digital marketing: past, present & future

Digital Marketing

Columbia Business School B8679-001: Digital Marketing michael Brown 01/12/18

The Agenda For Today…

• 11:00 - 11:05 - Introduction To Michael Brown

• 11:05 - 11:10 - Introduction To Bowery Capital

• 11:10 - 11:20 - The Past

• 11:20 - 11:30 - The Present

• 11:30 - 11:40 - The Future

I. Introduction

5 facts about

michael brown

fact #1 - graduate of Columbia College

• Class of 2006

• Majored in Political Science

fact #2 - my entire career has been in the technology industry

• Started as a software research analyst and have been in venture capital since 2007

• Made investments for Richard Branson in technology companies

• Founded AOLs venture capital arm

• Raised Bowery Capital in 2013 to build a focused VC firm - $100MM AUM / SF + NY / 8 employees

fact #3 - created a three level system at bowery that helps companies scale sales & revenues

Infrastructure Set Up

• What systems do I need in place before selling my product?

• Who is my ideal customer profile?

Business Development

• How do I generate marketing or sales qualified leads?

• How do I get deals “unstuck”?

Recruiting & Hiring

• What is the best profile of a sales person to hire into my organization?

• How can I find people who will help me sell my product?

fact #4 - this three level system helps all of our companies scale to substantial revenues

fact #5 - i teach the course “building the sales machine” at columbia gsb

• MBA elective

• Marketing department

• Offered Summer 2017 and will be offered again Spring 2018

in sum, i am a technology investor & authority on systems & approaches

• Graduate of Columbia College

• Founding VC of NYC / SF early stage software firm

• Background building scalable sales systems that have resulted in companies generation $100MM+ of annual revenues

• Teach at Columbia GSB specifically focused on sales / revenue




• 11:10 - 11:20 - The Past

• 11:20 - 11:30 - The Present

• 11:30 - 11:40 - The Future

II. Introduction To Bowery Capital

BOWERY CAPITAL

Since 2013, we have been specialized investors focused on transformative business software

13

The most successful startups of the next ten years will be those providing transformational upgrades to existing corporations at the marketing and technology layer

BOWERY CAPITAL

We started with & still believe that marketers & technologists drive internal & external spend shifts

14

Chief Marketing Officer (CMO) Chief Technology Officer (CTO)“How do I market to my customers?” “How does tech better my organization?”

Enterprise Planning (ERP) Collaboration Tools Internal Analytics Data Analysis Workforce Training Infrastructure Spend

Content Management (CMS) Advertising Technology Media Buying (TV, print, online) Marketing Platforms Customer Management (CRM) Market Intelligence

NOTES: These are example it spend categories

BOWERY CAPITAL

This is primarily due to Internet Natives entering the c-suite & promoting technological change

15

First ad she heard was on radio Used to use a PalmPilot back in the 1980s and 1990s

First ad she saw was on the Internet Grew up using Facebook, Pinterest, and an iPhone

Started career at IBM Grew up using $15,000 computer in the 1980s

Built mobile apps to get through college Grew up using a $1,000 computer in the 2000s

CMO CTO

BOWERY CAPITAL

This effect on IT spend remains large & growing— roughly $1.5T today & growing to $2.0T by 2020

16

Enterprise Technology & Marketing Spend

400

800

1,200

1,600

2,000

2,400

1980 2010 2015 2020

NOTES: NUMBERS ARE US SPECIFIC; sources are Gartner 2012 Internet Trends, JP Morgan Research, Forrester, eMarketer, PwC, MAGNAGLOBAL

BOWERY CAPITAL

Yet allocation is shifting ahead of our initial thesis —$468B of total spend will go to new tech by 2020

17

Share Of Total Enterprise Spend

0%

20%

40%

60%

80%

100%

1980 2010 2015 2020

24%12%

18%

67%

75%86%94%

9%13%12%6%

Traditional Marketing Traditional Tech Next-Gen

$468B}2%

($357B prior)

NOTES: sources are Gartner 2012 Internet Trends, JP Morgan Research, Forrester, eMarketer, PwC, MAGNAGLOBAL

BOWERY CAPITAL 18

CFO CROCISO CPO

VP/LOB

First, this is due to spend expanding within existing IT purchasers & new IT purchasers coming online

NOTES: IT buyer types are a representative sample only; cro = Chief revenue officer; cFO = chief FINANCIAL officer; VP = vice president; lob = line-

of-business employee; ciso = chief information security officer; cpo = chief product officer; CIO = Chief information officer

IT budget is expanding

CIO

Existing IT Buyers

IT budget is newly created

New IT Buyers

BOWERY CAPITAL 19

Second, demand is rising for more specialized IT solutions within traditionally laggard industries

Verti

cal S

oftw

are S

pend

($B)

0

5

10

15

20

25

Gov't Finance Mftg. Media HC Insurance Retail Utilities Transportation Edu. Wholesale

2010 Spend Incremental Spend By 2020

NOTES: All figures in USD and us-only. Source: gartner

Vertical Software Spend Increases Through 2020

BOWERY CAPITAL

These Internet Native buyers are upgrading to new & relevant tech across every horizontal function

20

Busin

ess

Intell

igenc

eAd

verti

sing

Tech

nolog

yCu

stome

r Su

ppor

tFP

&A

Enter

prise

Co

llabo

ratio

nPa

ymen

t Pr

oces

sing

Infra

struc

ture

& Vir

tualiz

ation

Secu

rity &

Pe

rform

ance

NOTES: These are example it spend categories

BOWERY CAPITAL 21

0

40

80

120

160

200

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

39%

32%

26%

21%

16%13%

9%7%

5%4%3%2%1%1%0%0%

Cumulative Revs ($B) From Next-Gen Exits (M&A + IPO)

NOTES: 20% revenue growth rate assumed post-acquisition; 2016-2020 exit projections by Bowery capital.

source for M&A & IPO data; Capitaliq, 451 Group, Nasdaq.

