IBM made it clear Friday it wants to own the online marketing and advertising analytics space. The company reported a deal to acquire software automation company Unica in an effort to better support Madison Avenue marketing and ad agencies, from campaign launch through execution and measurement.
The plan to build support for marketing and ad agencies reflects the industry's move into technology and science, rather than solely art or design. Earlier this year, IBM CEO Sam Palmisano talked about making $20 billion in acquisitions during the next five years. This is part of delivering on that roadmap.
"No one, until today, has pulled together this end-to-end story," Craig Hayman, general manager of IBM Industries Solutions Group, told analysts and media during a briefing. He says some competitors have tackled pieces of technology, but IBM wants to support the entire process, so it looked for a company with the core required capabilities.
Yuchun Lee, Unica's CEO and co-founder, called marketing "one of the last-tapped areas." The deal comes in response to CEOs alerting chief marketing officers not to increase budgets, but become more effective by measuring the campaigns.
Lee estimates companies spend about $3 trillion in marketing annually-when adding up TV, print, online and other mediums-"and most of the money is wasted." Forrester Research pegs companies will spend nearly $55 billion for interactive marketing by 2014, up from $29 billion this year.
Overall, analyst look at the deal as good news for the industry, because any time the leader in enterprise marketing software gets acquired by a big player it shines a spotlight on the entire industry. Additional deals, and more innovation and investment typically follow.
Not all believe IBM will jump in to support Madison Avenue and land on its feet. Suresh Vittal, Forrester Research VP and practice lead, views the deal as a long-term "aspiration" rather than short-term reality. "If IBM wanted to make a big push for the Madison crowd they would have been better off acquiring an ad network or an optimization demand side platform company, rather than Unica, which sells more into business to consumer, financial services and retail markets."
IBM wants to bask in the glow of the attractive online marketing and advertising space, Vittal says. Any company today acquiring a marketing services company needs to say they want to support online advertising and search. He's not entirely convinced IBM can accomplish that out of the gate because Madison Avenue and ad agencies are most concerned with online media optimization, and traditional marketing channels, which they have historically supported, focus more on customer, contacts and offline optimization. They are two different things, he adds.
"As marketing becomes more and more data-driven, technology takes on a bigger role. Having the right tools for cross-channel reporting and analytics is essential," says Aaron Goldman, principal at Connectual. "It makes sense that a company like IBM, which has a strong client and product portfolio around business software solutions, would want to have Unica in the mix. It's basically a share of wallet play, giving IBM another tool to help grow their customer's businesses."
Following IBM's acquisition of Coremetrics in July, Michael Haydock, IBM global lead for business analytics and optimization, told MediaPost IBM has been building out software and services, working with CMOs to allocate advertising and marketing resources to help get media buy allocations correct.
Investment firm Jefferies advised Unica on the IBM acquisition. Alec Ellison, chairman of Technology Investment Banking at Jefferies, took the role as lead banker on the deal.