TMW #044 | Will the CRM last? Living in Apple's ecosystem and display advertising’s role in fake news.

Jun 13, 2021

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The CRM industry fascinates me. It is one of the categories that have benefited the many companies that moved to the cloud-first, continue to enjoy very low customer churn, but remain technologically diverse, in spite of popular belief.

Inspired by a massive thread this week in the TMW Slack community, I look into the CRM space, along with the latest in Apple's privacy announcements and the role of display advertising in powering fake news.

✍ Commentary

🤝 Will the CRM last? The CRM industry as we know it today started properly in the late 90s, with IBM, Gartner, and Seibel, the three amigos. But if you look around now, there are almost 700 CRM software packages out there, in an environment where a small group of companies owns more than 50% of the total market share of the industry. Ever since my first Salesforce CRM implementation, the product category has always been a peculiar fascination to me. Customers who buy CRMs never leave them, because it’s horrendously difficult and complicated to leave. And companies like Salesforce have been able to tie personal ambition to data technology in a way that turns what should be pretty mundane stuff into topics that people will enthusiastically tell you all about, at no end.

How did we end up here? This week we started an open thread in the TMW community slack group about why Salesforce is the dominant player in the CRM space and what it means for people who work with these types of products on the daily. And a number of factors came out of that conversation.

When you look at the data, the CRM industry is dominated by Salesforce, and of course, they deserve the 20%+  market share after a decade-long growth rate of 1182% (compared with a 200%+ growth rate from the second-largest CRM company, Adobe). Salesforce was the first true cloud platform to run CRM, they have been able to keep customer retention high, are masters at selling to the enterprise, and have created a religious ecosystem that ties employee ambition (promotions, raises, career trajectories), with community, achievement, and education (Trailblazer), which culminates every year at Dreamforce, the company’s yearly homage to B2B sales. And because they went in cloud-first, they’ve been able to integrate email marketing, customer data platforms, service, and many other aspects of business into their platform. Make no mistake, Salesforce is the Amazon of B2B enterprise tech. Almost every other major CRM vendor has decreased in prominence, Salesforce has only grown in appeal and relevancy compared to its peers.

But what about the other 50% of the CRM market? Salesforce, Adobe, and Oracle have been successful in selling to large, enterprise businesses in a variety of ways. Yet what has remained especially true is that various industries have specific needs from a CRM, from hairdressing to renting out cars to the local accountant’s office - each have particular needs. This really speaks to a market where the uniqueness of solution is a strong vantage point to have, and what I suspect is that many who go to the most well-known CRMs in the market are the ones who have failed implementations, lack integration, and all of the things you’d need to run your business properly as the solutions don’t closely align with the industry they are serving. If anything, this should tell you that the CRM market is alive and well, it's growing and there's plenty of space for vertical-specific platforms. Links: Salesforce Fiscal year 2020. G2 CRM industry report.Salesforce as religion.Why CRM project fail.Gartner CRM market share report. Forbes analysis.The CRM is dead.

🏡 Living in the Apple ecosystem. This week my social feeds blew up with headlines out of Apple’s annual WWDC conference, announcing a number of significant changes to how iOS will further limit the kind of tracking that can happen in apps like Mail. Now the first and most obvious things to discuss is Apple’s move to restrict tracking pixels in the Mail app, which will lead to a loss of reliable data on email open rates. This is bundled in with an update that will force the caching of all images sent to Apple devices, which will affect real-time images and aspects of personalization as well. But outside of that, there are some enhancements made to how data transfers are made between iOS apps and the domains that collect that data, which will likely expose a whole new cast of non-compliant data and tracking processes and the companies behind them.

And while email marketers everywhere have been saying the sky is falling, and rightly so, almost 50% of the email client market runs on iPhones, the reality, for now, is that the changes really only affect the Mail app, which is about 13% of the total market according to Litmus. The sky isn’t really falling, but the cracks are starting to show, and marketers will need to adapt to the privacy-first world we’re about to find ourselves in, or that Apple is telling us should exist.

What is the goal here for Apple? Well, we can’t really be surprised at this announcement, as Apple’s view on privacy has been to block everyone else except themselves from tracking data on users. Compare what has happened with IDFA blocking, Safari’s cookie removal, and how Apple collects data on users in the Podcast app. It’s a stark difference, Apple saying that nobody should know what you’re reading on an iPhone, while also saying that they use your listening behaviors to give you personalized Podcast recommendations and hand that data to outside parties highlights the contradictions and gaps in the new privacy front.

Something else was also announced this past week, and that’s the ability to run experiments in the App Store to help developers find the optimal messaging and feature highlights as part of Apple's growing advertising suite in the App store. Of course, what can be tested is significantly constrained, yet this highlights what should be now a glaringly obvious fact - Apple wants to own all aspects of the customer experience and data on the platform. Outside parties will be squeezed out, as Apple continues to build into new areas of business like advertising, video streaming, and even search. And of course, there’s resistance.

This week it was announced that the EU competition authority will be forcing Apple to allow a second app store on its platform to mitigate marketplace dominance. Facebook also announced that they will support small businesses to monetize outside of apps to get away from the 30% Apple tax. Both of these reactions really highlight the obvious problem of platform dominance. Once a company controls the hardware, operating system, and marketplaces, this leads to less innovation, fewer startups, and at the end of the day, a worse deal for the users on the platform. Links: WWDC recap. Email tracking on iOS. Email tracking practicalities. Apple and AB testing. EU commissioner on a second app store. Facebook and Apple’s 30%. Apple iPhone monopoly. Apple’s integration strategy.

