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Era of ‘Mazboot Jod’ (strong adhesion)
We hear the word ‘marketing’ being thrown about very casually all the time – for once, let’s start by understanding what marketing really is. In simple terms, marketing is a process of attracting customers, engaging and retaining them by building a relationship and analyzing their behaviors and usage patterns.
Let’s get nostalgic for a minute, shall we? Do you remember the iconic Fevicol ad featuring an overcrowded bus somewhere in Rajasthan? The ad that left you wondering as to how those many people fit into that bus – well, that creative ad and many more bold marketing moves is the prime reason behind the success of Fevicol.
Now imagine you were the marketer behind that Fevicol ad in the 90s. The options available with you to reach your audience was limited namely to radio, TV, newspaper, and pamphlets/banners. You would spend a month working with an agency to create a TV ad campaign. The only tangible metric to know if your marketing ad was successful back then was your sales data. What’s more – for that, you had to wait a few weeks to aggregate the data and see if there’s any significant growth. Even if you observe growth, you couldn’t be entirely sure if the growth can be attributed to that specific ad campaign.
Evolution of MarTech
MarTech has evolved dramatically in the last two decades. On one hand, we have the likes of Google, Facebook which jumped on the digital ad bandwagon as their core business model and on the other, are companies like Amazon, Apple which use every marketing tech out there to get to their customers.
Today the story therefore is entirely different. There are tens (if not hundreds) of ways to reach your users. But, how different is it really?
Let’s say, you’re a marketer for a digital product like Zomato. You create ads on Facebook and Instagram to acquire new users. Facebook gives you data on how many users saw the ad (impressions), how many users clicked the ad (clicks), and how many users installed your app (installs). You can clearly attribute how many new users joined because of a particular campaign. It doesn’t end there.
You can track how many users shared that ad across platforms and how many new followers/subscribers you earned from that ad. The best part, you don’t even need to wait for weeks to get this data. All of it is updated in real-time. Similarly, you send emails and push notifications to your existing users to get more orders. You can track how many people saw them, opened them, and made an order from that campaign.
All this and more is made possible by MarTech platforms. The technology that powers marketers to achieve their business goals is broadly termed as MarTech. These include everything from social media platforms where brands attract users by creating content and showing ads to engaging with them through email, WhatsApp, and push notifications to retaining them by offering loyalty programs. Today, there are over 10,000 MarTech companies that empower marketers to effectively attract, analyze, engage, and retain their users.
How has MarTech become an indispensable part of life for modern marketers? Today marketing has shifted from being a one time ad campaign to a more dynamic activity – where marketers can constantly run multiple personalized campaigns to promote awareness about a product, influence consumer purchase behaviors in a specific way, while continuously engaging and retaining their consumers. In particular, the tremendous rise of MarTech in the last decade or so, has been due to rapid digital transformation, widespread adoption of mobile devices and social media. What’s more, the dollars spent on ads on Google, Facebook & Amazon as recently as 2018, was 40 cents for every dollar of VC funding!
MarTech is a moderately fragmented market with the majority of revenue split between many large and medium-sized players. The big fellas like Salesforce, Adobe, Oracle, and Hubspot have end-to-end marketing cloud solutions that cater to large enterprise businesses. Startups, SMBs and smaller enterprises have a set of tools to power their marketing efforts, often called the martech stack.
MarTech Pricing Models
Most MarTech platforms are SaaS (software-as-a-service) products (Read more about how SaaS in India took off before the funding drought here). Similar to any SaaS platform, MarTech companies have a minimal churn owing to their high switching costs. It’s a common practice for companies to enter into multi-year contracts with set SLAs (service level agreements) and support tiers.
Pricing of these products typically fall into three categories – onboarding, platform, and usage. As an analogy, think of your mobile phone expenses.
Onboarding fee is what you paid when you bought the sim card (some companies might give it to you for free). This is a one time charge to help the companies onboard the MarTech platform, support any integration issues, and provide training to get started.
Platform fee is what you pay as your monthly/quarterly/annual package based on the call and internet features you need. This is recurring revenue for the company and accounts for the majority chunk.
Usage fee is what you pay for any additional minutes or data you use or special services such as international calling For example – if you’re an email marketing platform, you might be charged anywhere between 0.1 $ to 2 $ for every 100 emails sent, depending on your volumes.
Indian MarTech Industry
India recently touched the mark of 100 unicorns last month. 6 of those are Marketing Technology products. Infact, India’s unicorn counter started with InMobi, a profitable MarTech unicorn. Within the Indian MarTech startup world, the top 3 categories are – Customer Relationship Management (CRM), and Customer Engagement Platforms (CEP), and Conversational AI platforms.
- Customer Relationship Management (CRM)
CRM platforms have been around for a long time and are one of the most mature categories of MarTech. Customer relationship management (CRM) is a technology for managing all your company’s relationships and interactions with customers and potential customers. India’s leading CRMs, Zoho and Freshdesk, are growing their presence in global markets competing with Zendesk. Freshworks listed in the US at a market cap of US$13B . Leadsquared is another modern CRM and marketing automation company in the Soonicorn race.
- Customer Engagement Platforms (CEP)
Don’t you love it when brands notify you regarding your web check-in or your favorite products sale through push notifications, email, or whatsapp? CEPs enable brands to deliver the messages you love, when you need them, through your favorite platform. Customer Engagement Platform (CEP) uses first party customer data (clicks, interactions, and behavior) to create personalized marketing campaigns to drive customer engagement and retention. As usage of 3rd party data gets regulated, the market for CEPs will only increase. IDC estimates TAM to be north of ~US$30 B globally for CEPs.
