CMS Vendor M&A Continues With Bloomreach’s Acquisition of Hippo
… the fact is that much of the CMS market is getting a bit long in the tooth. It still has value, but it’s not high-growth or sexy today, even though WCM remains at the heart of, and is essential to, the promise of CEM. It’s this market maturity that has driven recent deals…and will continue to drive more in the near- to mid-term.
Background on the players
BloomReach, as noted above, is a start-up, so a new and relatively unknown brand. That said, the company has raised $97 million since its founding in 2009, including $56 million in January 2016 in a series D round, from a group of heavy hitting investors that includes Bain Capital, Lightspeed Ventures, Battery Ventures and Salesforce Ventures. The founders and management team has a diverse set of industry credentials: the CTO, for example, worked previously at Google and IBM Research, while the CEO has a background in the telco and networking world with previous stints as an entrepreneur and a product director at Cisco.
Hippo, in contrast, is a relatively mature company, having been founded in 1999. We estimate that the company’s revenue is currently at the $15-20 million range. This is low considering how long it has been around, but understandable considering it is open source: lots of customers are Hippo users, but only a fraction of them are high-paying. Hippo has been investing for growth, expanding its presence in Europe via new offices in Germany and in North America through an office in Boston. And the company’s move in the Gartner Magic Quadrant for WCM to the “visionary” category likely helped to further raise its profile among technology buyers on both sides of the Atlantic.
In the acquisition announcement, BloomReach described itself as a “leading ecommerce personalization platform,” explaining its belief that all business will have “three core platforms powering their digital presence” in the future. These three platforms will include an e-commerce platform on the back-end, an “experience platform powering personalization” the middle layer, and a “marketing platform handling campaign execution.” In this vision, Hippo would provide the middle layer and BloomReach the marketing one. Though not explained further, the back-end commerce layer would presumably be that of a separate existing e-commerce platform vendor or the customer’s own proprietary system.
That’s a nice idea but …
- First, while BloomReach may have deep pockets and leadership with impressive resumes, they are still a relatively unknown entity compared to Hippo, and yet it looks like they are retiring the Hippo brand. This could be a premature move considering how much Hippo has invested in building up that brand in Europe and North America: they may not be large in revenue terms, but there is real equity in those spongy orange hippos that sit on desks from Berlin to Boston.
- Second, part of Hippo’s growth has been due to its partner network. These partners will now need to take on another platform and counterparts that, smart as they are, largely come from outside the WCM/CEM world. Ironing out these new relationships could be particularly disruptive to Hippo’s U.S. partners, in particular, who are relatively new and only recently boned up on the Hippo platform and ways that the company works with partners.
- Third, and most importantly, there is a massive gap between the “three platform” vision that BloomReach describes and the reality of how organizations think about, buy, and use technology.
In our discussions with technology buyers at medium and large enterprises, both as part of our research and our end-user consulting business, these folks describe a world in which they must balance working with a hodgepodge of proprietary and vendor technologies of various versions – some of which are no longer supported but which would be too disruptive and/or expensive to replace – with navigating their own internal organizations where decision-making is dispersed among marketing, IT, operations, procurement, and more. BloomReach may have a great technology solution and vision, but to succeed, it will need to meet its prospects and customers where they are today. And where they are today, we hear time and time again, is that the promises that vendors have made about their digital experience platforms fail to materialize when confronted with the reality of the complex integrations needed to actually get those platforms up and running.
Then again, BloomReach may not actually care if it loses the business of existing Hippo customers, since the vendor was fairly small. Instead, BloomReach may see the Hippo platform itself as the real value, as a piece for a larger platform that can later be sold to a larger vendor (after all, the VC investors funding BloomReach are looking for that kind of return). So where does that leave Hippo’s existing customers?
Implications for Hippo customers
As we say with all vendor acquisitions, there is no reason for existing customers to panic. Instead, now is the time for Hippo customers to collect information from the vendor itself on how account services, customer support, and the future of the technology, as well as how the issues in this post will be addressed (i.e. what will happen with the partner network). At Digital Clarity Group, we’ve advised scores of organizations on how to navigate vendor acquisitions: you can check out further details here.
Implications for the CMS market landscape
A larger trend that this acquisition points to is that the era of the stand-alone CMS vendor may be coming to an end. Instead, the CMS is becoming increasingly part of organizations’ larger “digital transformation” projects, where the buyer is looking for a solution to help them better understand and engage with their customers. To meet this demand, we’ve seen more CMS vendors widen their solution set over the last few years (frequently through acquisitions), into commerce and marketing analytics, in order to offer a broader range of digital experience-related products. Episerver and Crownpeak are just two of the more recent examples. Hippo may have realized this and decided that being acquired was a step it needed to take in order to offer customers the personalization and analytics tools it didn’t have. And BloomReach was correct in realizing that the content that customers engage with is inextricable from their experiences with brands.
This makes sense since it is what customers are looking for, but the challenge ahead is for those vendors to actually deliver these different products as a true platform. What is happening now is that today’s platforms often turn out to be platforms in name only. In practice, many buyers are finding that these platforms, often the result of acquisitions, are still like a set of separate companies under the hood, with disjointed sales teams, customer support contacts, and documentation that don’t link together. For BloomReach to grow – and for its illustrious investors to earn the returns they expect – it will need to address this challenge with Hippo and with the future acquisitions that are undoubtedly on the horizon.