earnings. No surprise: Salesforce, Workday, Snowflake and several others all had blockbuster quarters.
The big takeaway about the state of the software market: "Long live the king … front office is great, back office is coming back. What's not to like," said Wolfe Research's Zukin. Below are highlights from the end of the week:
- Workday's revenue rose 18.7% to $1.26 billion. The quarter was "one of our strongest in company history," per co-CEO Aneel Bhusri.
- VMware's revenue rose 9% to $3.14 billion. Newly-minted CEO Raghu Raghuram's focus on software-as-a-service is seeing early results: SaaS and license revenue increased 12% to $1.51 billion.
- Domo's revenue rose 23% to $62.8 million.
Around the Enterprise
- Salesforce investors and analysts got a rare peek at what life at the software giant will be like once (if?) Benioff steps down.
- Microsoft warned customers that intruders may be able to access their main databases,reports Reuters. The company just committed $20 billion over the next five years to beef up its cybersecurity.
- Freshworks is trying to raise $100 million in its upcoming IPO.
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Thanks for reading — see you Thursday!