Salesforce Marketing Cloud is company’s next billion-dollar product

Earlier in the series, we discussed Salesforce’s (CRM) fiscal 2Q17 results as well as the performance of its cloud offerings. Though App Cloud grew the most in fiscal 2Q17, Salesforce’s marketing cloud performance was also satisfactory. According to the Wall Street Journal, John Somorjai, executive vice president of corporate development and Salesforce Ventures, stated, “Our Marketing Cloud as a whole is our next billion-dollar cloud.”

Salesforce in its 2Q17 earnings release stated, “While many enterprise software companies are aspiring to achieve a billion-dollar run rate in one product, we already have three products with revenue run rates of more than $1 billion today with the Marketing Cloud soon to become our fourth. This gives us multiple levers of growth and provides additional business diversification.”
Salesforce Sees $1 Billion Run Rate from Its Marketing Cloud

Salesforce’s Marketing Cloud will get a boost from Demandware acquisition

According to the same Wall Street Journal report, Keith Block, Salesforce’s vice chair, president, and COO, stated that digital commerce is expected to become an $8 billion industry in the near future. Block said, “Demandware will be well-positioned to deliver the future of commerce and lead the multibillion commerce market.”

Salesforce’s Marketing Cloud now encompasses subscription and support revenue from Demandware. Owing to Demandware’s dominant presence in the digital commerce space, Salesforce’s marketing cloud will benefit.

The above chart by Tfmainsights shows the significant acquisitions announced in the marketing technology space by leading technology players like Salesforce, Oracle (ORCL), Adobe (ADBE), and IBM (IBM). The above list doesn’t include Oracle’s announcement of AddThis and NetSuite in this space. Later in the series, we’ll discuss the factors that have contributed to the significant M&A (mergers and acquisitions) activity in this space.

Investors who want to gain exposure to Salesforce can consider investing in the SPDR S&P 500 ETF (SPY). SPY has exposure of ~29% to application software. It invests ~0.23% of its holdings in Salesforce.

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