NetSuite’s Bronto Buy Signals Coming Changes to Online Commerce

Bronto Software’s bread-and-butter business is helping companies understand what their customers browse and buy online—information that can then be used to nudge consumers to buy even more.

This type of “marketing automation”—the ability to analyze consumer behavior in order to form targeted and personalized e-mail messages—primarily serves retailers. But the Durham, NC-based company has its sights set on a broader range of transactions, such as ticket sales, subscriptions, and even travel. Joe Colopy, Bronto’s CEO, sees the future of online buying as a series of seamless, automated transactions that involve few salespeople.

“We have a vision to change the way people do commerce,” he says.

Bronto will be better positioned to pursue a wider scope of applications as part of NetSuite (NYSE: N). The San Mateo, CA-based enterprise software vendor announced in late April an agreement to acquire Bronto for $200 million in cash and stock. But the ambitions of Bronto and NetSuite are shared by a number of companies jostling for advantage in online commerce. Whether consumers realize it or not, every time they shop online, retailers are trying to engage them in an ongoing dialogue where each click, view, and order becomes a touch point in the conversation. NetSuite’s deal for Bronto, as well as a wave of acquisitions sweeping the sector, suggests that software companies want a bigger hand in those conversations.

NetSuite’s SuiteCommerce software handles what happens after a customer places an order—processing payment, sorting inventory, tracking shipments. But NetSuite hasn’t had a good view of what customers are shopping for before they actually place the order, says Christine Dover, research director at analysis firm IDC, who focuses on enterprise applications and digital commerce. Bronto brings to NetSuite the capability to track and measure what customers are doing. “It’s not really about the e-mail marketing, it’s about the behaviors,” she says.

From a customer’s perspective, the contact from a retailer is a simple e-mail message. But there is nothing simple about the e-mail. If a customer abandons a product page, say, or leaves something in the online shopping cart without completing an order, marketing automation software can crunch that information, along with other shopping metrics, to compose and send a targeted e-mail reminder, Dover explains.

The message may be automated, but each message is tailored to its recipient. Personalization software has been available since the late 1990s, but the growing sophistication of software to analyze data has vastly improved the technology’s personalization capabilities, according to research firm Gartner. As a result, business interest in personalization has taken off in recent years.

In a Gartner survey of software vendors, 64 percent responded that they implemented their personalization offering in 2012 or later; 27 percent of responding companies implemented personalization in 2014. Gartner says the spike in personalization is driven in part by mobile devices that enable consumers to price shop from anywhere—forcing companies that had previously competed on product and price to also compete on awareness of customer experience in order to gain competitive advantage.

Interest in personalization has led to recent mergers in the sector. Just over a year ago, IBM acquired marketing automation company Silverpop. Shortly after that deal, SAP acquired Boston-based behavioral marketing software firm SeeWhy. Silicon Valley companies have also been active in marketing automation deals. San Mateo-based startup Marketo (NASDAQ: MKTO), which has focused on marketing automation since its 2006 founding, has rounded out its offerings with acquisitions of its own in recent years.

Meanwhile, Redwood Shores, CA-based enterprise software giant Oracle (NYSE: ORCL) has bolstered its marketing automation capabilities with its 2012 acquisition of Eloqua, followed by its 2013 deal to buy Responsys. Gartner says that by 2018, companies that are fully invested in all types of online personalization for their marketing will outsell those who have not by more than 30 percent.

For its part, Bronto started out as a strictly e-mail marketing company. Colopy and Bronto co-founder Chaz Felix, both former employees of open-source software company Red Hat (NYSE: RHT), had bootstrapped Bronto since its 2002 founding. In the ashes of the dot-com bust, Colopy says, there was no investor money available. The company remained bootstrapped even as it grew in size and scale, and evolved from e-mail marketing to marketing automation. Projected revenue for 2016 is between $40 million and $45 million. Bronto has offices in London and Sydney, Australia; global expansion accounts for some of the company’s revenue growth.

With no outside investors pushing for a sale, Colopy says Bronto was not actively seeking to be acquired, though NetSuite was already familiar to the company as one of its business partners. Bronto and NetSuite have some 100 customers in common who use Bronto’s technology to develop marketing campaigns, while using NetSuite’s technology to handle the back end of commerce. The addition of Bronto’s marketing automation capabilities to NetSuite’s commerce software could also be indicative NetSuite’s longer-range goals, says Penny Gillespie, a research director at Gartner who focuses on electronic and mobile commerce.

“Much of the underlying technology that can be used for personalizing e-mail can be used for personalizing the online experience, which may be next in NetSuite’s roadmap,” Gillespie says, adding that other vendors are taking this step.

Bronto has already expanded beyond its core retail base. The company currently counts as customers a handful of sports teams, such as the Durham Bulls minor league baseball team, who use Bronto to drive ticket sales. Expanding the Bronto offering to tickets, travel, and other applications makes sense, says IDC’s Dover. While retail is the primary way that consumers encounter marketing automation right now, she sees the technology soon finding a place personalizing other transactions.

“Every company is a commerce company—everyone has something to sell,” Dover says.

Frank Vinluan is an Xconomy editor based in Research Triangle Park. You can reach him at [email protected] Follow @frankvinluan

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