's ExactTarget Buy Equals Marketing Clout - InformationWeek

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50%'s ExactTarget Buy Equals Marketing Clout strikes $2.5 billion mega-deal to extend the breadth and depth of its marketing cloud services.

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(click image for larger view and for slideshow) on Tuesday announced a whopping $2.5 billion deal to acquire ExactTarget, a 14-year-old marketing automation and campaign management vendor based in Indianapolis.

The deal, which is set to close by the end of July subject to regulatory approvals, will dramatically increase's marketing capabilities, helping the company to respond to rising digital marketing expenditures.

"The CMO is expected to spend more on technology than the CIO by 2017," said Marc Benioff, chairman and CEO of in a statement. "The addition of ExactTarget makes Salesforce the starting place for every company and puts in the pole position to capture this opportunity."

By combining ExactTarget's digital marketing capabilities with's sales, service and social marketing capabilities, Salesforce said it will create "a world-class marketing platform across email, social, mobile and the Web."

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The acquisition comes at no small price, as Salesforce is paying a 53% premium over ExactTarget's Monday stock closing price $22.02 on the New York Stock Exchange. Under the terms of the deal, will offer $33.75 per share for the outstanding shares of ExactTarget. Salesforce recently raised $1 billion through a bond offering for the express purpose of bolstering its marketing capabilities through acquisitions. The ExactTarget deal,'s largest acquisition to date, will blow through all of that cash and more.

ExactTarget had revenues of $292 million last year and was projecting revenue of $317 million in 2013 -- a comparatively modest growth rate of 8.5%. The company's cloud-based marketing platform helps companies integrate customer data from multiple sources to power digital marketing campaigns across multiple channels, including e-mail, mobile, social and Websites. ExactTarget has more than 6,000 customers, including Coca-Cola, Gap and Nike.

Salesforce marketing capabilities were previously limited to social channels, powered by capabilities gained through the acquisitions of Radian6 and Buddy Media. In contrast, rivals including IBM, Microsoft, Oracle, SAS and Teradata, among others, have much broader, multi-channel marketing capabilities, most on the strength of acquisitions over the last three years.

Benioff recently acknowledged the gaps in the Salesforce Marketing Cloud, and he said acquisitions would be required to meet the goal of reaching $1 billion in annual revenue. Marketing cloud revenue is currently at about $100 million, he said.

Will the ExactTarget deal be worth it? Salesforce said the acquisition will increase total revenue by just $120 to $125 million in the current fiscal year, as revenues won't accrue until the fiscal third quarter. Salesforce also anticipates a $65 to $70 million reduction in revenues related to adjustments to billed and deferred revenues. Salesforce is clearly counting on growth to make the deal pay off in the long term.

"Marketing was the fastest-growing CRM category in 2012, growing at 21% -- more than four times the software industry forecast norm in 2012," said Gartner analyst and VP Yvonne Genovese in a statement issued by Salesforce. "We believe this growth will continue and marketing will be the largest growing CRM category through 2017."

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