Results International publish their AdTech and MarTech Barmometer every quarter. Q2 2016's report reveals unprecedented M&A deal values greater than USD$500m (£381m). Furthermore, public market performance across MarTech jumped 32%. In this piece, ExchangeWire quiz Julie Langley, partner, Results International about economic factors driving the market.    

ExchangeWire: The Q2 2016 report reveals many upward trends. For example, unprecedented mega-M&As, several deal values greater than USD$500m (£381m), and 32% growth in public market performance across MarTech. What economic factors do you think are driving this surge in activity and performance?

Julie Langley, Partner, Results International

Julie Langley (pictured): We are seeing a race to become a de facto software platform for marketing functions. A precedent exists for this – other functions within enterprise businesses have a core, dominant software platform. For example, Workday in HR, Salesforce in Sales, SAP or Oracle in finance. Such dominance is yet to be set in marketing, where a wide range of software products are being used. History shows us that it is unlikely there will be room for more than two clear winners in the long run. Until that gap is filled, inevitably, big players e.g. Oracle, Salesforce, IBM, and others, will continue to jostle for control.

Other drivers of upward trends seen in Q2 include:

– An ongoing shift to digital

– A need to map evermore complex customer journeys

– Desire to provide a consistent brand-customer engagement experience across all channels and touchpoints

– Pressure to bring equal levels of rigour when it comes to measurement of marketing ROI/KPIs - something that other functions do by default.

In the adtech space, the pace of innovation and new entrants into the sector is driving demand.

Why do you think MarTech companies are out-performing AdTech companies in terms of share price performance?

Public market performance of MarTech companies has been driven in large part by takeovers of listed businesses, causing takeover premiums. MarTech's revenue model, typically based on licence subscriptions, has proven more attractive to public market investors than transaction-orientated models (percentage of media spend, or arbitrage) seen more often in adtech. A subscription model offers longer term revenue visibility. In addition, publicly-listed MarTech companies tend to have greater scale and revenue growth.

How do you see the Oracle/Salesforce/Adobe 'arms race'?

Large players will continue to add components to their marketing clouds before a clear winner emerges in MarTech. A good example here would be the recent acquisition of Demandware by Salesforce – a clear strategic move. Oracle and IBM both have an e-commerce platform, but Salesforce didn’t. Salesforce already had marketing automation tools used to send emails to drive sales, it also had Service Cloud customer service software to manage support for those e-commerce transactions. Crucially, it did not have visibility of sales transactions and Demandware enables Salesforce to track customer journeys more completely.

Adobe uses a slightly different approach, given it started out in content creation and focused on the front-end. It doesn’t own a CRM platform – unlike Oracle or Salesforce, which have a heritage in CRM.

Who will be the winner will depend a lot on sector and size of client.