Scott Brinker and ChiefMartec published their annual eye chart of MarTech companies. The list grew another 13.6% to 8,000 companies. However, the attrition rate was 8.7% as one in twelve companies on last year’s list were either acquired or folded.
The Data category grew by 25.5% to 1,258 companies. Within the data grouping, Governance, Compliance, and Privacy rose 68%. Other sub-segments with rapid growth include Conversational Marketing and Chat (up 70%), Projects and Workflow (up 41%), Print Advertising and Promotion (up 35%), and Video Marketing (up 26%).
While MarTech continues to expand, Brinker contends that the industry has a long-tail with one to two dozen platforms that “dominate global market share.” These are followed by a few hundred category leaders, each with tens or hundreds of millions of dollars in revenue.
Brinker argues that MarTech has evolved from suites to platform ecosystems that look to leverage the capabilities of long-tail builders and entrepreneurs, providing niche solutions integrated into their platforms. “The stability of a major platform as the backbone of a marketing stack augmented with a set of specialized apps designed to plug deeply into that platform is a powerful combination. A “point solution” — which used to be a negative label — isn’t a point solution any more when it seamlessly integrates into your primary platform. It becomes part of the fabric of your stack. Literally: it’s a feature, not a bug.”
“At the same time, these characteristics give long-tail Martech businesses a certain degree of robustness,” continued Brinker. “By integrating deeply with a major platform, they overcome buyer objections to unintegrated software. They tap network effects with other integrated apps that can benefit from each other’s data and services. And they can focus their marketing and sales energies toward a well-defined target audience — customers of that platform — often through online marketplaces run expressly for that purpose.”
This logic is being replicated in newer categories such as Sales Engagement. Outreach and SalesLoft have offered partner ecosystems for several years that augment their capabilities and provide flexibility to their offerings. Just as Salesforce has acquired companies to extend its capabilities, SalesLoft has acquired partners (NoteNinja and Costello) to extend core capabilities. Smaller vendors may not offer formal app directories, but usually partner with a few best-of-breed vendors in various categories (e.g. LinkedIn SNAP, Vidyard, Drift, Zoominfo).
Now, this year’s data was collected before the coronavirus pandemic exploded globally in March 2020. The elephant-in-the-room question, of course, is what impact will this crisis have on the Martech industry? What will the Martech landscape look like in 2021?Scott Brinker, ChiefMartec
Brinker sees the pandemic as “more of a short-term hit than a long-term death” as “it’s going to be a tough time for their customers,” resulting in a culling of weaker vendors. Certainly, business spending will be reduced due to economic uncertainty. Brinker also cautions that marketing operations will be stretched thin, dealing with crisis operations, and a reduction in VC funding will increase the perceived vendor risk for startups.
But the pandemic is not entirely negative for MarTech companies. On the positive side, businesses will “lean in to digital engagement / transformation,” focus on performance marketing, and benefit lower-priced products tied to platform ecosystems.
“The world is going to continue to become more digital. If anything, this crisis will accelerate the motivation for firms to embrace digital operations and digital customer experience. And that’s where MarTech thrives.”
Finally, Brinker noted market analysis conducted by Luma Partners. While the S&P 500 was down 25% in Q1, MarTech public companies were down only 8%. This mild decline is an indicator that MarTech is viewed more favorably by the market than other categories (and far better than AdTech, which declined 32%).
- 2019 Chief MarTech Analysis