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Why Salesforce.com Could, Would And Should Buy HubSpot

Dec. 07, 2015 12:35 PM ETHubSpot, Inc. (HUBS)CRM8 Comments
Alex Clifford profile picture
Alex Clifford


  • HubSpot's inbound-marketing platform is seeing intense growth and compliments Salesforce's current offering.
  • HubSpot's new CRM platform, Sidekick, is gaining traction in the mid-market.
  • Salesforce's history of acquisitions with marketing tech companies make this likely.

HubSpot's legendary Inbound conference, Source: Michael Conway

I first wrote this article a month ago when the company was trading at $49. Sadly (but proving me right), it has risen about 16% since then.

Since its IPO, HubSpot (NYSE:HUBS) has rocketed from $30 to $58 a share. It currently trades at ~$58 and I think HUBS has further to go. It's an incredibly smart company with very smart people and I expect it will be acquired at a much higher price.

I think Salesforce.com (NYSE:CRM) could, would and should make this acquisition.

Where HubSpot fits in marketing tech field

Any B2B company and many B2C companies need HubSpot to manage their "inbound" marketing processes. Over the past 10 years, as online marketing has become more dominant it has split into two factions.

1) Outbound marketing - This is pay-per-click advertising, banner adverts, search advertising, social adverts, etc.

2) Inbound marketing - Getting organic traffic from search, SEO (search engine optimization), creating blog articles, solving problems first, pushing products later.

Outbound marketing is very complicated and fractured. But inbound marketing is much simpler: create informational, educational content around search terms people are searching for. Then you put a marketing funnel in place to collect leads and follow up with them.

HubSpot has a real monopoly over this market because they've created such a quality platform. HubSpot's founder, Dharmesh Shah, even invented the term "Inbound Marketing." I was given his book as a primer when I started my digital marketing career.

HubSpot is like a company selling magnets. It's selling the platform, the services and tools that connect business and customers. Its Inbound marketing platform provides huge value for any company with an online presence.

The CRM platform that HubSpot have built

What's more, their Sidekick business could make it a strong

This article was written by

Alex Clifford profile picture
ifs Young Business Writer of the Year 2012. Author of "How The Financial Industry is Dealing With The Pensions Timebomb". Featured in The Times in the UK. My day job is a freelance marketing consultant, and by night I research stocks.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in HUBS over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I have been a Hubspot user and customer through companies I have worked with.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (8)

mjs504 profile picture
I see the stock has plunged from about $50 to $38 in less than a week. There's also been a lot of insider selling as of late. Any insight as to why the recent drop (market has not been down nearly as much) and/or why the insider selling?
Are you aware that Saleforce already built a marketing automation platform? Pardot?

With Saleforce's resources, they could build the technology HubSpot has created in a year. What they can't replicate is the community and audience that HubSpot has built. For that reason, I'm not sure what the value would be for an acquisition. What are your thoughts?
Salesforce didn't build Pardot - it came through ExactTarget who also bought it. It's probably the best bit of ExactTarget!

Also I think you underestimate building something like HubSpot..by that logic Oracle could just build a Salesforce in a year. The world is littered with software that doesn't quite have the right magic that maybe something like HS has and a copy may not.

Either way, can't see HS being bought by SF...as I said earlier, they haven't remotely integrated ExactTarget yet - heard this morning about some customers leaving it because it's so disconnected...don't tell the shareholders!
DewellConsulting profile picture
The big issue I see with HUBS is that although stock price is up, customer acquisition is up and sales are up, pre-tax profit margin, net profit margin, return on equity and return on assets all are down.And, , the “net loss attributable to stockholders” as shown on your Sep 2015 10Q is ($35,802,000). Further, Paid in capital took an enormous jump from $12.8M in 2013 to $265 in 2014.

I'm wondering what's up and if this would really be a good acquisition?
Salesforce already has their hands in HubSpot, they were part of the Series D round for $32M


They also have their big investment in ParDot (ParDot and ExactTarget are the foundations of Marketing Cloud.
Good arguments in theory, BUT didn't Salesforce already bet on automating sales further when it bought and incorporated RelateIQ (Now SalesforceIQ)? The Sales/CRM side of Hubspot would thus be redundant.

Additionally, Hubspot has had success in with Small and Medium Businesses but Salesforce has been making a strong push to move upstream (e.g. - Enterprise clients). An acquisition of Hubspot would seem to be inconsistent with the story that Salesforce has been pushing to the street.

Finally, since Salesforce was also an early investor in Hubspot (http://bit.ly/1NGt1WP) don't you think the fact that they didn't buy them after that round highlight that Hubspot doesn't fit into Salesforce's long-term plan?

Do you recommend CRM issue stock or debt for acquisition?
'HubSpot would integrate well into Salesforce's "Marketing Cloud" like ExactTarget did after their $2.5 billion acquisition three years ago.'

When you say integrate, do you mean from the perspective that investors will think it's all very integrated and will keep pumping the share price? It can't be from a technical perspective as ExactTarget is completely unintegrated all this time later.

Adding yet another set of messy technologies onto what now is a very messy set of stuff all over the place will just bring forward why Salesforce will be doomed. They can keep buying growth while the cheap money is around but when the music stops...look out below!
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