Startup action in social media marketing

Even after Facebook’s IPO “disappointment,” there was a lot of action around social media marketing startups last week. Perhaps it’s because the industry recognizes that the challenges in monetizing Facebook and other social media present big opportunities for companies that can help. Salesforce.com bought Buddy Media for nearly $700 million and Oracle announced it would buy its second company in two weeks. At the same time, two social media marketing companies – Shoutlet and Unified Social – raised about $15 million apiece.

While these transactions are riding the same uber-trend, it’s too simple to just say: “social media marketing technology is hot,” or “get ready for market consolidation.” In the overall social media marketing ecosystem, some combinations make more sense than others.

Who buys social CRM?

The big guys are buying technology and services companies to roll up into social CRM offerings. But most of them have little experience selling to advertisers or publishers, two big constituencies in in the social marketing ecosystem. Gartner says that by 2017 CMOs will spend more money on technology than CIOs. That seems like a stretch, even to a social media analyst like myself. But reports of billion-dollar ad sales for Twitter seem aggressive, too. Regardless of the final total, marketing-technology spending is a potential new growth area for enterprise software companies.

Larry Ellison claims Oracle took a look at Buddy Media, but got the company it wanted when it announced it would purchase Vitrue. Both companies offer technologies and services that help advertisers and marketers manage social media campaigns on Facebook, Twitter and across the web. Last week Oracle added to its portfolio Collective Intellect, which makes semantic analysis software it says works faster and cheaper than natural language analysis. Oracle is fleshing out its SaaS offerings with technologies for integrating social data into marketing functions like customer analysis and service, and it has eyes for social-media style enterprise collaboration. But it doesn’t have much history working with advertising agencies or the advertisers directly.

Buddy Media, Salesforce’s biggest-ever acquisition, adds heft to Salesforce’s social media monitoring tools from Radian6. Salesforce has similar ambitions to Oracle’s, and similar expertise. Buddy Media CEO Michael Lazerow says his company needed to ramp up its own sales force to grow faster. But it’s pretty clear from this interview that Salesforce has had to add personnel that know how to sell into unfamiliar marketing functions. That’s not a condemnation, but a sign that it recognizes there are different customers for social media advertising tech.

Meanwhile, on the advertising side

Google might have been looking at Buddy Media, too. Google, and other big companies like Adobe and Microsoft, have more experience in selling services for advertising and web publishing. A truism of social media and content marketing is that advertisers are now publishers. Adobe announced Adobe Social in March, which will in theory unite a suite of social media management tools from its Efficient Frontier/Context Optional acquisition with social analytics.

But there are good reasons to believe the social media ad ecosystem won’t consolidate to a handful of big players. Sure, just as in the overly complex online display advertising space, there’s a case to be made for knitting together companies to provide a simpler, easier to manage solution for buyers or sellers. But there is also a need to maintain natural, healthy adversarial roles between marketing buyers, sellers, and “counters.” Otherwise, you have conflicts of interest – the fox guarding the henhouse. That’s why Shoutlet might be able to stay independent and focus on brand advertisers and agencies, and why Unified Social took an investment from Advance Publications, the parent company of the Conde Nast magazine empire.

That same dynamic exists for data collection, with the additional twist of maintaining consumer privacy via aggregation and clearing-house functions. Advertisers will never completely trust data from the companies selling them ad inventory. The Nielsens and Experians – which bought Conversen in May – of the world can be arms sellers to both sides.

Question of the week

Who will be the winners in social CRM and marketing?
Relevant Analyst
P1040724

David Card

VP Research Gigaom Research

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