TMW #089 | The iteration game
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Here’s the week in Martech:
- The iteration game: Has Martech run out of novel ideas?
- The centrality of APIs: Integration needs only continue to grow
- Minecraft vetoes NFTs: Another blow to speculative crypto assets
- Everything else: Netflix and Disney choose ad networks, the mobile marketing winter, Web3 will succeed and it will be bad, marketing preparedness for AI, Pew research on the metaverse, BeReal and Microsoft streetwear.
The iteration game.
When Alan Turing invented a machine to decrypt Nazi wire communications there was no telling that this point-in-time technological breakthrough would lead to the smartphone in your pocket. Neither could DARPA, the US Government military R&D department, have predicted Google, TikTok or Salesforce when they were working on something called ARPANET, the predecessor to the internet.
Almost all the innovative marketing technology we enjoy relies on those who had the foresight to build HTTP, RSS, and Email, the building blocks of the internet as we know it today. Because of this, every single Martech startup is standing on the shoulders of these early pioneers.
Lately, however, it seems that the creation of breakthrough ideas has come to a standstill in the marketing technology industry. Most of what we call innovation is just playing cyclical games of iterating on what has come before, with no real breakthroughs in sight.
This week I asked LinkedIn, is Martech sliding into a state of endless iteration? Or are there some innovators building marketing technology solutions that are truly novel? One person commented that it’s been “20 years of changing logos around and doing essentially the same thing.” But this affirmation, at face value it not enough to justify a sweeping analysis of the industry to confidently say that Martech is no longer a movement of innovation.
The great Martech slowdown
In 2022 are there more or fewer marketing technology startups than in previous years? If you zoom out over the past decade we can say one thing is certain – Martech startups are becoming fewer in number. Thanks to Scott Brinker's and Frans Riersma’s decade-long work tracking, categorizing and counting marketing technology companies coming into the industry, we can now see that while the number of new companies is still growing every year– swelling to almost 10,000 logos in 2022, the year-on-year growth rate is in a long trend of decline.
Martech startups: Building to be bought?
If we zoom into prominent companies like Y-Combinator, and OnDeck, incubators for some of the world’s most successful marketing technology startups we can start to see what is happening. Most of the startups building marketing technology today are by and large feature factories designed for 3 – 5 year acquihires by the bigger marketing cloud players.
Most of the companies in the marketing technology category within these incubators are either fully dependent on a foundational predecessor (better eCommerce search in Shopify), a fresh interpretation of existing technology (A No Code version of Looker), or a verticalized SaaS tool taking off the shelf features to a new market (Marketing Automation for restaurants). The startup ecosystem in Martech is filled with companies that are iterating on the edges, dependent on the companies that came before.
The all-consuming cloud platforms
It's no surprise that a company like HubSpot, a CRM and Marketing Automation Platform company recently announced the launch of a $100 million dollar fund as part of Hubspot Ventures. The enterprise value of HubSpot’s ecosystem of software startups, services companies, and infrastructure products are worth more than $8 billion according to IDC.
According to a recent Pandium research project looking at the state of integration marketplaces, 86% of the top largest SaaS companies own one. Ecosystems are not just another way to enable customer success, they are also a pipeline for finding, vetting, and integrating other startups that are building the features that they don't have time to build.
As many of the early cloud platforms like HubSpot get bigger, they create their own pool of innovative companies to acquire through strategically investing in feature and product-aligned startups. This is less about building a VC or equity fund looking to make a return on a portfolio and more of an incubator for future talented employees and their inventions
The problem of course that you can count the number of big marketing cloud companies on two hands. If startups are increasingly building the future feature sets of potential acquirers, then it stands to reason that the opportunity for doing so will only get smaller.
The bigger cloud players have taken the past three years of pandemic-fueled growth and have channeled it into a series of bolt-on acquisitions. Surprisingly, even Intuit has entered this domain with the acquisition of Mailchimp to build an SME marketing and operations cloud.
Has Martech run out of good ideas?
It’s not that we’ve run out of novel inventions, or big bets on the future of marketing technology. It’s that we’re not incentivized enough to make those bets. An easier path for most startups is to be acquired and to do that you need technology capabilities that acquirers don’t have.
It stands to reason that the pressure that created the Turing machine in WW2 or the creative inventiveness of the computing industry in the 60s that gave us ARPANET were also free of potential acquirers and incentives. Both inventions were funded by universities and the military.
So what would happen to an industry that will spend the next 20 years iterating on the same fundamental concepts? What you get is the automotive industry. Today, a small group of global manufacturers builds slightly more efficient and safe vehicles year after year. Sure, changes happen over time with things like GPS, in-car entertainment and air conditioning but all of these innovations are just slightly improved upon the core use case of a car.
In the same way, you could implement Rubric, the first ever B2B marketing automation platform that launched back in 1998 and it will solve many of the basic use cases today. The original press release announcing Rubric's invention explains the innovation of a marketing automation platform in this way. Has much really changed since then?
