CRM, Social & Relationships

Salesforce Strengthens Its AI Capabilities With an $800 Million Purchase

salesforce CRM

Enterprise software company Salesforce (NYSE:CRM) recently announced yet another buyout deal in 2018, this time of artificial intelligence (AI) provider Datorama. It’s been a busy year for Salesforce — it made its largest purchase ever just a few months ago with the addition of MuleSoft, and it has seen top-line growth reaccelerate as it makes more inroads into the software industry.

This latest move won’t cause the same stir as MuleSoft did, but it is nevertheless an important one for investors to consider.

A list of the spoils

After a year-long hiatus, Salesforce is back on the prowl — 2016 was an active year with a total of 12 buyouts, and 2018 is on track to be nearly as busy. Included in the purchases this year was MuleSoft, which topped its $2.8 billion acquisition of Demandware back in 2016 by a hefty sum.

Company Purchase Price Description
Attic Labs Not disclosed Attic Labs is the creator of Noms, a database for the storage, editing, and sharing of enterprise data.
CloudCraze Not disclosed A digital business-to-business commerce company that will supplement Salesforce’s existing marketing and commerce cloud services.
MuleSoft $6.5 billion MuleSoft helps organizations integrate all of its apps and data into one place. The company is being used to create a new segment: integration cloud.
Datorama $800 million Cloud-based AI software for marketing and analytics for retailers.

Why Datorama?

To date, the primary goal of Salesforce’s shopping spree was to add a fifth segment to its cloud-based offerings, integration cloud, which it accomplished with MuleSoft. CloudCraze was a small company that will be used to supplement its fast-growing marketing and commerce cloud by helping business-to-business commerce migrate to a digital format. Datorama is a much larger addition that will further bolster this up-and-coming segment.

Datorama is AI for the retail industry. The company’s technology helps marketers make sense of their advertising campaign data from across all channels, improving decision-making on a campaign to help increase consumer engagement. Datorama boasts that over 3,000 brands from around the globe use its service, including names like PepsiCoUnileverLive Nation Entertainment subsidiary Ticketmaster, and travel site Trivago.

Datorama will be used to supplement the AI capabilities Salesforce already offers through its built-in “Einstein” software. Existing retail customers will be able to leverage the new service in its marketing campaigns. As for Datorama customers, CEO Ran Sarig says they will receive even faster and better support now that the company is part of the Salesforce family.

The marketing and commerce cloud segment is getting some attention, and for good reason. E-commerce is quickly reshaping the retail industry, and it shows up in Salesforce’s numbers. Marketing and commerce is the smallest segment at Salesforce, making up only 15% of revenue in the last reported quarter. However, it’s by far the fastest-growing segment, increasing 41% from the same period a year ago.

Helping the industry with its marketing and selling capabilities is a natural fit for Salesforce; its biggest money-maker remains its customer relationship management software, so marketing and e-commerce is hardly a stretch. The company has competition in that space, though, including Adobe Systems, which bought e-commerce company Magento a few months ago, and e-commerce software leader Shopify.

Salesforce has momentum on its side in that expanding division, but it could be doing better; Shopify’s subscription-based revenues grew 61% in the first quarter of 2018. Thus, while the marketing and commerce cloud’s growth of 41% is nothing to scoff at, bigger gains are out there for the taking. With Salesforce making a push to hit $20 billion in revenue in the next few years — a 50% increase from this year’s expected top line — Datorama’s AI software could be a key piece of the puzzle to help the company reach its ambitions.
Previous ArticleNext Article

Leave a Reply

Your email address will not be published. Required fields are marked *