Over the 11 years that I’ve been publishing the martech landscape, because it mushroomed from ~150 options to ~10,000, I’ve seen many individuals react to it as an anomaly. “What is it about marketing that spawns so many software apps? Surely no other profession has to deal with such sprawl!”
To which software program assessment website G2 responds on this article, “Hold my beer.”
While there are definitely dynamics specific to marketing that feed the frenzy of latest martech startups, the reality is that martech is merely part of a a lot bigger software program revolution. Marc Andreessen known as it “software eating the world.” I name it The Great App Explosion. Software is all over the place (and, more and more, all the things is software program).
But precisely what number of commercially packaged software program apps are there in The Great App Explosion?
Let’s take video games and consumer-oriented apps off the desk. We know there are tens of millions of such apps for cell gadgets on the Apple App Store and Google Play Store. It’s truthful to say that’s a special kettle of fish than B2B software program, resembling martech.
Well, at the very least in the present day. Frankly, shopper and enterprise software program apps are powered by a lot of the identical underlying expertise. And you see growing cross-pollination between these domains. The consumerization of IT stays an enormous motion underway. I personally see similarities between creators on shopper platforms and “makers” inside companies leveraging no-code tools. And when you imagine the hype of the metaverse — which can at some point rise from the trough of disillusionment — the convergence of enterprise and shopper experiences will blur even additional.
But for now, let’s stick with a slender interpretation of what number of enterprise software program apps are there on the earth?
The reply: at the very least 103,528.
That is the variety of software program merchandise profiled on G2’s website as of final week. It’s not a theoretical guesstimate. It’s an empirical rely — just like the martech panorama, however spanning all enterprise software program classes.
I emphasised the phrase “at least” in entrance of that quantity for 2 causes:
First, G2 acknowledges that they haven’t uncovered the entire enterprise software program apps on the market but. My impression is that particularly in markets outdoors of North America, there’s a ton nonetheless to find. Think of China and Japan, for example.
Second, new software program startups preserve being launched. (You could be mumbling beneath your breath, “Let’s see what the current economy does to that merry-go-round.” Put a pin in that caveat for a minute – I’ll come again to it.)
In different phrases, that 103,528 quantity is a decrease certain of the B2B software program product universe. The precise quantity is definitely greater, and probably a lot greater. 150,000? 200,000? More?
G2’s database is definitely nonetheless rising, including on common 945 software program merchandise monthly.
What about consolidation, you say? These numbers from G2 are inclusive of the truth that they’ve dealt with over 760 merger and acquisition instances since January of this yr. So, sure, consolidation is occurring. But the paradox of simultaneous consolidation and expansion in software markets holds true. It’s not simply martech.
Speaking of martech, the oldsters at G2 additionally shared with me the counts of 9,365 martech merchandise and 1,488 adtech merchandise of their database. Combined — which is how I’ve all the time considered them — that’s 10,853 madtech apps in complete. More than what Frans and I got here up with in our 2022 martech panorama launch in May.
Our plan is to share information between us and G2 to get a superset of all of them. But it’s good to even have an unbiased corroboration that, sure, in the present day’s martech panorama actually is on the magnitude of ~10,000 merchandise.
Is 2023 the Year of the Martech Cataclysm?
But let’s get again to that query concerning the economic system I dodged earlier.
No sugarcoating it. This subsequent yr or two goes to exert a ton of strain on the present martech panorama. Funding will likely be more durable to come back by, and at significantly extra modest valuations. Marketing departments are going to have tighter budgets and grow to be a lot more durable clients with regards to contemplating and negotiating martech purchases. This is the primary time in over a decade of exponential martech development that the trade is going through a genuinely formidable financial setting.
Undoubtedly, it will lead to many extra acquisitions of smaller martech fish by larger martech fish, in addition to the personal fairness crowd betting on the opposite aspect of this cycle. But extra painfully, there will likely be an growing variety of early-stage martech ventures that merely name it quits after failing to both safe their subsequent funding spherical, discover a prepared acquisitor, or rebalance their operations to profitability.
My greatest guess? Up to twenty% of the present martech panorama might churn earlier than 2024.
But it’s solely the churn fee of current martech distributors that I’ve a darkish prediction about. As far as collective trade income goes, I imagine martech goes to proceed to develop for the foreseeable future. Maybe not as quick because it has been for the following couple of years. But within the large image, nonetheless fairly quick. For one easy motive: the digital transformation of promoting is way from over, and it stays one of many best levers each firm on the planet has for profitable and retaining clients.
Especially within the difficult instances forward, nice martech will likely be essential to survival success.
Forget valuations for now, which have been the semi-delusional yardstick of measuring martech ventures these previous few years. Revenue is the bottom fact of sizing an trade. And I’m 99.9% sure martech income will develop year-over-year for the remainder of this decade.
And to repeat the mantra of this submit: it’s not simply martech. The complete software program trade has huge development forward of it. The inspiring chart above from Battery Ventures (with my two annotations in orange) is each an correct look-back at software program income development over the previous 5 a long time, but additionally a reasonably conservative extrapolation of common compound annual development of software program income for the following twenty years.
Two issues come out instantly from that chart:
First, holy cats, the scale of what the software program trade is prone to develop to by 2050 dwarfs the place we’re in the present day. “Software eating the world” is software program taking up an increasing number of of each side of the economic system. Worldwide GDP in 2020 was ~$85 trillion. By 2050, it’s anticipated to be ~$165 trillion. It’s truly not that loopy to consider software program making up a mere $6 trillion of that, or ~3.6% of complete GDP.
Second, the Dot-Com Bubble Burst in 2000 and The Great Recession in 2008 barely register as tiny dents within the upward slope of this mountain. That’s to not trivialize the difficulties so many confronted in these years. But placing these hurdles in perspective of the lengthy recreation, the general trajectory of the software program trade hasn’t been derailed by the ups-and-downs of macroeconomic enterprise cycles. I believe that’s going to stay true for this era and possibly the following.
All of which leads me to conclude that The Great App Explosion will proceed via these subsequent couple of years. And on the following wave of restoration and enlargement, the expansion in new software program apps may very nicely hit mild pace ludicrous speed.