Salesforce’s $700 mn Krux acquisition fuels artificial intelligence

Seth Ulinski, senior analyst at TBR, says Salesforce’s Krux acquisition for $700 million fuels artificial intelligence.

On October 3, 2016, the eve of Salesforce’s Dreamforce conference, the software company announced the acquisition of Krux, a privately held, 6‐year‐old advertising technology (ad tech) vendor, for a reported $700 million ($340 million in cash).

Krux operates in the data management platform (DMP) segment and will play an integral role in providing new sources of consumer touchpoints that feed into Einstein, Salesforce’s newly unveiled artificial intelligence capabilities.

Einstein “lives” between Salesforce Thunder, a platform supporting complex event processing, and Salesforce Lightning, the company’s end‐ user design platform.

TBR estimates Krux’s 2016 revenue at $50 million, making the acquisition a 14‐time multiple on annual revenue. Krux is already a Salesforce partner, connecting its DMP to the Salesforce CRM platform, and will provide data signals from 5 billion offline activities and 3.5 billion digital devices, per Krux CEO Tom Chavez.

The Krux acquisition could complement a huge volume of social and sentiment data Salesforce  would acquire from an acquisition of Twitter as well as create an advertising front end to Salesforce’s  customer engagement suite resulting from the company’s $3 billion acquisition of Demandware in June  2016 and its existing Service Cloud.

The lofty valuation highlights the importance of DMPs in today’s data economy. Specialists such as Krux provide a critical integration point between ad tech and marketing tech stacks, enabling  marketers to orchestrate smarter omnichannel campaigns across earned, owned and paid media  channels, while helping publishers maximize audience monetization opportunities.

The addition of Krux  will enable Salesforce to better compete with enterprise marketing cloud peers with well‐established  DMP functionality, such as Adobe and Oracle. Krux will add predictive intelligence to Salesforce’s  audience segmentation and targeting capabilities via billions of new signals about consumer  engagement with brands and publishers, providing fuel for Salesforce Einstein’s machine learning.

Considering SAP Ventures led a $35 million B‐series investment round in Krux in Q2 2014, SAP will take note and pursue one of the few independent vendors remaining (e.g., Lotame,  AudienceScience) as a means to bolster its marketing cloud, SAP Hybris. However, given SAP’s launch of  Exchange Media in Q1 2016, the company may pursue a different path by leveraging native data  management capabilities within Hybris Marketing, such as Profile.

In addition to enterprise marketing  clouds acquiring ad tech, device manufacturers are also acquiring it as a means to extend their position  in the consumer engagement value chain. In Q3 2016 Samsung acquired AdGear, a multichannel digital ad buying platform.

Samsung is now rolling out  addressable TV solutions to help marketers improve targeting in the linear TV market, encroaching on  the turf of satellite and cable TV operators, such as DirecTV (owned by AT&T) and Comcast. As Salesforce Marketing Cloud extends omnichannel marketing capabilities, addressable TV represents a logical extension.

Seth Ulinski, senior analyst at TBR