June 8, 2023

Market Company

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Think the martech landscape is big? Here’s the size of the software industry overall

6 min read
Martech and Other Software Landscapes

Martech and Other Software Landscapes

About the 11 yrs that I’ve been publishing the martech landscape, as it mushroomed from ~150 answers to ~10,000, I’ve witnessed quite a few persons react to it as an anomaly. “What is it about internet marketing that spawns so a lot of software program apps? Definitely no other profession has to deal with these sprawl!”

To which application evaluation web site G2 responds in this post, “Hold my beer.”

Though there are absolutely dynamics distinct to marketing that feed the frenzy of new martech startups, the reality is that martech is merely a part of a substantially larger computer software revolution. Marc Andreessen named it “software eating the entire world.” I contact it The Terrific App Explosion. Software package is in all places (and, increasingly, anything is program).

But specifically how several commercially packaged software applications are there in The Wonderful App Explosion?

Let’s take games and shopper-oriented applications off the table. We know there are thousands and thousands of this kind of apps for mobile products on the Apple App Retail outlet and Google Participate in Store. It’s truthful to say that’s a distinctive kettle of fish than B2B computer software, this kind of as martech.

Very well, at minimum today. Frankly, customer and small business software package apps are powered by a great deal of the exact same underlying technological innovation. And you see increasing cross-pollination in between those domains. The consumerization of IT continues to be a massive motion underway. I individually see similarities amongst creators on buyer platforms and “makers” inside of businesses leveraging no-code equipment. And if you think the hoopla of the metaverse — which will a person working day increase from the trough of disillusionment — the convergence of business enterprise and shopper ordeals will blur even further.

But for now, let’s adhere to a slender interpretation of how quite a few business enterprise program apps are there in the globe?

The remedy: at least 103,528.

That is the range of computer software solutions profiled on G2’s web-site as of very last 7 days. It is not a theoretical guesstimate. It is an empirical count — like the martech landscape, but spanning all business software program classes.

I emphasized the phrase “at least” in front of that amount for two factors:

First, G2 acknowledges that they have not uncovered all of the business enterprise software apps out there nevertheless. My perception is that primarily in markets exterior of North America, there is a ton however to find out. Assume of China and Japan, for occasion.

Next, new software package startups retain currently being launched. (You could be mumbling under your breath, “Let’s see what the existing overall economy does to that merry-go-spherical.” Put a pin in that caveat for a moment – I’ll arrive back again to it.)

In other words, that 103,528 variety is a reduced certain of the B2B application item universe. The precise quantity is certainly larger, and perhaps much higher. 150,000? 200,000? More?

G2’s databases is definitely continue to escalating, including on typical 945 computer software merchandise for each thirty day period.

What about consolidation, you say? These quantities from G2 are inclusive of the fact that they’ve taken care of around 760 merger and acquisition scenarios due to the fact January of this year. So, indeed, consolidation is going on. But the paradox of simultaneous consolidation and expansion in software marketplaces holds real. It is not just martech.

Speaking of martech, the folks at G2 also shared with me the counts of 9,365 martech solutions and 1,488 adtech solutions in their databases. Blended — which is how I’ve normally assumed of them — that’s 10,853 madtech applications in total. More than what Frans and I came up with in our 2022 martech landscape launch in May possibly.

Our program is to share data involving us and G2 to get a superset of all of them. But it is great to also have an independent corroboration that, certainly, today’s martech landscape actually is on the magnitude of ~10,000 products.

Is 2023 the Yr of the Martech Cataclysm?

But let’s get back again to that query about the overall economy I dodged earlier.

No sugarcoating it. This subsequent calendar year or two is likely to exert a ton of force on the latest martech landscape. Funding will be more difficult to arrive by, and at substantially extra modest valuations. Marketing and advertising departments are going to have tighter budgets and become substantially more durable buyers when it will come to considering and negotiating martech purchases. This is the to start with time in in excess of a 10 years of exponential martech expansion that the industry is going through a genuinely formidable financial setting.

Unquestionably, this will outcome in a lot of far more acquisitions of smaller sized martech fish by more substantial martech fish, as effectively as the personal fairness crowd betting on the other side of this cycle. But much more painfully, there will be an increasing range of early-phase martech ventures that just phone it quits immediately after failing to possibly safe their subsequent funding spherical, discover a inclined acquisitor, or rebalance their functions to profitability.

My finest guess? Up to 20% of the present-day martech landscape could churn just before 2024.

But it is only the churn level of existing martech suppliers that I have a dark prediction about. As considerably as collective marketplace revenue goes, I believe martech is heading to go on to grow for the foreseeable foreseeable future. Perhaps not as quickly as it has been for the up coming few of yrs. But in the big picture, even now very fast. For one very simple rationale: the digital transformation of promoting is much from more than, and it stays a single of the best levers every firm on the planet has for successful and retaining consumers.

Specially in the tough situations in advance, great martech will be essential to survival achievement.

Growth of the Software Industry (Revenue)

Forget valuations for now, which have been the semi-delusional yardstick of measuring martech ventures these past couple of years. Income is the floor fact of sizing an field. And I’m 99.9% certain martech profits will develop yr-about-year for the relaxation of this ten years.

And to repeat the mantra of this submit: it is not just martech. The complete computer software sector has monumental development ahead of it. The inspiring chart over from Battery Ventures (with my two annotations in orange) is the two an exact seem-again at software package income growth above the earlier 5 many years, but also a pretty conservative extrapolation of normal compound annual development of software package income for the upcoming two a long time.

Two points pop out straight away from that chart:

Initial, holy cats, the dimensions of what the software field is very likely to expand to by 2050 dwarfs where we are these days. “Software eating the world” is application using over much more and extra of each individual facet of the financial system. Worldwide GDP in 2020 was ~$85 trillion. By 2050, it is predicted to be ~$165 trillion. It is basically not that nuts to assume of software package creating up a mere $6 trillion of that, or ~3.6% of total GDP.

Next, the Dot-Com Bubble Burst in 2000 and The Excellent Recession in 2008 scarcely register as small dents in the upward slope of this mountain. That’s not to trivialize the problems so several faced in those people a long time. But placing those hurdles in point of view of the extensive recreation, the total trajectory of the computer software sector has not been derailed by the ups-and-downs of macroeconomic company cycles. I assume which is heading to stay legitimate for this technology and in all probability the next.

All of which potential customers me to conclude that The Fantastic Application Explosion will keep on by these subsequent pair of a long time. And on the next wave of recovery and enlargement, the progress in new computer software apps may extremely properly strike gentle velocity ludicrous velocity.

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