Digital Marketing Overview

PRIVATE AND CONFIDENTIAL TECHNOLOGY FOCUS. BROAD REACH. OPTIMAL RESULTS.

Digital Marketing Overview

Peter Falvey

Managing Director

[email protected]

P. 1.617.598.0437

Jason Myler

Managing Director

[email protected]

P. 1.617.598.0438

Jeffrey Cook

Vice President

[email protected]

P. 1.617.598.0439

2

Digital Marketing will Continue to be an Active Sector in 2013

Strong market growth: We are only partly through the growth phase of upgrading and

expanding the enterprise marketing stack, still substantial ROI to be achieved

CMO influence is increasing: CMOs are wielding increasing purchasing power and

influence over marketing software solutions

Marketing is increasing in complexity: Areas like mobile, social, integrated analytics,

and personalization make the creation of a marketing solution much more challenging

SaaS model speeds adoption: The emergence of enterprise SaaS model companies

greatly eases purchasing, integration and flexibility

Emergence of platforms: Platform vendors pursuing full solution suites through organic

development and inorganic acquisitions

We believe that M&A and investment activity seen in 2012 will accelerate in 2013 as the

confluence of several trends will shape the digital marketing landscape

3

Strong Market Growth Expected to Continue

The foundational elements of digital marketing will continue to grow quickly even as

they mature – emerging point solutions are growing even faster

DIGITAL MARKETING MARKET SIZE

The CMO is the new CIO

− CMO tech budgets are expected to

grow at 11% per year, compared to

less than 3% for CIOs

SaaS delivery is expanding the market

− Lower cost and flexible solutions

expand the market

The marketing stack as a competitive

advantage

− Successfully integrating customer

touch points, analytics, and internal

workflow software allows CMOs to

create more effective campaigns

KEY DRIVERS

Source: Gartner, Forrester, Technavio

0

5

10

15

20

25

30

35

40

2010 2012 2015 2016

$ (Billions)

Analytics

Social CRM

WCM

Email

Automation

Sales CRM

eCommerce

$14.2B

$20.2B

$33.3B

13% CAGR

19% CAGR

4

Complexity is Growing and Demanding Integration

The evolution of digital marketing demands integrated next-generation technologies

that enable marketers to deliver exceptional customer experience

Source: Gartner, Forrester, Technavio

CMOs are employing a growing number of “best of breed” solutions

The number of technologies in the stack has increased by 2x in the last 5 years

The locus of customer interaction has moved well beyond the web

Growing number of digital touch points need to be managed – web, mobile, social and a growing number of additional channels

Need for a single, seamless conversation across all channels

Extracting the most value and best customer experience requires integration of technologies in the stack

Complexity is only increasing with proliferation of channels and additional trends such as Big Data

Growing Stack

Evolving Consumer

Next-Generation Marketing

NEXT-GENERATION MARKETING REQUIRES COMPLEXITY

5

Overall Market Comprised of a Growing Number of Solutions

Digital marketing is fragmenting into several specialized sub-market solutions at

various levels of maturity

External Facing Internal

Ma

turi

ty

Les

s

Mo

re

Customer Experience / Touch Intelligence / Analytics Internal Workflow

Solutions enabling digital

touch points used to

interact directly with

consumers

− Web contact

management

− Blogs

− Email marketing

− eCommerce

− Communications

− Search

− Mobile apps

− Video content

− Social channels

Customer intelligence

and analytics packages

used to optimize user

experience

− CRM

− Web analytics

− Automation / inbound

− Personalization

− Social media analytics

− Business intelligence /

big data

Solutions used to

maximize efficiency and

optimize budgets

− Content management

− Digital asset

management

− Marketing resource

management

− Workflow automation

− Project management

6

Many Point Solutions and Few Suite Providers

Siz

e

Larg

er

Sm

all

er

Point Solution Providers

Suites

Customer Experience / Touch Customer Intelligence Resource Mgmt / Workflow

External Internal

7

Maturation is Driving Consolidation

As expected, consolidators are beginning to acquire the emergent leaders

CR

M

Au

tom

ati

on

E-m

ail

Mk

tg

E-C

om

merc

e

Traditional Consolidators

Example Emerging Consolidators Category leaders are

becoming

increasingly

competitive with

traditional

consolidators

Leaders in maturing

markets inevitably

facing a slowdown in

growth

Need for additional

growth avenues,

particularly as public

companies

Recognition of added

value from integrating

systems

8

Acquisition Activity Following Platform Thesis

The best positioned consolidators are building end to end suite solutions by

assembling product portfolios through acquisition

No offeringStrong offering Some offering

MRM/Automation Social Web Analytics eCommerce WCM Sales CRM E-mail

in 2012 for $870M in 2012 for $300M in 2010 for $1B in 2011 in 2011 for $1.5B

in 2010 for $480M in 2010 for ~$600M in 2010 for $1.4B

in 2011 for $400M in 2009 for $1.8B in 2010 for $240M

in 2012

in 2012 for $689M

in 2012 for $96M in 2012 for $21M

AcquirerTargets and Offering Map

Source: Pitchbook, Public Filings

9

M&A Activity Has Been Steady And Will Accelerate

The consolidators are paying attractive prices for the emergent leaders to fill in

product offering holes

Source: Company Press Releases, SEC Filings, Wall Street Research, CapitalIQ, Pitchbook

