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Adobe and Other Tech Players Want More Digital Marketing Space

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Digital Marketing expected to witness huge spending

Earlier in the series, we discussed the performance of Adobe Systems’ (ADBE) Digital Marketing segment in fiscal 2Q16. The company was recognized as a leader in Forrester Research’s 2016 Enterprise Marketing Software Suites Wave report. It garnered the highest scores for its overall Marketing Cloud offering and strategy. We’ll look at Adobe’s Marketing Cloud performance later in the series.

Now let’s see the growth prospects of the Digital Marketing space. The Forrester Research report estimates that spending in the Digital Marketing space in the United States is expected to increase to $103.4 billion by 2019, from $57.3 billion. According to a recent Juniper Networks (JNPR) research study and as the presentation below shows, digital retail marketing is expected to double by 2020, reaching $362 billion from $174 billion in 2015.

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Increased spending in Digital Marketing space is attracting tech players

Adobe has a leading position in the Digital Marketing space. It’s expected to benefit from increased spending in the space coupled with the ongoing SMAC (social, mobile, analytics, and cloud) revolution, provided it retains a hold on its competitive edge.

Although Adobe has a leading position in this space, strategic initiatives by Salesforce.com (CRM), Oracle (ORCL), and IBM (IBM) have increased the competition. This has decreased Adobe’s revenue growth in this space.

It’s Adobe’s leadership position in the Marketing Cloud space that made market research firm Stifel suspect that Adobe was the other competitor in the Demandware bidding war with Salesforce.com. The Demandware acquisition marks the biggest deal in Salesforce.com’s history. However, Adobe’s efforts to gear up in order to acquire Demandware forced Salesforce.com to pay a premium for Demandware. Salesforce.com announced the Demandware acquisition for $2.8 billion.

You can consider investing in the Technology Select Sector SPDR ETF (XLK) to gain exposure to Adobe. It accounts for 1.1% of XLK, which invests ~38% of its holdings in application software.

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