📈Chart Of The Week  

📰 How is fake news supported by ad networks? New research from the University of Michigan looks at the correlation between fake news and display advertising. They found that Google serves almost half of all ad traffic on fake news sites. Also, there are hundreds of fake news sites that are significantly dependent on the revenue generated from the largest ad networks. There’s a lot to unpack here, but the main point is that high-quality journalism is becoming a product that people will pay for, but fake news doesn’t really qualify for that, so what happens when the most accurate, trustworthy news always lives behind a paywall? Study. Analysis.

📰 Latest Developments

Amplitude reaches a $4B valuation. This company is one of the most interesting platforms in Martech. Some of their customers pay well over $1M annually for the product analytics service, which shows how important packaged analytics suits are to companies in the pandemic age. Amplitude managed to quadruple their valuation from last year and they reached over $100M in revenue in 2020. Link

Apple, Google, and Microsoft to build a common view of extensions. Browser extensions have their own economy and business models, and more importantly, they can quickly become a central part of a user’s workflow. However, if you’re using Safari or Chrome, the experience is very different, and usually, the developer loses out because of this. In a very rare collaboration, the three companies are going to work together for a better browser extension framework. Link

Government access to messaging apps. A story broke this week about the Australian Federal Police running a three-year sting by compromising a messaging app, ANoM, to gain access to user data and encrypted conversations.  The government wants to target larger messaging services, which should raise plenty of questions about privacy and security. Link

📚 Reading

The state of data engineering. Data engineering has always been part of software development, however, the industry has grown so large it needs its own supergraphic to contain all of the solutions that fit into the ecosystem. Manageability is now a first-order problem as data engineering touches everything from core services to reporting, dashboarding and predictive analytics. Most advanced tech companies had to build their own solutions to manage scale, but now alot of those solutions have been atomized and sold as products in their own right. Link

So you want to be a software company? If you’ve been reading along for a while, something I say often is “every company is a technology company.” That’s because, for almost every single industry, software, the internet, and the devices we access them with have become an inescapable way to do business. As the past twenty years have ushered in this change, most “nontech” businesses looked to software-based business as a model for growth, which had led to a number of misconceptions. Link

The UX industry isn’t what it was. UX is a relatively young discipline in the digital economy, which used to be very niche, but has recently exploded in adoption across almost every industry. The culture of UX signifies elements of respect, compassion, and curiosity about the people who use digital products and services yet has recently become more of a methodology to get buy-in from business stakeholders on design ideas. Where did the magic go? Link

🔢 Data & Insights

Generational attitudes to payments. Gen Z is our first truly digitally native generation, and so you would presume that the ways in which this generation approaches payments and commerce would be different. Some interesting research from Worldpay looks into how the next generation will be checking out, like one statistic which suggests that 75% of Gen Z prefer to use subscriptions to pay for things. Link

The age of the customer. New research from Forrester looks at the impact of planning for CX on company growth. CX here is defined as “data-driven customer experiences. It’s a survey across the industry and helps to add to the narrative around the challenges of building customer experiences and the expectation that it will pay off for companies. About 85% of respondents said that investing in CX will yield business results for them, and if you look at this with another result that said the main business driver for investment is meeting customer expectations, you can probably tell that investing in CX is really about helping companies catch up with technology innovation. Link (note you will need to sign up for the report).

The rise of regions. A fascinating study into the pandemic inspired shift of populations moving to regional areas in Australia. The amount of people who’ve moved to regional areas has doubled compared to 2019. I’d say this kind of shift is happening elsewhere, and it’s important. When WFH means living near a capital city is optional, people will opt out of the CBD life for a whole host of reasons. Marketers should watch this change, as it augments how brand value is aligned to the interests of a demographic that are quickly changing their geographical preferences. Link

💡 Ideas

The Netflix D2C experiment. Every great entertainment company has offered merchandise with Disney being one of the clearest examples. So what does it say when Netflix gets into the merchandise game for some of its most popular shows? For entertainment-centric companies, all roads lead to shopping, something that retail companies are yet to figure out. Link

Wordtune. With Google products like slides, docs, or Gmail, you've probably noticed that your sentences are being completed for you based on Google's algorithm. But what about a tool that will completely rewrite your sentences for clarity? Wordtune does this in a way that blurs the lines between authorship. If an algorithm does some of the editing and some of the writing for you, how much of your work is actually yours? Link (BTW, this paragraph was edited by Wordtune).

Why decentralisation matters. For most people, crypto signals a sense of decentralised finance that’s an alternative to government oversight, censorship and the centralised control of the banks. But it’s actually bigger than that. The internet is now a place where the centralised platforms that started a decade ago (like iOS or Facebook) have so much control over the flows of information and commerce that there’s little incentive to continue creating value for the users in that platform. Here’s a breakdown of how decentralising may become a way to rebalance the internet. Link Also see the same concept but for the music industry. Link

✨ Weird and Wonderful

Linguistic competence and memes: A study. This slide deck is perhaps one of the most colorful examples of a serious investigation. How do memes augment how we communicate? What does it mean for creative expression? Why is it that a single idea captured in a funny photo can traverse language, culture, and place? Heaps to unpack in this study of memes. Link

Read something great. Someone took the most popular articles shared around the twitterverse and created a simple tool to serve them up 5 at a time. The creator thought it would be a small way to help people get off the infinite scroll. Link

Don’t feed the thought leaders. This article puts into words what I suspect alot of us are thinking when it comes to generic advice in our industry. It’s all over the social channels and pushed by articles and webinars across tech companies, consultancies, and the like. This person’s point of view is that most of this should be ignored instead of it being upheld as thought-leading activity. Link

Stay Curious,

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Juan Mendoza

Juan Mendoza is an expert in researching global media, marketing, data, and technology trends. He is the CEO of The Martech Weekly, a media and research brand with subscribers in over 65 countries.

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