Marin Software is a pioneer in the pay-per-click (PPC) software industry.
They became the first company focused on making software for PPC professionals to go public in 2013 and trade under the stock symbol $MRIN.
But since going public and seeing the stock price rise 43% on opening day, Marin has struggled.
Marin’s market cap has dropped from $500+ million to under $50 million. Meaning, the company has lost over 90% of its value in the eyes of Wall Street over the last five years.
Revenues are declining as well.
In their most recent earnings call, Marin reported that revenues in Q4 2017 were $17.7 million, down 23% YoY from Q4 2016.
Why did this happen?
“For every complex problem there is an answer that is clear, simple, and wrong.” — H. L. Mencken
Making software for the PPC marketing industry is really hard.
Our company makes PPC software too. I sympathize with Marin on a deep level. I have even written in detail about why it’s so hard to make PPC software.
Most of my working life has been spent thinking about how to build great PPC software. Trust me, there is no blueprint.
Make No Mistake — Marin Makes Powerful Software
Since being founded in 2006, Marin did a lot right in order to launch publicly in 2013.
I used Marin back in my agency days during this period. Our company went through a trial period of three months where my core focus was vetting the platform as the manager of the Paid Search department.
It’s powerful software; there’s no doubt about that. The Marin team should be proud of what they built and I have great respect for the technology.
In many ways, Marin is a victim of their own early success. With a $500 million market cap and an impressive IPO, Marin had to believe they were on the right path.
Since then, the demands the market placed on PPC software have changed. But, Marin hasn’t quite changed with the market.
Here’s my take on why Marin has struggled to sustain growth and what it says about the future for PPC-focused software.
Marin Found Traction Serving In-House Teams…Then Came the Era of Agencies
The market for PPC software was very different in 2006 when Marin was founded. In my view, PPC was dominated by big brands with large in-house teams. There was nowhere near the amount of agencies providing PPC marketing services as compared to today.
Marin correctly identified that most big brands were keeping things in-house. They designed software that was great at taking a big chunk of data from one company to make recommendations.
But digital marketing was becoming democratized.
Companies big and small started participating in digital marketing and agencies sprung up in record numbers to serve new entrants who couldn’t afford in-house teams.
Marin’s model and data structure is less effective for agencies with clients across many industries. What makes sense for one client might not make sense for another. You actually wall off data in many cases and generate insights from smaller data sets.
Marin’s core infrastructure wasn’t designed for a different use case. Marin works best when you dump a bunch of data into one big pool, not split it up into 500 smaller pools each representing a different client. I saw this firsthand trying to implement Marin for my team in 2012.
Acquisio (which was recently acquired) was one of the first companies to exploit this weakness. They focused on generating recommendations from as small of data sets as possible in order to best serve small business accounts.
Most Digital Marketing Agencies Can’t Afford Marin’s Prices
Marin is expensive.
This makes selling to digital marketing companies tough. The average digital marketing company charges a percentage of ad spend as a management fee. This percentage traditionally ranges from 10 to 30% of ad spend. In most cases, Marin’s offerings cost ~3 to 5% of ad spend. For an agency, that’s a huge chunk of revenue going right back out the door.
Marin’s pricing is another relic of serving big in-house teams with massive advertising budgets. When your marketing budget allots millions of dollars for PPC campaigns, paying a fee of tens of thousands of dollars a month isn’t an insurmountable expense.
But that’s not how agencies work and it creates friction for them when evaluating Marin.
Marin’s Onboarding Process is Long and Arduous
The SaaS buying process has changed a lot over the last 12 years.
Whether you are an enterprise or SMB buyer, most people would prefer a low-friction (and preferably free) trial period to get a taste of the software without having to talk to a salesperson.
Marin’s software isn’t set up for this. Onboarding Marin is a months-long process that involves a lot of people, technical skills, and even legal work.
Advanced Ad Creation Features in Third-Party Tools Are No Longer Feasible
One of the big value propositions that Marin offers to prospects is their ad creation tools. The issue is that Google, Facebook, and other ad networks develop new functionality fast. They are always adding new features and targeting.
In order to offer the latest and greatest ad features in your third-party PPC software, you now have to match the development speed of companies like Google and Facebook….simultaneously.
This is impossible.
This creates periods of time when Marin customers are forced to leave the platform to work directly in the advertising UIs.
Third-party tools also rely on APIs. There is often a lag between when a new ad creation element is available to analysts and when it actually makes it into the API for third parties to add.
I would guess that Marin has sunk a lot of engineering and product resources into keeping up with rapid changes in ad creation workflows.
Unfortunately, I believe this is a losing fight. Analysts prefer to optimize out of the ad platforms anyways. They know they are getting the newest functionality and that tooling is greatly improved over even a few years ago.
The PPC MarTech Landscape has Grown
Marin started getting attacked from every angle as more companies began making PPC management software.
Just look at Marin’s section of Scott Brinker’s famous MarTech landscape infographic from 2011 to 2016:
It’s even more crowded in 2018.
This is a very fragmented market.
Savvy technical marketers now cobble together solutions using microservices and APIs. They have been able to replicate most of the value of Marin by connecting smaller, more-affordable providers instead.
Marin Didn’t Open Their Data to Other Platforms Soon Enough
Search the Slack app store for an offering from Marin. You won’t find anything.
What about an API so you can build solutions yourself? Marin's API is only in the ‘alpha’ stage and their documentation warns, “The Marin API is not yet suitable for building business critical applications.”
I frequently wonder how Marin would be different if they focused on the API sooner. They were better positioned then anyone else to be the company that made pulling PPC data easy via an API.
No one knew the pains of working with the ad network APIs better then them. But instead of empowering other teams to overcome that pain with their own API, Marin protected it as proprietary tech until recently.
The customer exodus from Marin is made easier because they haven’t opened their data to integrate into other systems. This would have helped Marin and their customers deliver more valuable solutions. It also would have more closely tied Marin to their customers’ organizations beyond just a long-term contract.
Co-founder Chris Lien returned to his CEO role in 2016 with the goal of returning Marin to growth and to maximize shareholder value.
On the earnings call for Q4 2017 Lien said:
The first chapter of Marin’s success was one of replacing single channel publisher tools and spreadsheets which were poorly designed and didn’t meet the need to the world’s leading advertisers.
This is a nod to the early era of Marin, pre-IPO.
Moving forward this is his vision for the company and products:
Focusing on where Marin can add value, shifts products focus from replicating and replacing publisher tools to the Your Ally and digital commitment to drive performance and efficiency for brands. Marin’s future lies in this open independent cross channel approach. As we continue to make more progress with customer adoption, retention and product development, Marin’s long-term value will grow and Marin will grow and Marin will return to growth.
It will be interesting to see how the next chapter of Marin’s history plays out. In January 2018, Marin laid off 48 employees or about 11% of the workforce. Revenues in 2017 were $77 million compared to $99 million in 2016.
Lien and the team have a lot of tough decisions ahead. Marin’s stock price shows no sign of rebounding.
For Marin, the pressure to right the ship will only grow larger.
Scrappy SaaS companies keep launching new solutions to help people better manage billions of dollars of digital advertising spend and wearing away a little more of Marin’s market share every day.
Author: Jon Davis, CEO at Shape
I spent years as a PPC consultant and agency analyst before focusing on making software.
I enjoy thinking about how technology fits into the future of digital marketing and how it's used within agencies delivering great results for clients.