US Mid-Market
If we dig deeper into the US B2C Martech opportunity, we can classify the companies into three categories: the small businesses (less than 500 employees), mid-market (500-1,499 employees), and enterprise (1,500 or more employees). By this estimate, the US mid-market is about 13,500 companies and the enterprise market is about 7,000 companies. Taken together, these 20,000 companies have the potential to spend about $25,000 per month each on martech creating a $6 billion addressable market. To put this in perspective, this is about 20 times the total Indian martech market.
The key question to therefore ask is: can an Indian company get a significant share of the US market? Given that this market is growing by 25-30% per annum, the size will grow to about $12-15 billion in the next 3 years. Even a 1% share of this market comes to $120-150 million in revenues, and probably $1.5 billion or more in valuation. (For comparison: Braze trades at over 20 times its ARR.)
Here then is the challenge for an Indian company seeking to tap into the US market:
- Get 1,000 US mid-market and enterprise companies
- Generate $10,000 MRR on average from each of these companies
- This will create a $120 million ARR business
What are the products that can comprise this $10,000 MRR? Here is a short list:
- Email and SMS Marketing (messaging)
- Multi-channel Campaign Management
- Automation and Engagement
- Customer Data Platform
- Analytics
- Personalisation and Search
- Product Experience to offer nudges and guide behaviour
Consider a B2C company with 100,000 customers. How much should they be spending on maintaining their customer relationships? A dollar a year would mean 10 cents a month – which would come to about $10,000 a month. These 10 cents could save the company tens of dollars in reacquisition costs should the customer churn. (In the Indian context, I recommend spending one rupee a month.)
Once businesses start seeing martech as a way to actually reduce acquisition costs, they will start shifting budgets from adtech to martech, and this will drive the flywheel of martech spending. I have discussed this in some of my previous writings:
- Marketing: Disrupted and Simplified
- Attention Messaging: Bridging Adtech, CPaaS and Martech
- The Coming Martech Era: Driving Exponential Forever Profitable Growth
- The Subscriptions Future: Customer Retention Forever
The shift towards digital, the pandemic-led acceleration in digital transactions, the explosion in availability of customer data, and the increasing demand for differentiation based on the digital experience – all point to a martech future. This also creates a great opportunity for Indian SaaS companies to go beyond their home market and tap global B2C companies as customers. In the next 10 years, the Martech opportunity will grow from $30 billion to $100 billion in revenues, and a trillion dollars or more in value creation. Just as Adtech created many trillion dollars in value in the past decade, martech can do the same in the 2020s. The key to success at scale lies in cracking open the US mid-market.