India has as many as 4 CEPs that are on the Soonicorn (soon to be unicorn) list – MoEngage, Clevertap, Netcore Cloud, and Capillary Tech. There’s been a lot of activity among these players in 2022. MoEngage announced US$77 Mn Series E funding to fuel international expansion. Netcore Cloud acquires a majority stake in Unbxd, a personalization platform to race past the US$100 Mn ARR mark. Clevertap acquired US based Leanplum giving them a cumulative customer base of 1200+ companies. Capillary Tech acquired US based Customer Experience Platform Persuade to open doors for their US expansion.
- Conversational AI Platforms
You must have seen a chatbot popping up whenever you visit a prominent website. You probably interacted with a chatbot when you tried to get support from food delivery or ecommerce platforms such as Swiggy or Meesho. These are examples of conversational AI platforms that provide chat and voice bots in multiple languages for customer support, customer engagement, and conversational commerce. With an immense promise and a potential to lower customer support costs and improve resolution time, many Big Techs (IBM Watson, Amazon Lex) and customer support and communication platforms (Intercom, Zendesk) built their chatbots.
India’s early players such as Niki.ai and Haptik didn’t find much success early on, as chatbot adoption was slower than expected in India. Niki, despite raising 6 Mn USD, shut down its operations in 2021 and Reliance Jio acquired Haptik for 100 Mn USD. However, as pandemic accelerated digital adoption, Conversational AI platforms started to become mainstream. Uniphore became a unicorn in 2022 after a US$400 Mn fundraise. Last year, Yellow.ai raised US$78.15 Mn Series C round and joined the Soonicorn club.
Signals Amidst the Noise
What are some of the major trends to watch out for? There’s three broad signals – hyper personalization of consumers’ digital experience, growth of influencer marketing, increasing focus on data privacy & ethics, as the companies within MarTech segments begin to consolidate.
The ads you watched during IPL this summer are most likely different from the ads your friend watched. There were 30+ ad sets that were shown to users, personalized based on their preference attributes. It’s highly likely that your most loved apps (Netflix, Spotify, Amazon, Swiggy etc.,) personalize their content, messaging, and offers to you and that makes you love them more. Every element of your interaction with a brand is increasingly becoming unique to you. Products and offers shown to you when you open the website or an app will vary depending on your behavior, demographics, location, consumption habits, and interactions. To help marketers personalize experiences, MNCs such as Salesforce acquired Evergage and Mastercard acquired Dynamic Yield. In India, Netcore Cloud acquired Boxx.ai and invested in Unbxd to boost its personalization stack.
Short video platforms such as Tik-tok, Instagram Reels, Youtube Shorts, and Moz have grown exponentially, over the last 4 years. The popularity of these platforms among digital natives and Gen-Z is powering the creator economy. If you’re a creator, your playbook involves picking an area of expertise, creating content on appropriate channels to gain your audience, and monetizing your audience by brand collaborations. In other words, you are on the road to become an influencer!
Influencer Marketing is a type of social media marketing where brands work with these creators/influencers to attract an audience through endorsements, product mentions, and placement. Globally, influencer marketing has grown to $16.4 billion in 2022. Businesses are making $5.78 ROI for every $1 spent on influencer marketing, which makes this an attractive channel. Influencer Marketing platforms have cumulatively raised US$800 Mn in 2021. India is catching up with the rest as companies like Kofluence, Opportune, and Convosight grow in their own unique ways with their freshly raised capital.
Data privacy is the new name of the game – whenever you open a website, you’re most likely bombarded by pop-ups that ask you to allow cookie tracking. This became important as General Data Protection Regulation (GDPR) guidelines are becoming a norm. 81% of companies are still reliant on 3rd party cookies despite regulatory concerns around the cookie system. Taking data privacy to the next step, Apple introduced Apple Tracking Transparency (ATT) as part of iOS 14.5 release. This gives users full control over how their third-party data is shared. Many apps use third-party data to target ads to consumers, often without their knowledge or explicit permission. With Apple’s ATT policy, this is no longer possible. Apple’s privacy changes were stated as a major reason behind Facebook’s stock crash last month, wiping out 200 Bn USD from their market cap. Google is soon expected to bring similar changes to Android.
On one side, companies want to hyper-personalize experiences to their users and on the other hand, regulations are being tightened around how data is collected and used. As users become more aware of data privacy, companies will be forced to change their digital marketing budgets and practices that might affect existing MarTech platforms and give rise to the birth of new platforms.
Last 2 years have seen consolidation within the mature sectors of MarTech. Between 2020-22, MarTech industry has seen 28 IPOs and 512 acquisitions globally. Given the unfavorable macro environment, a lot more mergers and acquisitions are expected in this space.
With the global economic turndown and unfavorable market conditions, companies are moving away from chasing growth at all costs. Across the globe, this will likely result in shrinking of marketing budgets for companies big and small.
However, MarTech budgets themselves are unlikely to take a hit. Why? Simply because, businesses and marketers have become increasingly dependent on MarTech platforms to acquire, engage, and retain their customers. MarTech has become their armament of choice, in the battle to reach their customers.
Article written by Pushpak Teja.