Overview:
Brands are increasingly adopting digital marketing techniques to engage with existing customers and attract new customers. The COVID-19 pandemic has only accelerated this trend as the contagiousness of the disease has mandated people across the world to stay at home for almost all the time.
The general uncertainty with respect to business and economy has brought about drastic changes in consumer preferences and spending patterns. This has caused digital marketing departments across organizations to rework their strategies to realign with the changed consumer behavior as well as make budgetary considerations to manage expenses.
In this article we discuss, some of the current trends in the MarTech industry and what M&A in this space will look like in the next 12-18 months.
Current trends in MarTech:
Conversational AI will gain heightened traction from digital marketers going forward. The rapid changes in consumer behavior, that have been seen in the past several months, can be best tackled using near real-time analytics and AI. Also, customer experience has become a key driver of customer loyalty. Conversational AI not only enhances customer experience but also helps gain insights about the customers, resulting in better recommendations.
While most organizations have witnessed a decline in sales in the current year and have lower MarTech budgets as a result of cuts in discretionary expenses, companies in the online education, e-commerce and digital entertainment industries have seen unprecedented growth in sales and have an increased budget for their MarTech stack and their digital marketing workforce.
It has also been found that most organizations have been struggling with the utilization of their MarTech stack. According to a recent survey by Gartner, marketing organizations make use of only 58% of their MarTech stack’s full breadth of capabilities – a level that has remained flat since 2019. As a result, MarTech leaders want to rationalize their MarTech stack and are looking for easy to use, integrated platforms over standalone solutions.
MarTech M&A:
Due to the fragmented nature of the MarTech space, it has been seeing consolidation for some time now. The the current need of enterprises to have an integrated MarTech suite will only intensify M&A activity in this space. Smaller MarTech platforms will increasingly look to acquire AI-focused complementing capabilities to build more integrated MarTech suites akin those of Salesforce, Microsoft or Adobe.
IT consulting companies are expected to consummate capabilities focused acquisitions to augment their MarTech capabilities and headcount as enterprises will outsource some of their MarTech personnel requirements to them due to the lack of in-house expertise and for better utilization of their MarTech stack.
We expect M&A activity in the services space to continue to be dominated by targets with Salesforce / Adobe / MS Dynamics capabilities in the near to mid term as they have the most comprehensive MarTech stacks. The consulting partner ecosystems of smaller players will be playing catch up for some time as the bigwigs continue to expand their capabilities and offerings actively.
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