We continue to see ample M&A activity in online marketing. Not only are there distressed assets on the and an opportune time for acquisitions, but a longer-standing trend persists: feature expansion. Broadening a product suite can help achieve key metrics like revenue per user (ARPU) and recurring revenue (ARR).

The place we’ve seen this play out most prominently is in the website builder space. The last year has seen ample M&A activity as leading players accelerate their time to market by buying rather than building. That includes everything from eCommerce to payments to social to CRM to email marketing.

Speaking of eMail marketing, the same drivers exist there. Over the past year, players like Constant Contact have added new capabilities and fleshed out a more comprehensive marketing suite. That most notably includes the company’s move into websites… sort of the inverse of the above website-world expansions.

Atomizing Communication

With that backdrop, the latest move comes from Constant Contact’s primary competitor, Mailchimp. The company this week announced it will acquire messaging startup Chatitive for an undisclosed amount. The Seatle-based Chatitive helps businesses communicate with their customers via messaging.

The acquisition is largely driven by the fact that SMBs today are increasingly scattered and doing business across several devices and modalities. That longstanding trend has sort of paused over the past year when desktop screen time has grown due to the inability to be as mobile and “out-and-about” as in normal times.

But the overarching trend line is clear that digital marketing providers have to provide more tools to SMBs to reach their customers in more ways. In that light, Chatitive brings Mailchimp greater optionality for its customers to reach their customers. It sort of atomizes communications into smaller and easier formats.

Put another way, email marketing is impactful but it’s somewhat heavy in terms of portability and access to recipients wherever they are (mobile email notwithstanding). Messaging can provide SMBs a lighter-weight way to reach their customers. In tandem with email marketing, it could be an effective one-two punch.

That brings us back to broadening product bundles in order to deepen relationships with SMBs. A more extensive suite of products, not only increases average spend (again, ARPU), but gives customers greater overall value. The latter can work towards retention and a sort of natural lock-in effect.

Rap Sheet

As for the deal itself, terms weren’t disclosed as noted. Chatitive, formerly known as Essential, originally spun out of Madrona Venture Labs in 2014. It’s proven itself over the past few years by landing enterprise clients such as Rover, Universal Music Group and Vivion — brands that have adopted customer messaging strategies.

Its team also demonstrates a strong rap sheet, including its CEO, tech veteran Andy Hollenback. After founding and selling RootMetrics to IHS in 2015, he co-founded Chatitive along with Daniel Pirone who’s currently VP of engineering. Hollenbeck will serve as head of conversational SMS at Mailchimp.

Mailchimp meanwhile has 12 million global active customers and its last reported annual revenues (2019) were $700 million. It will clearly be looking to grow revenue by meeting the moment for inflections in SMB digital marketing and communications. Messaging should help it unlock a portion of that market opportunity.

“It’s more important than ever for small businesses to reach their customers where they are,” Mailchimp said in a statement, “and mobile messaging is an incredibly effective way to do just that.”

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