Salesforce.com, Inc. (NYSE:CRM) will likely emerge as the leader in the new IT industry and may be successful in creating a completely new $30 billion "FUSED Marketing System" industry.
San Francisco, California-based Salesforce, which offers customer relationship management software, is one of the best positioned software companies with continued strong fundamentals and enterprise growth strategies.
Marketing systems are highly complex, with complex technologies and business processes. In the future, the ad spent between online and offline market would be combined and Salesforce is well positioned to exploit this huge opportunity.
According to Global Equities Research, total ad-spend world-wide is about $500 billion, out of which 20 percent ($100 billion) may be invested in technology, and 30 percent of this $100 billion may be spent on FUSED Marketing Systems Cloud Offering.
Salesforce.com has been quietly building a portfolio of cloud services for its Marketing Cloud offering. These offerings help companies to market in social networking sites such as Facebook, Inc. (NASDAQ:FB) and Twitter.
The proliferation of social media and increased demand by consumers to engage with brands across multiple social channels is driving chief marketing officers (CMOs) to look for an integrated social marketing platform. These platforms help them publish their ads and marketing campaigns on social networking sites but also helps in monitoring their campaigns.
Salesforce.com may continue its investments in creating this new fused marketing systems cloud industry - including more M&A. Salesforce acquired ManyMoon for $25 million; Radian 6 for $326 million; Rypple for $65 million; Buddy Media for $689 million. The latest being Exact Target for $2.5 billion.
In particular, ExactTarget acquisition holds significant promise for Salesforce, especially for the next year. The deal would help accelerate overall billings in 2014 to at least 25 percent from 19 percent.
The combination has the potential to turn CRM's Marketing Cloud portfolio into a true platform, and propel it ahead of the point solutions of many competitors.
"Despite experiencing hypergrowth since launching its first product in 2000, CRM's $3Bn+ subscription rev run rate is still under 20% of the overall $17B CRM market and only 3% of a $124B TAM that reaches across CRM and infrastructure," UBS analyst Brent Thill said in a client note.
The integration of Exact Target into CRM's existing Marketing Cloud portfolio is well underway, with sales cycles moving forward on big joint deal opportunities. More details could be available on at ExactTarget Connections 2013 event on Sept. 16 at 4:00 p.m. EDTin Indianapolis. In addition, the company will host an Investor Session on Tuesday, Sept. 17 at 8:30 a.m. EDT,
"Salesforce.com may need to do more Acquisitions to build out this new $30 Billion "Fused Marketing Systems" Industry," Global Equities Research analyst Trip Chowdhry wrote in a note to clients.
Salesforce may need to buy companies with-in each sub-segment of the industry, including agencies, media buying desks, exchanges and video ad networks/servers.
Salesforce has proven that they can deliver innovative products, including many firsts - such as Social Computing, Data.com. Salesforce.com has proven that it can create industries, such as service cloud.
Meanwhile, Salesforce has started to get higher ASPs for its new products. The company recently announced a Performance Edition product combining Sales Cloud, Service Cloud, and other products at $300/user/month, or 20 percent higher than the Ultimate Edition and 140 percent higher than the most popular Enterprise Edition.
The company also unveiled Salesforce Files, enabling companies to connect any file to business. Salesforce Files is the only enterprise file system that connects any file seamlessly with sales, service, marketing and other business processes-from any device. For the first time ever, customer companies can unlock files from third-party repositories such as Box, Google Drive or SharePoint, and make them mobile and social.
"Salesforce.com is so far executing flawlessly on the Complete Innovation Equation," Chowdhry added.
The innovation mechanism and creation of new industry would create more value for shareholders while the company's revenue may see acceleration in the mid-to-long-term.
Shares of CRM, which trade at 95 times its 2014 consensus earnings estimate, have been trading between $34.76 and $50.60 during the past 52-weeks. They have gained 27 percent in the last one year.
Wall Street analysts, in general, have a positive opinion on Salesforce stock, with 37 out of the 44 analysts covering CRM giving a "buy" or "strong buy" rating. Three analysts rate the stock as "hold," while 4 have a "sell" rating on the stock.
Disclosure: I am long FB.
Additional disclosure: This article was posted at iStockAnalyst.com.