I’m personally familiar with the products offered by Marketo. I’ve looked closely at their automated system for unattended drip marketing for a couple of my clients. So I’ve got to say I was taken aback by a set of quotes from an analyst opinion on this business as they were published in an article written by Tiernan Ray, Marketo: Wells Starts at Buy on ‘Big Customer Era’ Potential, which was published on September 30, 2013 on the Barrons web site.
The quotes are full of abstractions, with little effort of any kind on the part of the analyst producing the opinion, to explain, in specific terms what Marketo’s marketing products are all about. Here’s an example: “We believe the rapid adoption of mobile, social and cloud computing is creating massive disruption in the way customers and businesses interact and transact.” First, there is nothing whatsoever new, or illuminating about this comment. Second, the subject at hand, Marketo, per its most recent quarterly filing with the U.S. SEC, produced $22,504,000.00 in sales for the quarter ending June 30, 2013. Of this revenue number, 40% or more simply paid for directly related sales costs. In contrast, the Direct Marketing Association, which is merely one segment of the product and company promotions business, estimated commercial and not-for-profit businesses in the United States spent $168.5 billion on direct marketing products and services. So Marketo’s current annual sales rate is approximately 100th of the rate of simply the direct marketing industry.
So why the grandiose presentation and broad claims? Keep in mind this presentation on Marketo is just one instance in a very powerful stream of this genre of exaggerated exposition masked as analyst opinion. I don’t know the answer to this question. But I do know this kind of technical writing does little service to the investor and, in all likelihood, even less service to the analysts authoring it.
Since we can neither stop analysts from publishing this kind of literary hyperbole, nor successfully petition regulatory agencies to keep these firms under tight control, all we can do is to be discerning. In this case, discerning means maintaining a highly skeptical attitude about this type of communications collateral. Investors will do well to demand clarity and should not proceed where opacity is the response.
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