Tableau And Marketo: The Long And Short Of It

Oct.29.13 | About: Tableau Software (DATA)

Last quarter, we delivered a highly bullish missive regarding Tableau's (NYSE:DATA) tone of business. The stock responded by crushing the quarter, sending the shares from the low-50s to the mid-70s in a few trading days. On Monday morning, we reiterated our sentiments, predicting that Tableau would deliver "blowout" Q3 results. Monday evening, DATA reported numbers that made the word "blowout" look like a gross understatement.

Total revenues were $61.1 million, up 90% year-over-year and an astonishing $10 million above consensus estimates. The data visualization software maker also reported an unexpected profit of $0.08 (consensus estimates called for a loss of -$0.09). License revenue grew 90% to $42M.

This confirms our thesis that the Data Discovery tide will not float all boats equally. Both Qlik Tech. (NASDAQ:QLIK) and Teradata (NYSE:TDC) disappointed Wall Street, something we believed to be company specific (and partly due to DATA's substantial momentum).

When looking at the high-valued software darlings, we continue to believe that shareholders of Marketo (NASDAQ:MKTO) are better served by owning Tableau. With both IPO lock-ups expiring near-simultaneously, I view MKTO's lock-up as a greater risk to than DATA's.'s (NYSE:CRM) acquisition of ExactTarget left MKTO standing at the altar. It also exacerbated MKTO's already-worsening competitive picture.

Adobe (NASDAQ:ADBE) is now in the market via its acquisition of Neolane. Oracle (NASDAQ:ORCL) entered the space by scooping up Eloqua. Teradata bought Aprimo. Hubspot and Act-On are privately-held up and comers. Aside from them, Marketo is one of the few notable vendors without a dance partner (most thought would acquire them, not ExactTarget).

MKTO was getting a large portion of their customers through the Salesforce partnership. Pardot (which was acquired by ExactTarget) was moving up-market and attacking the same space. CRM now has Pardot via ExactTarget, so we are concerned about the impact of that headwind on MKTO's future sales funnel. With the competitive changes in the landscape, customers are sure to question whether MKTO is going to be a long-term winner.

For the time being, MKTO has a good product which draws rave reviews from many of its customers. However, it sometimes draws complaints around support and professional services. If you look at the Eloqua product, it serves a particular purpose for a particular type of customer (B2B marketing; primarily, lead management). There is some exception to that but that's 85% of what they do. If you look at ExactTarget, it's a much broader platform. You could argue that email marketing has seen its peak and is starting to go away. However, developments in the industry continue to emerge and show that there are still some legs left to email marketing.

MKTO customers tend to be companies that cannot afford Eloqua. Many CMOs and VPs of Marketing have installed Eloqua, Marketo, and Aprimo - given one choice I believe that most would choose Eloqua. This is because it is thought to be the most elegant product out there. It thinks like marketing people do and has a really well thought-out architecture.

MKTO certainly has its fans. However, it cannot be considered the clear darling of the space. The competitive environment is simply too muddled.

In contrast, Tableau is gaining more steam by the day. The company continues to add salespeople. Of equal important, they are getting them up to speed quickly. Because of these factors, we continue to believe the company can grow as fast as it chooses. Customers don't really care about the IPO, but the capital infusion has certainly impacted the growth trajectory from having more awareness and salespeople. They don't have to discount either. They are riding a huge wave of demand.

Based on a study conducted by PTT Research, their recent customer conference last week was reminiscent of Apple (NASDAQ:AAPL) product announcement events. Customers were literally exuberant, as if they are at a rock concert. After interviewing several customers, it was clear that Tableau's solutions make its users look like superheroes within their organizations -- Data Superheroes. Its competitors simply aren't delivering at that level.

Based on our analysis, it should be clear that DATA and MKTO have similarly high valuations, but very dissimilar profiles. Meanwhile, 83% of MKTO shares will become available for sale on November 13. This represents all of its remaining outstanding shares. Given the company's uncertain future, we believe that many investors and insiders will look to diversify their wealth away from MKTO shares.

Conversely, we suspect that DATA insiders are feeling like rock stars, and justifiably so. The company is on fire and clearly the Data Discovery darling. Accordingly, I continue to believe that DATA is the superior play … and that's the long and short of it.

Disclosure: I am long DATA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. I am short MKTO.