M&A Alert - March 4, 2010
ExactTarget Acquired CoTweet
Transaction Overview
On March 2nd, 2010, ExactTarget, an email marketing company, announced its intent to purchase CoTweet.
Target Description
CoTweet offers software that allows corporations to engage with customers using Twitter, CoTweet enables companies to track conversations with existing or prospective clients to enhance brand awareness or close prospects. The company allows companies to manage multiple Twitter accounts from a single dashboard, assign roles and create follow-up tasks. Customers include Whole Foods, McDonald’s, Microsoft, Ford, Dell and Pepsi. Upon announcement of the acquisition, CoTweet announced its intent to enable clients to utilize Facebook in a similar manner by the end of Q2 2010. The company raised just over $1 million in seed capital from Ron Conway’s SV Angel fund, The Founders Fund, Baseline Ventures, First Round Capital, Maples Investments and Freestyle Capital. Founded in 2008 by Jesse Engle, CoTweet is based in San Francisco, CA. Jesse Engle will join ExactTarget as head of the newly formed Social Media Lab.
Buyer Description
ExactTarget provides on-demand email marketing software solutions to enterprises and organizations, enabling them to create, target, deliver, track, and manage permission-based email marketing communications. It also delivers messages via short messaging services, Web landing pages, and automated voice services. The company also offers 3sixty, a social media platform that enables companies to build, host, and maintain permission-based online social networks in order to give their prospective clients, customers, employees and others a forum to gather, exchange ideas, distribute learning materials, and engage in discussion.
Scott Dorsey, CEO and Co-Founder, was the executive sponsor of the transaction. Since inception, ExactTarget has raised $161mm in funding from Battery Ventures (Michael Brown), InSight Venture Partners (Nikitas Koutoupes), Montagu Newhall Associates, Inc., OpenView Venture Partners, Scale Venture Partners (Rory O’Driscoll, Stacey Bishop), Technology Crossover Ventures (David Yuan, Kapil Venkatachalam). ExactTarget has achieved significant revenue scale ($114mm in revenue in CY 2009) and has the clear potential to take the IPO path.
Transaction Parameters
The transaction value was not disclosed. CoTweet is very early in its development and revenues were quite small as monetization of their service only began late last year via a monthly subscription fee of $1,500 per client. Update: An SEC filing indicates $8.1mm of ExactTarget equity was issued as partial consideration for CoTweet.
Strategic Rationale
ExactTarget is acquiring CoTweet to augment its strong email marketing legacy to integrate Twitter and other social media capabilities. ExactTarget has already begun to integrate mobile via direct SMS messaging capabilities and social media via its 3sixty platform. ExactTarget also recently acquired UK-based Keymail Marketing to expand its international reach in September 2009. ExactTarget’s moves to combine online, mobile and social media marketing services offerings highlights the growing importance of integrated marketing capabilities.
Architect Partners Observations
This transaction highlights the significant growth potential of social media/digital marketing. According to Forrester’s 2009 U.S. Interactive Marketing Forecast Report, social media marketing will grow faster than any other form of interactive marketing. Social media marketing will grow at compound annual rate of 34 percent, reaching $3.1 billion by 2014.