Yet our opportunity still remains nascent—only 13% market penetration from $61B in spend shifts

cumulative revs of exited next-gen cos

$61B

total next generation enterprise revenue

$468B

÷

=

current market penetration

13%

% Penetration Of $468B Opportunity

BOWERY CAPITAL

We believe the time is now & enterprises have never been more ready to accept change

22

Increases in IT spend by existing buyers (e.g. CISO) as well as new IT buyers coming online (e.g. LOB employee) create more opportunity

Internet Natives continue to be open to enterprise-level change —- risk and safety being replaced by growth and leverage

Various industries starting to move from offline to online for the first time in decades, expanding the thesis further

Ultimately we believe the greatest area of value creation today in VC is with the next generation of business software winners




• 11:10 - 11:20 - The Past

• 11:20 - 11:30 - The Present

• 11:30 - 11:40 - The Future

III. The Past…

1980s | Database marketing systems emerged to store customer information like never before

• Campaign management begins in the 1980’s, predating the Internet (in fact, campaign management was originally designed to manage direct mail lists)

• Telemarketing, PC spreadsheets, and desktop publishing catalyze new ways to reach broader audiences

1990s |CRM systems evolve to store customer information and track interactions

• Building block on top of database

• Transition from campaign management to journey orchestration

• Marketers had to develop tools to track individuals over time, to…

• personalize messages to those individuals

• identify and optimize individual journeys

• act on complete data in real time

• to incorporate masses of unstructured data

2000s | SaaS companies emerge to help marketers track customers

• Proliferation of marketing channels (i.e. social or search)

• The emergence of the customer journey to customer data, qualitatively and quantitatively

• Move from web 1.0 to web 2.0 to more dynamic experiences

• Change from static messages to dynamic content, from segment-level descriptive analytics to individual-level predictions

• Point solutions start to win

2010s |Explosion of Contextual Data

• Customers expect seamless experiences across all their devices

• Marketers struggle to navigate a fragmented landscape of marketing technology to provide those experiences to consumers

• Omni-channel (offline + online) becomes key

• Point solutions continue to win here

marketing technology timeline

wrapping up…

• Industry really starts at the database layer then moves into the customer relationship management layer

• “Online Marketing” has more channels than “Offline Marketing” so we see huge growth in the 2000s to manage this effort

• 90% of all the data that humans have has been generated in the past two years…

• Other historical trends:

• Consumers wag the tail of the dog…you don’t build a social media marketing tools if Facebook does not exist

• Systems of record (solve all my problems) build the foundation and point solutions (solve one problem) drive the next 20 years




• 11:10 - 11:20 - The Past

• 11:20 - 11:30 - The Present

• 11:30 - 11:40 - The Future

IV. The Present…

from 2009 through 2016 three trends emerge

first, the creation and rise of the marketing cloud around 2010-2011

what are marketing clouds?

• Platform (sometimes called a system of record) for marketers that allow them to create and manage marketing relationships and campaigns with customers

• From 2009 through 2011 five companies begin moving outside of their core products and buying or building their way into the CMO• Adobe• Oracle• Salesforce• IBM• Microsoft

they buy a lot of companies & build the rest in house

these five vendors dominate a large component of cmo it spend

second, in 2012 gartner predicts that the cmo will outspend the cio

what is happening here?

• Mandate goes out for more digital natives in the CMO suite

• C-suite allows the CMO to spend more and more

• In medium to large organizations this generally takes two forms:

• People

• IT

• Both of these things mean more power for CMOs!

• This is still happening but warning signs are showing (more on this in our “future” section)

third, we see an explosion of point solution growth in this ecosystem

what is happening here?

• Hundreds of VC backed point solution companies are launched that focused on a certain capability, such as web content management, e-mail marketing, social media marketing, demand side advertising, supply side advertising, ecommerce, etc

• Most remain standalone, some get acquired by the big 5, and a few build large moats themselves

as a result the ecosystem still has a large amount of independent vendors

wrapping up…

• System Of Record - Platforms now exist in this category and the majors continue to ensure the success of their systems of record

• Point Solutions - Using Hubspot, Criteo, and The Trade Desk as examples there is still room for growth as a best of breed independent vendor

• The more and more we hear about consolidation the larger the landscape has grown!

• CMO increasing spend makes a lot of sense




• 11:10 - 11:20 - The Past

• 11:20 - 11:30 - The Present

• 11:30 - 11:40 - The Future

V. The Future…

some predictions!

prediction 1: Smaller marketing budgets will lead to smaller tech stacks (whoops!)

prediction 2: the roi pendulum will swing back to retention

prediction 3: rise of the machines & algorithms

prediction 4: offline + online really works (& gets better & better)

prediction 5: beware of the walled gardens

wrapping up…

• Privatization Of The Web• Facebook, Google, Netflix, Apple, Amazon as basically private networks…we are already

seeing consolidation of digital destinations • More data but on a less open web so who owns your identity?• Innovation will be challenging related to this trend

• CMO Spend More Than CIO…Only Until Industry Decline!• Maybe that expensive CMO hire wasn’t the best idea?• Likely see cost cutting (People + IT) going on in the next few years from F500• Innovation will come by solving human capital leverage + process automation

• Bridging The Offline & Online World• Deterministic picture of a consumer still not solved• Innovation will come from the strongest ML/AI players that understand how to bridge this

Thank Youmichael brown [email protected]