Dash For the Exit: CDP Acquisitions Rattle MarTech Firms
How much is that Customer Data Platform in the window?
It’s been a rough year for martech firm Radius Intelligence. Last year, three months after the customer data platform company announcing a merger with competitor Leadspace, the deal was canceled without fanfare. Not long afterwards, they fired their CEO. And in early September of this year, it was announced that they would be acquired by fintech startup Kabbage. The terms of the acquisition were not disclosed.
Now enter predictive marketing company Mintigo, who danced into 2019 by securing a $7 Million funding round – only to be acquired in late August by Anaplan, a business performance management software company. Again, the terms of the deal have not been made public.
These acquisitions, coming on the heels of the recent Dun & Bradstreet grab of Lattice Engines, should have a lot of CDPs, if not nervous, certainly eyeing these moves with raised eyebrows. And there are a few reasons why. Lots of companies are making plays for data – that’s what these moves are really about. That they’re not disclosing the terms of the deals isn’t great for other CDPs either – because it typically indicates a valuation much lower than anyone would care to make public. Basically, we want your data, maybe a little bit of your software development capabilities, but we’re dubious if it’s worth very much.
Given that CDP solutions and AI-powered anything are dominating the industry conversations right now, why couldn’t these companies make it on their own?
I’ve got some thoughts.
If you can’t stand the heat
Customer data management and predictive analytics are two kitchens that are thisclose to being over-crowded. There are several key players all gunning for market share in B2B’s small, hyper-competitive space. Couple this with the recent rumblings about a potential recession and many of the small players are looking to exit fast, at whatever cost they can negotiate, before any economic troubles really set in.
To succeed in this industry right now, you’ve got to have a world-class team, a clear vision of where you’re heading, and a laser-like focus on ensuring that your customers believe in what you’re doing and are thrilled with the results. Lukewarm ain’t gonna cut it if you want to win here.
What business? Why ignoring SMBs is a mistake for CDPs
A recent article on these acquisitions faulted both Radius and Mintigo for failing to woo SMBs. An interesting argument given that Kabbage is primarily focused on providing small to medium companies with business loans. Radius may not have dedicated much time to SMBs, but it would seem that they’ve collected some valuable SMB data while they were busy courting the big fish.
This perceived failing (whether it is actually warranted in this case or not) does indicate a big mistake that a lot of B2B businesses make – targeting potential customers based on company headcount. As noted in a recent LeadCrunch B2B podcast episode, the vaunted Berkshire Hathaway only has 24 employees, yet reported $210 Billion in revenue in 2017. That’s a future-securing deal to close – but you’d miss it using traditional targeting methods.
Instead of considering a company’s headcount as an indicator of their size, and their potential value to you as a customer, a better approach is to consider the relative size of the department you’re targeting within the company. That information – like the ratio of say, remote employees to in-house – would be more valuable to you if the product you’re selling is a next gen VoIP solution. A small company of 25 that is fully remote might be your next ideal customer – but if you’re cutting the scope at companies of 500 employees or more, you’ve missed that sale opportunity completely.
The lesson here? If you’re only focusing on the big fish, those enterprise behemoths, you’re going to miss a lot of potentially lucrative SMBs.
Don’t be dumb about data
I saved this for last because it’s the meat of the issue. Listen to any industry analyst and they’ll tell you that data is the new oil. It’s the most valuable commodity we have, and the players who have the ‘best’ data will win the long game.
Best data does not mean the most data.
You can have terabytes of data on your servers, but if you can’t pull meaningful, revenue-generating insights from that data to help your customers, you’re wasting the space.
But it’s even more complex than just having great data that’s also relevant for your customer – you’ve got to have a crack data science team that can build algorithms and programs that make that data actually valuable. Behind a lot of these recent acquisitions is the desire for more data and that’s only meeting half the challenge.
These companies likely struggled on both fronts – data quality and data usage. If you’re crunching the same data everyone else uses for targeting like SIC codes, industry, headcount, titles – you’re going to get the same results. And customers that are interested in adopting AI for targeting aren’t interested in getting the same information they could have gotten themselves – even if it’s delivered faster. They want better insights. “Tell me something I don’t know.”
So now what? Are CDPs “dunzo”, as the kids say?
Not at all. I may be an unrepentant optimist but I think things are about to get really interesting. And this is a very good thing. It’s good for predictive analytics and customer data management companies, because it’s forcing all remaining players to acknowledge that it’s not enough to just have a lot of data. You have to be able to understand what that data is telling you, and then provide those insights to clients in a way that will make them money.
It’s also incredibly great for B2B companies that are starting to add artificial intelligence solutions to their martech stack. They now have access to information that helps them make smarter decisions – from how and who they message to, to what quality leads actually look like for their specific business offering, to the company-cultural repercussions that happen when Sales & Marketing are actually in alignment. The result? Happier people, who are more effective at their jobs. (I did tell you I was an unrepentant optimist.)