Martech and Beer: Bubbles, Sales and Growth – Part 1

In 2015, I wrote the blog post “How Marketing Technology Is Like the American Craft Brewing Renaissance.” As you can imagine (or if you’d rather not, you can read it), I compared the hyperbolic growth of American craft brewing to that of the marketing technology landscape and made a bold prediction about what forces might put the brakes on martech growth the same way that Prohibition annihilated the creativity and spirit of American beer for decades, even after its repeal.

Since the time of my first post, the number of craft breweries in the U.S. has increased to 4,014 from 2,804 in 2015 – a 43 percent increase, according to Brewers Association. And thanks to the tireless work of Scott Brinker and his Chief Marketing Technologist blog, estimates for the number of vendors in the marketing technology landscape went from roughly 2,000 in 2015 to nearly 7,000 in 2018 – a 71 percent increase. 

Like any good analyst, I’ve decided it’s time to revisit my original prediction and reflect. Looking across the B2B revenue engine, I think it’s important to add sales technology to the mix as well. Maybe we can coin a new term: MarSaleStack. It doesn’t exactly roll off the tongue, so I might have to work on that. In any event, no matter how much insight and data you have, predictions are tough ­– and three years isn’t nearly enough time to draw a definitive conclusion as to whether or not this prediction was wrong, or just a late bloomer.

At the time, I saw four forces that had the ability to greatly impact the martech (and now sales technology) markets: the death of cheap money, market fatigue, consolidation and regulation. In this blog post, I’ll discuss the first two of these forces.

The Death of Cheap Money

Then (2015): Let’s face it. There is a lot of money being thrown in the direction of unproven technology and unproven business models. And why is that? It’s a combination of factors – a low barrier to entry into the software-as-a-service (SaaS) world that spurs innovation, marketing’s thirst for new technologies, investors’ desires to become the next Facebook, Google or Amazon and, perhaps most importantly, a sustained influx of cheap capital (think quantitative easing) into the economy, which keeps interest rates and inflation low and morale and expectations high. When interest rates rise, budgets will fall (eventually) – or at least they won’t increase as much as they have in the past.

Now (2018): The Federal Reserve has raised interest rates seven times since my 2015 post, going from 0.25 percent to 2.0 percent (as of June 2018). What does this mean? It’s getting more expensive to borrow money. But for those companies that were acquired or are now turning a profit, the impact is much less. 

Additionally, companies that have leveraged venture capital or private equity investments have enjoyed what some call another golden age, as both venture capital and private equity investments have risen considerably since 2015 – with private equity investments in tech rising from $43 billion to $148 billion just between 2015 and 2016, according to TechCrunch.

Verdict: Available money has grown, and so have budgets. So, cheap money is not dead – yet. At the end of the day, companies that prove profitable (or ripe for acquisition) will survive, and if a venture capital firm has one successful company out of 10 that it invests in, it pays itself back and pays back the investment in the other nine. So basically only 10 percent of the market has to be highly profitable and sound to keep the money flowing.

Until we see a major increase in interest rates (the trickle-down effect will affect technology suppliers and consumers) or some very high-profile bad investments come to light (think Enron or WorldCom proportions), there will be plenty of money for startups to innovate and expand – a good thing for marketing and sales.

Market Fatigue

Then (2015): There are a lot of choices out there for today’s marketers. It’s a wonderful time to experiment with new technologies that can really make an impact on your marketing efforts. Eventually, though, we all need to decide what works (and what to keep) vs. just swapping a tool for the technologie du jour. The influx of “too many choices” is confusing and time consuming for the customer and forces vendors to fight for the attention of a dwindling number of interested prospective buyers.

Now (2018): If marketers (and salespeople) thought there were too many choices in 2015, they’re probably asking for Doc Brown’s DeLorean now – to travel back in time. While the choices have increased, interactions with SiriusDecisions clients have demonstrated that more forethought is being put into technology selection. B2B organizations are being more diligent when evaluating existing tech stacks and selecting new technology to add to their stacks.

Verdict: Technology fatigue has not set in, but buyers are becoming more tech-savvy and selective. At the same time, SiriusDecisions research shows that marketing and sales budgets for technology are increasing – 6 percent year-over-year for marketing across all revenue bands, and between 1 and 2 percent for sales across all revenue bands. I expect to see more marketers and salespeople look not only at vendor features and functionality but also at how they fit into best practice marketing and sales processes.

Stay tuned! I’ve touched on the first two forces. In my next blog post, I’ll tackle two other market forces: consolidation and regulation.