BMT 005 | The Martech downturn

▶️ Listen now on Apple, Spotify, and YouTube

Is Martech heading toward a prolonged downturn? Valuations are down, funding is drying up and Martech and Adtech are at historical lows even after the pandemic tech boom. This week, Juan and Scott discuss the unique opportunities for the next round of category creators to ride out of the Martech downturn. This, and no code innovation, Spotify and podcasting, Google's growing workplace ecosystem, and a good marketing automation joke!

In another BIG week in Martech:

🗞️ The Headlines

No Code on fire: More "wow moment" apps, and sector growth in the most accessible category in Martech.
Spotify and the downturn in podcasting: The streaming app decommissions its podcasting team and lets go of ten original shows. Is this good or bad for the podcasting industry?

💁‍♂️ The Big Chat

The Martech downturn: Valuations are down, funding is drying up and Martech and Adtech are at historical lows even after the pandemic tech boom. But are they really? Is our current season in Martech a correction or an opportunity for the next round of category creators?

⚡The Shoutouts

Google workspace adds more integrations and bolsters its ecosystem
A good marketing automation joke:

▶️ Listen now on Apple, Spotify, and YouTube

📚 Talked About On The Show

📖 Read The Show: The Martech downturn

Scott: Looking across the current economic situation in MarTech I think the place to begin is to just acknowledge we are in a rough macroeconomic environment for all businesses globally at this point.

And without being pessimistic about it, the consensus outlook is , it's probably going to get worse before it gets better. And this is just the nature of business cycles. We've been through them before. We'll go through them again. But, if we acknowledge this, then it has all sorts of implications, across every industry.

Are we in a downturn?

I think we can acknowledge, Martech companies are way down, of course, actually public valuations of a lot of companies, tech companies, , also all the way down. Funding is coming back from the stratospheric multiples from a year ago.

But it isn't like funding has gone away. Funding continues to go into things. The multiples that people are now getting would've been considered decent multiples too.

You've got all the people who actually did raise money at those crazy valuations over the past couple of years which means you have a ton of like MarTech companies sitting on these incredible multi-year runways. But I don't think it's in any way near like the end of MarTech because the challenge that all these businesses out there have, particularly in a recession-type environment have a problem - how do we competitively win and retain customers?

And this is all through digital channels. MarTech has become the defacto leverage, that businesses are using. Most businesses are still not using it well. A lot of the technologies that are still out there are legacy older versions of these technologies that are right to be replaced by newer and better Martech solutions

Well, I think it's going to be a tight market. I actually think Mari Tech is going to continue to grow over these next couple of years, and I think it's going to have a lot of success stories in the customers that it's able to actually power through this recession. But let me stop there. You tell me what's your take on all this?

Juan: No, I think we're in a really interesting season and I think one of the charts, that we've been talking about, Scott, is actually from emarketer is talking about the continued growth in just the B2B Martech spending space. So, the outlook is still looking pretty positive. But the growth rate actually declines quite a bit, so we've been through from 2020 to 2021, 21% growth in spending in B2B MarTech. And that is now dropping.

But if I could say, what season are we in right now? We still have a lot of innovative companies going to market. We still have a lot of VC and equity deployment going out. A lot of the VC and equity partners I've talked to, they're still like, “we need deal flow.”

The age of effectiveness

But I think we are in this interesting season of what I would call effectiveness. One thing about Covid 19 is that it really drove a lot of those incredible valuations. And looking at some of the analysis from Luma Partners some of the valuations over 2021 are huge, I mean, we are looking at the public valuations that are 17 times larger. For some of these ad tech companies, it’s unbelievable. I mean, 17 times on ARR.

It's just unbelievable in terms of the amount of value that is put on some of these companies, but also in the public markets as well. So I, I look at that and ask - is this a Covid 19 correction? Is this just, we've been through a digital transformation, if you could call it that.

Perhaps it's a forced digital transformation. A lot of brands need to invest in MarTech because all their consumers were online for 24 months. Are we going through a correction now where people are just not online as much anymore? Or is the correction a lesson about the effectiveness of some of these platforms?

During the pandemic, a lot of brands were trying new tech and trying to figure out how they reach consumers, how they convert them, and how they serve their customers online. In that specific environment, perhaps it took the sheen off perhaps some of the companies that are in the market.

Or actually, there's not really a lot of value that brands can create with these MarTech tools. I mean, that's often the case with many new products to market is that they launch, and their customers say, “look, we didn't get the return on investment that we need. We can't justify the spend, so we're going to have to say goodbye for the next contract cycle.”

But that's my take right now, Scott, is that I think it's a Covid-19 correction, but also a season of effectiveness, how do you prove that the tech that you're in market with is actually driving effectiveness for brands to marketers?

Scott: Yeah. Well I think that's a great angle to look at because last week we talked a bit about the Gartner, MarTech report that got published, and I don't think we mentioned this facet of it, but one of the things in their report is they were talking about were MarTech utilization actually is dropping. People were saying - what's the percentage of their MarTech stack that they really think they're using?

Martec’s law strike again

I actually look at it through a slightly different lens of I think there's been so much innovation in the technology over the past few years. I mean, again, you just look at the leaders across this space when it all started, I mean, there's so much innovation that’s happened.

