Here's Why Salesforce Spent A Whopping $2.5 Billion On ExactTarget

Business Insider

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Marc Benioff

Business Insider/Julie Bort

Salesforce.com CEO Marc Benioff

Yesterday, Salesforce.com made its largest acquisition ever, spending $2.5 billion to buy ~$300 million company, ExactTarget.

And that 8x multiple was a good deal, one analyst told Business Insider.

That's because companies spend nearly $4 trillion a year on technology, mostly through their IT departments.

Salesforce.com's CEO Marc Benioff believes that by 2017, the Chief Marketing Officer will buy more IT than the Chief Information Officer. So he's trying to beef up his Salesforce's Marketing Cloud service as fast as he can.

ExactTarget makes tech for email and mobile marketing campaigns. It will join Radian6 and Buddy Media as part of Marketing Cloud.

He's not alone in thinking this way. Oracle and Adobe are also frantically building up marketing software clouds, Forrester market research analyst Rob Brosnan told Business Insider.

But why ExactTarget? After Oracle bought Eloqua last December for $871 million, rumor had it that Salesforce would snap up Marketo. Marketo just went public last month with a super successful IPO.

ExactTarget was already closely allied with Salesforce, Brosnan said. It was a Salesforce customer and a Salesforce partner.

Better still, it has a very lucrative business model. It sells subscriptions to its software and also charges per email sent, Brosnan says. Its customers include Groupon, Microsoft, Toyota, CareerBuilders.

"Look at the B2C customers they have. They are sending hundreds of millions of emails per year," Brosnan said.

$2.5 billion was a fair price, too, he believes, on revenues of $292 million last year.

"It's a reasonable number. ExactTarget got an 8x multiple on revenue and they're growing at 40% a year. Salesforce did not overpay," he says because it was in line with what Oracle paid for Eloqua.

"I think Salesforce got a better deal than Oracle with Eloqua. Paid more but a better deal," Brosnan said.

One issue for ExactTarget's customers is what Salesforce will bring to the table for them. ExactTarget has a lot of consumer customers and most of Salesforce's tech is geared toward business-to-business companies.

Brosnan believes that this buy could be Salesforce's first step towards offering more ecommerce technology. Companies could use Salesforce for everything from an email marketing campaign to booking the sale.

This would put it on a collision course with SAP. SAP just bought Swiss ecommerce tech supplier Hybris Software on Wednesday, its first step into the $37 billion ecommerce tech world.



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