- Oracle announced its fourth acquisition in the digital
marketing space with Bluekai.
- New application license sales for Oracle have registered a
flat performance in CY13, with revenues of $3.06 billion
compared to $3.05 billion in CY12, indicating a 0.5% revenue
growth. Between CY10 and CY12 however, revenues grew at an
annualized pace of 16%.
- Oracle looks to be betting heavily on businesses moving
from traditional marketing campaigns to customized, digital
- We are positive on the company's acquisition strategy for
growth, given the consolidation Oracle is making in the highly
) posted gains that severely lagged the technology benchmark NASDAQ
Composite index in 2013. Over the course of last year, Oracle's
stock gained close to 16% compared to 41% for the broad composite
index. This year, the stock seems to be continuing its lagging
performance against the index, losing 0.3% in value so far.
Continuing from its strong performance in 2013, the technology
benchmark NASDAQ Composite index however gained close to 2.8%.
Strategically, Oracle looks to be acquiring companies across
various niche areas to create a holistic end-to-end IT solutions'
provider to the commercial market at large. The company
acquired close to 8 companies last year
, spread across its entire product portfolio. Interestingly, the
acquisitions it made in its applications business are mainly
cloud-based SaaS marketing solutions' providers, including
enterprise scale SaaS business-to-consumer marketing software
provider Responsys (for approximately $1.5 billion in cash).
Yesterday, the company announced that it signed an agreement to
acquire Bluekai, a data management platform to personalize
marketing programs and customer experience.
In this note, we take a look at various trends shaping the
digital marketing space in 2014 and analyze Oracle's potential
return from the acquisitions it made.
See Our Complete Analysis For Oracle
Customizable E-Commerce Experience Should Drive Digital
Marketing Investments Higher
The digital marketing space is transitioning from a generic
marketing campaign model to customizable campaign model specific to
individual situations. Additionally, the growth in mobile and other
hand-held devices globally induced a shift in customer buying
process from a sales-driven approach to a marketing-driven
approach. This is requiring marketers to deliver relevant and
engaging content to their customers in real-time across multiple
channels and throughout the customer's life-cycle, which has led to
the sharp increase in interest for various social, content, web and
CRM B2C offerings in recent times. According to Gartner, digital
marketing investments in 2013 have gone towards improving
e-commerce experiences, followed by social media marketing and
content creation and management.. These areas are currently very
The shift from generic marketing campaigns to user-specific,
real-time campaigns typically require significant analytics power
at the back-end of the marketing campaign. With the advent of
cloud-based SaaS services, small and large enterprises are
approaching SaaS digital marketing platform operators for their
campaigns. However, Gartner reports that digital marketeers often
struggle with the volume, variety and velocity of customer data
that is generated. Segmenting customers and online audiences,
and analyzing and deducing insights from this data, becomes a tough
task. ((How to Get the Data You Need to Win at Digital Marketing,
Gartner Research, August 2012)) The need for these meaningful,
actionable insights from marketing campaigns is driving valuations
higher for companies operating in the digital marketing
Is Oracle's Acquire-And-Grow Strategy Justified?
The Bluekai acquisition makes it the fourth acquisition for
Oracle within the digital marketing space, preceded by Eloqua,
Compendium and Responsys. The company spent approximately $2.3
billion on Eloqua and Responsys alone, with the deal size for
Compendium and Bluekai unknown. In order to see if these
acquisitions are worth the high money, lets take a look at digital
marketing spending trends in 2013. Gartner reports that firms
typically spend over 10% of their revenues for marketing purposes,
and these budgets are expected to grow 6% annually.
Moreover, the share of digital marketing in overall marketing
budgets is expected to be close to 25% in 2013, and digital
marketing budget growth outpacing overall marketing budget growth
going forward. Forrester believe the total spend on digital
marketing within the U.S. is expected to reach $55 billion in 2014.
However, even the leading digital marketing players such as
Constant Contact, Responsys, and ExactTarget reported revenues
lower than $300 million before being acquired. This shows the
extent of fragmentation within the industry, and helps understand
Oracle's thought behind its acquisition-led growth strategy.
With the latest acquisition, Oracle gains close to 300 Bluekai
customers, with actionable information on more than 700 million
profiles through the world's third largest data marketplace run by
Bluekai. Going forward, Oracle could begin cross-selling its
digital marketing offerings to its customers. More importantly, the
acquisition strategy creates a consolidation in the market place,
and gives strong top line growth potential for Oracle in a booming
In 2014, we expect to see strengthening sales from its
applications division, boosted by the acquisitions in the digital
marketing space. Our $44 price estimate for Oracle's stock is
approximately 16% above the current market price of $38.
See More at Trefis |
View Interactive S&P Capital IQ Analyses
(Powered by Trefis)