The rate of technological innovation relative to the rate of human or individual change or organizational change is very different. We just do not change or adapt quickly. I think there'd always been an underinvestment in the enablement support necessary for marketing teams. And there were broader organizations to really harness the power of all this marketing technology.

But I think it actually got very exasperated over these past couple of years where there was a lot of adoption of a lot of new tools, a lot of sophistication in what these new tools are, the team just haven't been like trained or empowered for the learning curve ahead for this. It's just, it's hard to short-circuit that.

And so I think actually, yeah, if one of the arguments would be like, okay, maybe in this period where we're looking to be a little bit more conservative, let's spend a little less on getting sophisticated technology. And how about we retrench for a moment and et's make sure we learn how to use what we've got.

But I think if you play that out if you buy into that, you're still going in a mode where MarTech investment in effectiveness and enablement is on the people side more so than the tech. That's good to deliver returns. And I think MarTech is ultimately going to be seen as one of the forces that can lift us our of the downturn.

A new season for new skills

Juan: It's fascinating. If I could ask you, Scott, what would be the skill sets that are emerging for marketers right now? Would there be a few that are on your mind? There's a few that come to my mind in terms of the things that marketers need to learn. But what are a few sort of emerging skills or things that you are seeing in, in that space right now?

Scott: Wow. We could come up with a whole list. In previous episodes we've talked a little bit about CDPs about reverse ETL. I'm incredibly bullish on all the innovation that's happening at the data layer inside companies around MarTech today, where all these incredibly rich sources of first-party and second-party data, are now technically able to be aggregated and fed into our frontline applications.

The truth. That is a perfect example of something where you've got teams who have no experience with any of that. Like how do we even like evaluate which data we're getting? How would we use it? Where would we be triggering automation? How would we feed that into determining, segments? There's just a ton of work to actually even understand this data, much less the playbooks we would run against it.

Yeah, I think that's a perfect example of something where the technology is there today, and a lot of companies haven’t even bought that technology today, but the investment in developing the organizational capital around that, Is still incredibly immature.

Juan: Yeah, I think there's, I think that that is a really good one because it's not just a skills change, it's a paradigm change on tech stacks really, if you think about it, right?

For years and years and years, a lot of marketing operations folks have been thinking about, well, what are all the apps in? I mean, the stack is a good example of that. Where are all the different apps that we use in our business? But the reverse ETL, the cloud-native, and what people call the modern data stack, is kind of flipping that a little bit around and saying well, this is about integration and cohesion within a sort of a core data environment as opposed to having many apps for many different things.

I think it's not just a tech shift, it's an interesting thinking shift on how you plan and manage your stack. And as we've touched on in the previous episodes, as you go check that out, there's been an aggressive push in the sort of cloud-native platforms like Snowflake into this space as well. So that's going to trigger a whole ecosystem of innovation just on its own.

Another area of skills that might not be so obvious, which I think is really quite interesting is the concept of DOOH, digital, out-of-home.

So this has been a bit of a sleeper technology that's been happening through Covid 19. So out of home is what you see on the billboards and the bus shelters, and the side of perhaps buses as well. It’s that sort of broad base and physical out of home advertising. But, over the past couple years, there's been a lot of innovation of bringing a digital aspect to that, not just digital billboards where it's replacing literally physical billboards with pixels and you can change that out.

It's also looking at the programmatic aspect of that as well and targeting and time of day, and there are all these really interesting angles on that. And, there, there's a lot of great research and stats on its effectiveness. We'll drop that into the show notes.

It’s a really interesting merging of physical space and digital using also 3D elements within that as well. So I think that's a really interesting one for marketers to learn in terms of, particularly markets that do a lot of out-of-home advertising, but there are also other areas.

I mean, looking at just contextual advertising, which is this other element. Uh, instead of doing sort of targeting our third-party cookies, you're targeting customers, say with ads and experiences with publishers, using the immediate context of whatever that customer's browsing, uh, at that point in time.

And, that's another really interesting domain. A lot of great case studies coming out now in the market o the effectiveness of contextual advertising. But it's a totally different paradigm. I mean, if you've been working in programmatic advertising, say you're doing a lot of display advertising on Google or use social media targeting, contextual is very different.

It's a little bit more strategic. You have to really understand the interest categories that all these different publishers offer. And then I'm going to chuck one in there, which is just a really confusing, I would say probably more of a dumpster fire at the moment, which is all the post third party cookie solutions like ID 5, Lotame, UID 2.0 and all these different platforms that are trying to build the next sort of cookie replacement.

So that's my take is that those are the, probably the skill sets that are emerging and the things that perhaps are sort of the mindset shifts that are happening in the space right now.

Scott: Wow. Now the phrase dumpster fire… We could use that! So Gartner has their magic quadrant. Forester has their wave and Big MarTech should have a dumpster fire grid of like, is this just a smoldering dumpster fire or is this like a three-alarm raging dumpster, fire? Maybe not. Anyways, I agree with you.

I think it's this idea of trying to understand changes in the technology, changes in the paradigms of how you use it. Understanding the specifics of the tools, just how to use tools even within that. And then on top of that, you get into your actual strategy and tactics for your business. And when you look at all those different layers, I mean, again, I've always said that marketing is an Olympic sport at this point in like what marketers are required to learn to like stay at pace with this industry it's just it's the most challenging it's ever been. And so I think recognizing that as we go into this next period is probably wise.