How CDPs are Shaping the Next Evolution of ESPs
ESPs have been continuously evolving since they were first commercially introduced in the late 1990’s. And the evolution of the platform followed a similar pattern that continues to this day. A third party would determine that there was a feature or a function lacking in the existing ESPs and solve that by introducing a new platform that solved this gap for email marketer, by either integrating with existing ESPs or acting in a standalone fashion. There are many examples of this. One of the earliest that I can think of was around transactional messages. The first ESPs were primarily designed to send out promotional email “blasts.” With the growth of email clients that could display html emails, the look and feel of commercial emails improved dramatically (vs. plain text emails). But on the ecommerce front, most purchase and shipping confirmation emails were sent by brands’ back-end systems tied to their ecommerce sites. These systems could only produce plain text emails, which didn’t look at all like the branded emails companies were sending out in promotional campaigns.
Into this mix came a company called Message Effects. Message Effects could take a plain text email spit out by a back-end system and “wrap” it in html, resulting in two big advantages for that brand. First, these transactional emails looked a lot better and a lot more like the other email messages they were sending. But perhaps even more importantly, the ESP leveraging the technology could now begin to track customer engagement with transactional emails as well as upsell and cross-sell in those emails. The ESP where I worked at the time, Acxiom, saw the value in that and bought the company in December 2005, subsequently integrating it into their platform. The other vendors quickly realized that providing transactional email capabilities along with promotional emails was going to be expected by brands looking at ESP options, so the race was on to build capabilities into their platforms.
It wasn’t too long before ESPs saw the lost business opportunity in not having this capability, and they all moved to upgrade the ease of setting up triggers and automated campaigns in their platforms. The need for a separate platform to hand automated emails eventually went away. A similar pattern was followed in areas like send-time optimization (STO), open-time optimization, and mobile marketing which were tasks initially handled by third-party vendors integrating into ESPs, and more recently have been adopted natively into leading platforms either through home-grown solutions or acquisitions (e.g., Marigold’s acquisition of LiveClicker and MessageGears acquisition of Swrve). All of these additional features and functionalities mean that the ESP of 2023 looks a LOT different than the ESP of 2003:
Buyers of email platforms on the brand side expect all of these features in a modern ESP. Their definition of what an ESP is and should be able to do has evolved over the years. But these platforms remain ESPs in their minds.
The next step in the evolution process might just be the biggest leap of all regarding ESP capabilities. And it’s directly related to the collision between ESP and CDP platforms. When CDPs became “the next big thing” in the martech landscape in 2019 one of the first things I noticed was how much overlap there was between these two platforms. I first spoke about it at the Email Innovations Summit in June of 2020, and followed it up here, for the OI Blog in July of 2020. I predicted that there would ultimately be a collision between the two platform types, and that it would have a big impact on the ESP landscape. The overlap between the two platforms, already substantial in 2020, was going to increase. And increase it did. I revisited the topic last July (2022), again in the OI Blog. At that point, I highlighted the dangers marketers faced in buying two platforms that did many of the same things. My advice for marketers was that they needed to proceed carefully when in the market for either a new ESP, a CDP, or both.
“Markets always change faster than marketing.” —Philip Kotler.
When Philip Kotler, known as the “father of modern marketing” (look him up) wrote those words, he wasn’t referring to the ESP vendor landscape, but he might as well have been. That’s an apt description as to what’s been happening in the martech world post the ESP/CDP collision. Marketers are beginning to wonder why these two platforms need to exist separately from one another, while the platforms themselves stick to either an ESP or a CDP script. Even those platforms that in many ways are hybrid ESP and CDP platforms continue to sell as one or the other depending on which camp they originated in.
Since they first appeared, I have always believed that CDP platforms represented transitional technology, created to fill a gap in the capabilities of modern ESPs. There is an increasing desire of brands to deploy real-time data-driven campaigns, to manage cross-channel and platform identity resolution, and to ensure compliance with complex multichannel permissions and the requirements of GDRP and other new laws. And these capabilities greatly taxed the existing capabilities of enterprise ESP platforms. So into this gap came the CDPs.
Now, I am not implying that CDPs also don’t represent an improvement in database technology for IT and analytics teams outside of the marketing teams. They most certainly do. The evolution from flat files, to relational, to schemaless has represented a steady improvement in how data is stored and leveraged by those teams. Which is exactly why the CDP landscape has already divided itself into two distinct types of platforms. One, preferred by IT and the analytics teams, and the other, preferred by marketing. And it is the latter which is driving the evolution of ESPs. The key difference between the two types of CDP is the ability of some to actually deploy campaigns, not merely to activate other channels. And it is these CDPs that have taken on a lot of the same characteristics as modern ESPs built on schemaless databases. And vice versa.
As I see it these new hybrid platforms—part CDP, part ESP—represent where the ESP vendor landscape is going, even if many of the vendors have not yet come to that conclusion. The brands we work with at Email Connect are more and more willing to consider including a Deployment CDP in an RFP for a new ESP. And CDP clients are willing to consider an ESP running on a schemaless database. A big reason behind this is that more often than not, the search for one quickly leads to the search for both.
Brands are waking up to the fact that they are looking for a solution, and whether they get there in a single platform, or in two separate platforms, is becoming less of a consideration. In fact, more and more brands seem to be leaning towards a single platform solution to meet their CDP and ESP needs. All of this is happening much faster than I thought it would when I started following the CDP market back in 2019.
So if you’re an ESP vendor, how should you be reacting to these changing buyer expectations? From my perspective, there are some platforms that are better prepared than others—in both camps—for the next evolution in platform capabilities. But for all of the players, there’s still time to adjust your product roadmap so you can stay competitive down the road. Moving ESPs is still a major step for brands to take, and one that they only take after a lot of thought. So, the market for legacy platforms isn’t going to go away overnight, and many will be competitive for years to come. But the landscape is also littered with platforms that didn’t adjust quickly enough to previous evolutions in the market, and no one is immune from that in the future.