With CMOs predicted to spend more than $120 billion (US) on marketing technology investments in the next 10 years, it’s no surprise that venture capital firm’s have the sector high on the target list.
While over in San Francisco, AdNews caught up with Joanne Chen, the partner at Foundation Capital, which has invested in the likes of Netflix, Uber, AdRoll and TubeMogul.
The 20-year-old business, which has given cash boosts to 160 firms, with 26 of them going public, says investing in marketing and ad tech firms is high on the list. The firm, which tends to help finance six to eight firms a year, gave a cash boost to Netflix 15 years ago, currently owns a 21% share in TubeMogul and has invested more than US$80 million in retargeting business AdRoll.
Chen says the last few decades have been characterised by different waves of corporate custodians. In the 1980s CFOs were the big deal, calling the money shots, in the 90s the power and influence shifted to sales, before moving into the hands of the CIO in the 2000s.
“That was then but our belief now is that this really is the decade of marketing and the CMO and we are seeing a lot of evidence of that,” Chen says.
She says Gartner forecasts that in the next five years CMOs will actually spend more than CIOs on technology – with the key tech capabilities falling under the marketers’ responsibilities - those being digital marketing, e-commerce and customer experience.
“As a result we believe that CMOs will increase spend tenfold over the next decade and this will be a US$120 billion opportunity,” she says.
“This is a huge market but it’s not actually a crazy projection.”
Chen says marketing spend today is about a trillion dollar spend globally, with 1% spend on software and 50% on media dollars. However, Foundation Capital projecting that 10% of all marketing dollars will go into software to make marketing more efficient and measurable.”
Sales to become ‘the order taker’
She says looking at the number of marketing tech startups, there has no doubt been “explosion”
In the US alone, she says there were about 150 VC-backed marketing tech startups in 2011, which has risen to more 4,000 now in 2016.
Chen also believes that the lines between sales and marketing, especially in the B2B world, look set to blur.
“Marketing will play an increasingly bigger role in taking the responsibility of sales in the next 10 years and sales will eventually become the order taker, with marketing doing a lot of the work upfront,” Chen adds.
She adds the biggest change she has seen in the past year is the way media has moved from TV to streaming and online video. She predicts that by 2020 the majority of people will prefer streaming and this will then of course impact where the advertising dollars go. Subsequently the money will flow to the technologies that help power and improve the streaming ecosystem.
Chen says that VR content, having scalable personalised video, the distribution of content, the online to offline debate, tracking results and mobile content are some of the hot areas the business is keeping an eye on.
She adds it’s all very well having a great product, technology or an idea, but stressed the personalities, skillsets and motivations of the founders still remain vital when it comes to the make or break of a new startup.
“The first few people really influence the outcome and growth of the company. Looking at Series A companies, the founder/team must be able to tell a good story, need to be able to hire high quality people, get customers, sell to others, talk to press - there’s a lot of important criteria especially early on.”
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