salesforce.com, inc. (NYSE:CRM) recently acquired ExactTarget Inc (NYSE:ET) for a hefty 53% premium, which is making investors question whether or not Salesforce.com is effectively deploying capital. Some are concerned by the valuation, and wonder if Salesforce.com even merits the $22.5 billion market capitalization and 6.9 price-to-sales multiple.
Anyone who works in sales will understand that coordination and collaboration are two of the most essential ingredients for success. What salesforce.com, inc. (NYSE:CRM) offers is enterprise-level software for any company that needs customer-relationship management when selling. Salesforce.com helps small, medium, and large-sized organizations to better coordinate and employ selling efforts. This is important, as information on selling may need to run through many departments within the same company. Decisions need to be made fast, and with this software, companies are able to limit bureaucracy, increase sales performance, and better enhance customer satisfaction while managing multiple marketing initiatives all at once.
The acquisition builds on top of salesforce.com, inc. (NYSE:CRM)’s marketing software. ExactTarget Inc (NYSE:ET) provides a mix of consultation and advice to advertisers wanting to implement CRM software, e-mail marketing, software support, consulting, and analytic market research. With the acquisition of ExactTarget Inc (NYSE:ET), Salesforce.com hopes to win the hearts of chief marketing officers across the United States by being an all-in-one solution. Think of it like Boston Consulting Group merging with International Business Machines Corp. (NYSE:IBM)’s business analytics division but apply it to the world of marketing, and you can get a basic idea of what’s going on.
Gartner projects that spending by chief marketing officers is going to exceed the spending done by chief information officers by 2017. AT&T projects that the cloud will be a $210 billion industry by 2017; so if marketing spending is going to become bigger than that, you can only imagine the growth possibilities with salesforce.com, inc. (NYSE:CRM).
The synergies that could happen by having a front-facing consultation team along with back-end software could be tremendous. Currently, the management team believes that interactive marketing, including e-mail marketing and marketing automation, will exceed $15 billion by 2016 (which is just a small component of what salesforce.com, inc. (NYSE:CRM) does).
Social and search engine marketing will grow
The world is continuing to revolve around non-sales-selling, along with personalized selling. The approach to customers should be either heavily customized based on individual need or should be based on the lack of selling presence. Google Inc (NASDAQ:GOOG)‘s search advertising has allowed some companies to avoid the investment into a front-facing sales staff. Today’s marketing is more about non-direct marketing that tries to sell without the customer feeling as if they have been sold to.