IBM is spinning off its advertising business, IBM Watson Marketing, and it could be bad news for Adobe, Oracle, and Salesforce
- IBM is spinning off its advertising business, IBM Watson Marketing.
- New CEO Mark Simpson said the new company would be "the largest independent marketing cloud" and poised to take on Adobe, Oracle, and Salesforce.
- Marketing clouds have been on a growth tear as marketers search for ways to manage and store their data and for help in running targeted ad campaigns.
- Simpson said his company will have more artificial intelligence capabilities than its rivals and be more open in letting clients work with other vendors.
- Click here for more BI Prime stories.
IBM is spinning off its advertising business, IBM Watson Marketing, in what it says will be the biggest independent marketing cloud, and it wants to take on Adobe, Oracle, and Salesforce.
IBM Watson Marketing was acquired by Centerbridge Partners LP, a private investment firm founded in 2005. The company plans to announce a new name and brand later in July. IBM Watson Marketing wouldn't say the size of the deal, but Mark Simpson, its new CEO, said the future company would have 1,100 employees and be "a very sizeable company in the market" and "by any metric, the largest independent marketing cloud."
Read more: MParticle is rolling out an API to fend off Salesforce and Adobe in the war over marketing tech
Rivals have lately been snapping up martech companies to help marketers manage and store their data and then help them run targeted ad campaigns. Salesforce's marketing and cloud operation is a $1.9 billion business that's growing at a 33% clip. Adobe's marketing cloud business is part of its $6.3 billion digital media segment that has been growing at a 22% pace.
The spinoff will let the new company focus solely on marketers
IBM, for its part, has been focusing on blockchain, and Simpson said spinning off IBM Watson Marketing will enable the new company to focus purely on marketers' needs.
As an independent marketing cloud separate from IBM, the future IBM Watson Marketing will be primed for an acquisition at a high multiple the way Krux and Marketo were bought, said Greg Paull, principal at R3, a consulting firm to marketers.
Krux was bought by Salesforce in 2016 for $700 million in cash and stock and Adobe purchased Marketo in 2018 for $4.75 billion.
Simpson himself has had a front-row seat at this consolidation trend; he was president of marketing firm Maxymiser when Oracle bought it in 2015.
The promise is that these cloud companies can meet all a brand's needs throughout every step of the consumer journey, from becoming aware of the brand to buying its products. Marketers want it to be easier to see all their data on one platform so they can more easily see, for example, whether an ad campaign translated into sales.
IBM Watson Marketing has built up its artificial intelligence offerings
Simpson said IBM Watson Marketing wants to solve two key problems for advertisers: It wants to provide a consistent and personalized experience for people across all channels, and know the most efficient way to spend marketing dollars.
Simpson, who previously was VP of offering management and strategy for IBM's marketing and commerce platform, said IBM Watson Marketing will do this through its artificial intelligence-fueled services, customer experience analytics, and content management systems. He said the company would soon release new marketing tech products to fill out its offerings.
"We've already invested significantly in AI, and that'll accelerate even further with new investment," he said. "I can point to more than 20 places in the marketing cloud where AI is involved - and no one touches those figures."
Simpson also emphasized that the company would be more focused on real problems, not future ones. In a swipe at Adobe, which featured a Tesla on stage during its 2016 Adobe Summit to show the possibilities of ordering from a Dunkin Donuts straight from a car's touchscreen, he said:
"There's a lot of hype out there. We have it on ourselves to keep the promises we make and provide answers that work. If you look at any of the recent press of our competitors, you sit there and think, am I really going to be ordering KFC from a Tesla screen? That may come, but it's not what people are doing [now]."
Adobe, Salesforce, and Oracle were not immediately available to comment to Business Insider.
The catch for these marketing cloud companies is that marketers don't necessarily want to be beholden to one company for all their data needs, just like they want to have many agencies and related companies handling their advertising needs.
Simpson's answer to that is that IBM Watson Marketing will be an open system that works with other companies clients might use, even competitors.
"Realistically, there's not a single vendor that can offer every single question from a marketer," he said. "Others treat themselves as the center of the universe. Marketers just don't see vendors in that light. We actively ingest Salesforce CRM, Adobe analytics. We truly want to be an open ecosystem. We're hearing from marketers that's what they want."