Social vendor HootSuite raises big dollars amid go-go times in Digital Marketing

Social Media Marketing Technology Vendor HootSuite just announced that it raised $165 million of series B (i.e., second round of) venture capital. Now, as VC funding goes that’s an outlier, since VC rounds typically fall in the range of 10 to 50 million dollars, depending on the recipient's stage. So, what are we to make of this rather large investment?

An unusually large investment signals that the VCs are gung-ho about the space the company operates in (and, needless to say, that the company they’re backing will emerge among the leaders in that space). HootSuite provides tools to manage and monitor different social media channels from a single place. Though it’s popular among small and medium businesses, less than 4% of them are paying customers. The bulk of the new funding will go towards sales and marketing and as HootSuite indicates, for making new acquisitions.

If we step back a bit and think about it, these are go-go times in the digital marketing world. The dizzying pace of deals and acquisitions can make your head spin. Marketo went public. Adobe acquired Neolane. Salesforce acquired ExactTarget. Salesforce acquired Entropysoft. Salesforce acquired BuddyMedia. Salesforce ran out of companies to acquire. Oracle is cobbling together Collective Intellect, Involver, Vitrue and meanwhile, itself uses Salesforce.

This is a small sample in the recent months and by no means comprehensive, but you get the idea, right? You may not be too mistaken believing companies spend more time and effort in acquiring other companies and getting acquired rather than “shipping better product.”  RSG's Digital Marketing Technology evaluation report certainly argues as much.

What’s fueling this gold rush is that marketing is undergoing some serious changes. Two large advertising companies Omnicom and Publicis merged last week to create the largest ad agency in the world; they merged so that they can effectively challenge the likes of Google and Facebook as marketing becomes more of a data and software business. Move over, Mad Men -- Big Data is here.

In the world of digital marketing itself, the frontiers are shifting. Social media and mobile are becoming more important. For instance: all year, Facebook shares stayed below their IPO price, but because of increasing share (41% in latest quarter) of mobile ad revenue, they seem to be back in favor. Similarly, Google’s last quarter financial results were deemed unsatisfactory because their mobile ad business is not growing fast enough.

But before we get too carried away. Mobile ads company Velti is having problems. Venture-pumped social marketing vendor Awareness shut shop. Customer-oriented execution still matters.

So as an enterprise customer, what are your takeaways? Your digital marketing portfolio needs to support new channels and modes of communication. The marketplace is not in equilibrium yet and as the game of musical chairs continues, tools and technology equations will keep shifting. Focus on projects that deliver short term ROI while the rules of engagement become clearer over the long term.

Stay tuned – we’ll have more to say in a major forthcoming update to our Digital Marketing Technology Evaluations.

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