- Salesforce’s revenue grew 24% last year, driven by its Service, Marketing, and Commerce Clouds.
- Many companies prioritized staying connected with existing customers versus finding new ones.
- Analysts expect these products will continue to drive Salesforce’s growth this year.
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Despite a turbulent 2020, Salesforce reported strong earnings on Thursday for its fourth quarter and full year, with annual revenue growing 24%.
The biggest driver of its growth wasn’t its flagship Sales Cloud business, but, instead, newer product lines like Service Cloud, Marketing Cloud, and Commerce Cloud.
CEO Marc Benioff has focused on diversifying Salesforce’s business beyond sales software to other customer touchpoints for the last few years. While Sales Cloud helps the firm’s clients reel in new customers, Service Cloud, Marketing Cloud, and Commerce cloud all help organizations stay connected to and retain customers.
Those needs became even more important during the pandemic when the number one priority for many companies was staying connected with their existing customers. Last year was “the year of the customer, rather than the year of the prospect,” Credit Suisse analyst Brad Zelnick told Insider in May.
Salesforce’s latest earnings showed that Sales Cloud’s annual revenue grew 13% from a year prior, while Service Cloud saw 20% growth, and marketing and commerce saw 25% growth. Service Cloud revenue surpassed Sales Cloud revenue for the first time ever in the first quarter and the gap increased over the course of the year, from $7 million in Q1, $24 million in Q2, $65 million in Q3, and $90 million in Q4.
Salesforce anticipates its overall revenue this year to grow about 21% and analysts expect that customer service and digital marketing will once again be the main drivers.
In particular, Salesforce’s recent acquisition of Slack will help grow Service Cloud, because it will provide an interface to help businesses connect with their customers, said Baird analyst Rob Oliver.
integration won’t happen in earnest until the acquisition closes, which Salesforce said will happen mid-year, there are some early signs that it’s already helping.
Using Slack with Service Cloud helped Salesforce resolve issues for its own customers faster, Benioff said on a call with analysts. “We’ve seen the combination of products like Service Cloud and Slack together just make it so much better for us as a company or for our customers, and we’re looking forward to doing so much more of that,” he said.
Service Cloud is a “really resilient, solid business,” said Futurum Research analyst Dan Newman. He also noted that Salesforce’s business segment for its Platform and other tools grew significantly and was likely boosted by the acquisition of data analytics and visualization company Tableau.
Salesforce acquired Tableau in June 2019, but it took a while for Salesforce find a way to scale it, he said. Now that it’s been able to do that, that part of the business is poised to keep expanding.
“Platform is the way forward,” he said. “Companies are looking for solutions that integrate multiple tools.”
Slack will likely drive more integrations with outside applications as well, given it robust ecosystem of third-party apps and developers. “We’re going to create the most open and interoperable ecosystem of apps and workflow and enterprise software,” Benioff said on the analyst call.
As companies and retailers want to reach customers digitally and sell online, they’re also relying on more marketing tools during the sales process itself, Newman said. In Q4 alone, Salesforce’s marketing and commerce revenue grew 27% from a year prior.
“Using marketing to sort of compliment the sales process more effectively,” Newman said. “It’s probably moving some spend from Salesforce administration into Marketing Cloud.”
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