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

Martech and Other Software Landscapes

Over the 11 years that I’ve been publishing the martech landscape, as it mushroomed from ~150 solutions to ~10,000, I’ve seen many people react to it as an anomaly. “What is it about marketing that spawns so many software apps? Surely no other profession has to deal with such sprawl!”

To which software review site G2 responds in this article, “Hold my beer.”

While there are certainly dynamics specific to marketing that feed the frenzy of new martech startups, the truth is that martech is merely a part of a much larger software revolution. Marc Andreessen called it “software eating the world.” I call it The Great App Explosion. Software is everywhere (and, increasingly, everything is software).

But exactly how many commercially packaged software apps are there in The Great App Explosion?

Let’s take games and consumer-oriented apps off the table. We know there are millions of such apps for mobile devices on the Apple App Store and Google Play Store. It’s fair to say that’s a different kettle of fish than B2B software, such as martech.

Well, at least today. Frankly, consumer and business software apps are powered by much of the same underlying technology. And you see increasing cross-pollination between those domains. The consumerization of IT remains a big movement underway. I personally see similarities between creators on consumer platforms and “makers” inside companies leveraging no-code tools. And if you believe the hype of the metaverse — which will one day rise from the trough of disillusionment — the convergence of business and consumer experiences will blur even further.

But for now, let’s stick to a narrow interpretation of how many business software apps are there in the world?

The answer: at least 103,528.

That is the number of software products profiled on G2’s site as of last week. It’s not a theoretical guesstimate. It’s an empirical count — like the martech landscape, but spanning all business software categories.

I emphasized the phrase “at least” in front of that number for two reasons:

First, G2 acknowledges that they haven’t uncovered all of the business software apps out there yet. My impression is that especially in markets outside of North America, there’s a ton still to discover. Think of China and Japan, for instance.

Second, new software startups keep being launched. (You might be mumbling under your breath, “Let’s see what the current economy does to that merry-go-round.” Put a pin in that caveat for a minute – I’ll come back to it.)

In other words, that 103,528 number is a lower bound of the B2B software product universe. The actual number is surely higher, and potentially much higher. 150,000? 200,000? More?

G2’s database is certainly still growing, adding on average 945 software products per month.

What about consolidation, you say? These numbers from G2 are inclusive of the fact that they’ve handled over 760 merger and acquisition cases since January of this year. So, yes, consolidation is happening. But the paradox of simultaneous consolidation and expansion in software markets holds true. It’s not just martech.

Speaking of martech, the folks at G2 also shared with me the counts of 9,365 martech products and 1,488 adtech products in their database. Combined — which is how I’ve always thought of them — that’s 10,853 madtech apps in total. More than what Frans and I came up with in our 2022 martech landscape release in May.

Our plan is to share data between us and G2 to get a superset of all of them. But it’s nice to also have an independent corroboration that, yes, today’s martech landscape really is on the magnitude of ~10,000 products.

Is 2023 the Year of the Martech Cataclysm?

But let’s get back to that question about the economy I dodged earlier.

No sugarcoating it. This next year or two is going to exert a ton of pressure on the current martech landscape. Funding will be harder to come by, and at considerably more modest valuations. Marketing departments are going to have tighter budgets and become much tougher customers when it comes to considering and negotiating martech purchases. This is the first time in over a decade of exponential martech growth that the industry is facing a genuinely formidable economic environment.

Undoubtedly, this will result in many more acquisitions of smaller martech fish by bigger martech fish, as well as the private equity crowd betting on the other side of this cycle. But more painfully, there will be an increasing number of early-stage martech ventures that simply call it quits after failing to either secure their next funding round, find a willing acquisitor, or rebalance their operations to profitability.

My best guess? Up to 20% of the current martech landscape could churn before 2024.

But it’s only the churn rate of existing martech vendors that I have a dark prediction about. As far as collective industry revenue goes, I believe martech is going to continue to grow for the foreseeable future. Maybe not as fast as it has been for the next couple of years. But in the big picture, still pretty fast. For one simple reason: the digital transformation of marketing is far from over, and it remains one of the greatest levers every company on the planet has for winning and retaining customers.

Especially in the challenging times ahead, great martech will be crucial to survival success.

Growth of the Software Industry (Revenue)

Forget valuations for now, which have been the semi-delusional yardstick of measuring martech ventures these past few years. Revenue is the ground truth of sizing an industry. And I’m 99.9% certain martech revenue will grow year-over-year for the rest of this decade.

And to repeat the mantra of this post: it’s not just martech. The whole software industry has enormous growth ahead of it. The inspiring chart above from Battery Ventures (with my two annotations in orange) is both an accurate look-back at software revenue growth over the past five decades, but also a fairly conservative extrapolation of average compound annual growth of software revenue for the next two decades.

Two things pop out immediately from that chart:

First, holy cats, the size of what the software industry is likely to grow to by 2050 dwarfs where we are today. “Software eating the world” is software taking over more and more of every facet of the economy. Worldwide GDP in 2020 was ~$85 trillion. By 2050, it’s expected to be ~$165 trillion. It’s actually not that crazy to think of software making up a mere $6 trillion of that, or ~3.6% of total GDP.

Second, the Dot-Com Bubble Burst in 2000 and The Great Recession in 2008 barely register as tiny dents in the upward slope of this mountain. That’s not to trivialize the difficulties so many faced in those years. But putting those hurdles in perspective of the long game, the overall trajectory of the software industry hasn’t been derailed by the ups-and-downs of macroeconomic business cycles. I think that’s going to remain true for this generation and probably the next.

All of which leads me to conclude that The Great App Explosion will continue through these next couple of years. And on the next wave of recovery and expansion, the growth in new software apps might very well hit light speed ludicrous speed.

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