Date Acquirer Target EV Revenue / EV

Jan 2013 N/A N/A

Dec 2012 N/A N/A

Dec 2012 $870M 9.7x

Oct 2012 $95.5M 8.7x

Oct 2012 $21M N/A

Jul 2012 $350M ~7.8x – 10x

Jul 2012 N/A N/A

Jun 2012 $745M ~14.9x – 18.6x

May 2012 $500M 10.0x

May 2012 $300M 3.0x

Feb 2012 $169M 3.4x

Dec 2011 $400M ~5.0x – 6.7x

Dec 2011 $107M 2.0x

10

Recent Investment Activity

Capital providers are showing interest in the CXM sector through significant

investment

Source: Pitchbook

Date Target Amount / Total Raised Most Recent Investors

Feb '13 $15M / $36M OpenView Venture Partners, Rose Tech Ventures

Feb '13 $15M / $34M Bain Capital Ventures, TL Capital

Feb '13 $18M / $34M OpenView Venture Partners, Austin Ventures

Jan '13 $60M / $79M Goldman Sachs, Arthur Ventures

Dec '12 $20M / $36M Northgate Capital, Trinity Partners

Nov '12 $25M / $69M Mitsui Global, Orix Ventures

Nov '12 $20M / $39M New Enterprise Ventures, Sequoia Capital

Nov '12 $30M / $69M Investor Growth Capital, Tenaya Capital, North Bridge Ventures

Nov '12 $35M / $101M Altimeter Capital, Cross Creek Capital

Oct '12 $25M / $41M New Enterprise Ventures, Bain Capital, Lightspeed Ventures

Sept '12 $16M / $31M Norwest Venture Partners, Trinity Ventures

Sept '12 $20M / $35M General Catalyst Partners, Floodgate

Jun '12 $39M / $67M Norwest Venture Partners, Nexus Venture Partners

Jun '12 $32M / $38M LLR Partners

Jun '12 Rocket Fuel $50M / $76M Northgate Capital, Summit Partners

May '12 Qualtrics $70M Accel Partners, Sequoia Capital

May '12 Birst $26M / $47M Sequoia Capital, Hummer Winblad

Apr '12 BrightTag $15M / $22M Baird Venture Partners, New World Ventures, TomorrowVentures

Apr '12 Sugar CRM $33M / $80M New Enterprise Associates, Draper Fisher Jurvetson, Walden Intl.

Feb '12 Marin Software $30M / $80M Temasek, SAP Ventures, Benchmark Capital

Jan '12 Lithium $53M / $107M New Enterprise Associates, Tenaya Capital, Benchmark Capital

Jan '12 Neolane $27M / $35M Battery Ventures, Auriga Partners, Xange Capital

11

Falvey Partners Overview

FOCUS SELECT TRANSACTION EXPERIENCE

December 2011

Has acquired

July 2012

Has been

acquired by

September 2011

Series D

Convertible

Preferred Stock

Led by

September 2012

Has been

acquired by

A portfolio company of

July 2011

Has been acquired

by a portfolio

company of

April 2011

Has been

acquired by

July 2011

Has been

acquired by

February 2011

Growth equity

investment from

July 2011

Has been

acquired by

March 2011

Has divested

its diagnostic

solutions unit

November 2010

Has received an

investment from

A portfolio company of

October 2010

PGI Notify and Send

platforms acquired by

August 2010

Two divisions have been

acquired by a portfolio

company of

April 2010

Has been

acquired by

August 2010

Series C

Convertible

Preferred Stock

Led by

SERVICES

Sell-side or buy-side M&A

Growth capital raising

Board and corporate advisory

SECTOR

Software / SaaS

Tech-enabled business services

IT services

Internet / digital media

COMPANY TYPE

$50M - $250M in enterprise value

Growing, with established scale

Profitable or near-term path to profitability

Falvey Partners is a leading advisory firm serving

mid-market clients across technology sectors

Founded in 2012 by Peter Falvey and key members of the Morgan Keegan / Revolution Partners team

Falvey Partners professionals have closed dozens of software transactions representing billions of

dollars in transaction value