A few months ago we wrote about Zoominfo’s acquisition of Datanyze in an effort to strengthen its sales intelligence engine. Well, along comes another fish to swallow the first two! DiscoverOrg, a best-in-class B2B contact database founded in 2007, acquired Zoominfo, another best-in-class B2B contact database which was founded in 2000, in early February. This is a little different, though. Rather than one solution scooping up a complementary, younger solution, as was the case with Zoominfo and Datanyze, DiscoverOrg and Zoominfo were longtime, fierce competitors who have also been facing a bigger foe in the past decade, LinkedIn.
This acquisition also further validates a key theme we mentioned a few months back with the previous acquisition: we’re continuing to head into a heavy period of sales stack consolidation and more mergers and acquisitions are going to happen amongst players. Not only does it reinforce that theme, but it does so in a bigger way due to where these two sit on the competitive landscape. Let’s check out G2 Crowd’s “Sales Intelligence Tools” positioning chart:
In essence, these two basically have the largest market presence behind LinkedIn for sellers looking to find rich contact information, and they just combined forces. This is mostly good, but there are also some challenging themes arising here, so let’s take a look at a few of them:
If all sellers use the same intelligence tools to find contacts and compelling reasons to reach out to them, then is there any advantage left when prospecting at the top of the funnel? For the creative, intelligent, and multifaceted sales teams, the answer is, “Yes, of course, you can still find an edge. Embrace the evolution! Explore social listening tools to find prospects who are signaling compelling purchasing behavior in real time. Work with marketing to setup lead scoring to figure out who is ready to engage. Build a partnership ecosystem to source warm leads with your allies. Do half a dozen other things beyond simply cold-calling folks you found in a database!” For those who are less experienced though, or overly reliant on database tools and single channel outreach, you’re definitely losing your edge and you will continue to struggle. The decision between “Should I buy DiscoverOrg or Zoominfo?” doesn’t exist anymore, and that means that the barriers between you and your competition having the same (now, much richer) database are that much lower.
With more and more consolidation, we see a mixed, but mostly good outcome for teams purchasing technology tools to support sales and marketing. You’re making fewer decisions and implementing consolidated solutions faster into your workflow. You’re also leveraging a larger and smarter database, with more integrations into tools you already love or use. That said, these two giants now have more pricing power due to a better product and less competition against each other too. They still face LinkedIn and the longer tail of solutions of course, but these are the economic results of leading providers consolidating in any industry.
Additionally, I think this puts more pressure on the best “lead engagement tools” out there to eventually scoop up a large, high-quality contact database. If we’re going to flood channels further with messaging to prospects now that we have more plentiful high-quality contact information, we might as well do it with smarter tools – those that are already consolidated with said databases, that help us plan our cadences in intelligent ways, with metrics to help us improve too.
If you’re an investor, do you still invest in tools like these? If you’re an entrepreneur, do you set out to build one? I don’t know! If I’m an early-stage SaaS investor, who typically looks at a 7-10 year investment horizon (spoiler alert: I am, this is what we do at Bowery Capital) then I’m very wary of the competitive landscape here and oligopoly that sits at the top. Other wrenches include GDPR threatening the legality of how certain databases are built and executed on, AI and machine learning models replacing certain human functions at the top of the funnel, and more.
Gartner just recently predicted that by 2020, 50% of European marketing lists will have been reduced by 30%. Ouch. At the same time, they also predict that slightly further down the road, by 2022, B2B sales organizations using AI-based data intelligence solutions for prospecting will cut the amount of time spent on prospecting by up to 50%. Woo! There may be opportunities here, but they don’t look the same as what exists in the market today.
By the way, some later-stage investors did make a good and quick return here! Great Hill Partners, a PE firm, invested in ZoomInfo in 2017 and reportedly made a 6x return on their investment two years later. Great job, Great Hill!
In conclusion, we believe this acquisition is a healthy one for the ecosystem, despite the fact that it does produce some challenges as well. We’re excited to see what happens in 2019, and are confident this won’t be our last article on sales and marketing providers combining forces to create better solutions for all of us!