[Rubric adherents] say it effectively closes the loop between sales and marketing, enabling the output from marketing programs to feed back directly into the sales programs which drive customer services and customer care schemes, and which in turn provide impetus for new marketing initiatives
In an iteration economy confusion reigns
One of the most curious things about the Martech industry over the past twenty years is how language is (mis)used. In most other maturing industries, language becomes more defined and precise over time. Going back to my automotive analogy, if I said that I’m going to buy a 4-cylinder, 2-door hatchback you would know exactly what kind of car I’m wanting to buy. This is because cars of this type have been around for decades and categories are reinforced as better, more popular versions are added to the market.
If I said I’m buying a Digital Experience Platform or a Customer Journey Orchestration Tool these technologies could have a dozen different interpretations. This is because even as Martech companies continue to iterate on the fundamental principles of technology, the use of language to sell, convince and inspire has only become more important to differentiate against a sea of competitors. As my colleague in response to my question said, most of Martech is “20 years of changing logos around and doing essentially the same thing.”
The title of this essay is a small play on words. Alan Turing titled a test “the imitation game” to see if a human can differentiate a human from a computer. In the same way, you can tell if a Martech company is doing the iteration game by asking if any of its technology is built to disrupt or built to be acquired. Until we have a decisive change in the format of the internet and how it’s experienced, Martech companies will continue to iterate on the edges and call it innovation. Links: MARTECH LANDSCAPE. Y COMBINATORONDECK. HUBSPOT.RUBRIC. PANDIUM
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📈Chart Of The Week
The centrality of APIs. A new survey on replacing marketing technologies found that one of the most important criteria when replacing Martech is the ability to use an open API or tap into pre-existing integration capabilities. It’s been a long-known factor that most of the marketing technology industry relies on APIs to create value for brands, but the needs continue to grow year on year. Link
📰 Latest Developments
Minecraft bans NFTs. In an increasingly hostile environment for NFT creators, the head of Minecraft has announced that the game will not support any NFT projects in the future. Part of the rationale for the move is to protect the gaming community from creating speculative financial investments that encourage profiteering instead of actually just enjoying games. Link
Netflix and Disney + choose ad network providers. The streamers are now moving to build their Adtech stack – Netflix with Microsoft and Disney + with The Trade Desk. If anything, more streamers turning into ad networks only adds to the choice and complexity equation when it comes to how marketers choose and manage channels. NETFLIXDISNEY +
DiDi breached data privacy laws. At almost 1B Euros, the Chinese ridesharing app was fined by the Chinese government because the app went public on the NYSE without a thorough audit of the app's data collection and usage practices. The review found that the company has been illicitly gathering large volumes of user data. Expect more of these stories to come out of the woodwork as data sovereignty and governance become a more significant issue for national security. Link
The mobile marketing winter. An argument to recalibrate your analysis in mobile marketing to better suit the broader economic situation and how consumers are engaging with products during a downturn. Link
Web3 will succeed and it won’t be a good thing. One of the most nuanced discussions I’ve yet seen about the potential of Web3 to succeed despite the recent collapse of almost every crypto project underpinning the movement. The essay lays out a very interesting case that success will not be good for the broader economy because the movement is fueled by a dangerous “techno-anarcho-libertarian” ideology aiming to subvert societal institutions with unchecked and centralized authoritarianism. Link
Matthew Ball on the Metaverse. With such a broad concept that can be taken to mean literally anything these days, Ball defines the Metaverse like this: “Think of the metaverse as a parallel virtual plane of existence that spans all digital technologies and will even come to control much of the physical world.” Sounds a little like the internet no? Link
🔢 Data & Insights
Marketing preparedness for AI. 63% of marketers from a Marketing AI Institute survey indicate that the main barrier to the adoption of AI in marketing is a lack of training and education. Part of the problem is the abstract nature of use cases. The issue is that it’s highly questionable that marketers should embrace AI without the guidance and enablement of data science and data engineering departments. Link
Reframing advertising profitability. Research from Kantar looks at the surprising ways in which marketers are gaining profitability multiples based on a number of variables not typically used in the analysis. One of the factors impacting the profitability of advertising is the size of the brand, with an 18+ multiplier. Link
Pew report on the Metaverse. This report is only worth reading insofar as to highlight how important the idea of “the metaverse” has become in mainstream marketing executive culture. Despite most people not knowing what the Metaverse is, countless reports, analysis projects, and surveys have been conducted to understand if there’s a “there there.” Link
What if Google ceases to be an ad network? There’s been discussion about Google offering to sell its ad network stack as part of a DOJ antitrust investigation. What would the internet look like if Google didn’t monetize on ads anymore? And who couple possibly acquire an advertising apparatus so large? Link
Media for equity. There’s a trend of D2C companies giving up equity to larger media companies in exchange for ongoing coverage of their brand across publishers. This creates all kinds of interesting incentives when publishers also become defacto sweat equity VCs. Link
BeReal. Every 6 months or so there’s a very niche, and very Gen X targeted social media app that goes viral. The new flavor is BeReal, a social media app that asks you to take a front and back camera photo once a day and at random times. An interesting social experiment, but a scalable ad business? Nope. Link
✨ Weird and Wonderful
Microsoft streetwear. Nerdy tech fashion for edgy millennials. Link
Explain jargon to me. Pairs well with McKinsey presentations. Link
Are we in a simulation? The CEO of $17b crypto exchange Binance explains that we’re all living in a simulation on the company blog. With this kind of strange behavior, maybe we are? Link
Make sense of marketing technology.
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