B2B Software Spend Contracts Sharply
What happened
A sharp contraction in B2B software and marketing spend is evident in the public markets, signaling budget cuts by CIOs and CMOs. Research and advisory firm Gartner's stock is down 71% from its peak, while Forrester now trades at a market capitalization of just $105 million. This downturn suggests buyers are scrutinizing ROI and consolidating vendors around platforms with measurable impact.
Why it matters
- Average marketing budgets have fallen to 7.7% of overall company revenue, a significant drop from 9.1% in 2023 and below the pre-pandemic average of 11%. - While overall marketing budgets are shrinking, spending on martech has hit a decade low as CMOs prioritize investments in paid media, which grew to 27.9% of the 2024 marketing budget. - In contrast to marketing departments, 73% of U.S. CIOs expect their IT budgets to increase, with top spending priorities being cybersecurity, business intelligence, cloud platforms, and artificial intelligence/machine learning. - Higher interest rates increase the cost of capital, which pressures SaaS companies to raise prices and lengthens customer acquisition cost payback periods, contributing to more cautious enterprise spending. - Despite the market contraction, venture capital funding for marketing technology startups saw a 34% year-over-year increase in volume, with AI and automation-focused companies capturing the largest share (38%) of investment. - To adapt, marketing agencies are focusing on unifying their martech stacks to reduce resource loss from disconnected tools and are embedding AI to automate workflows and enhance personalization. - The overall B2B SaaS market is still projected to grow, with 85% of business applications expected to be SaaS-based by 2025, up from 70% in 2023. - Reflecting the pressure to grow more efficiently, equity-backed private B2B SaaS companies are spending a median of 107% of their annual recurring revenue (ARR), with sales (13% of ARR) and marketing (8% of ARR) being significant cost centers.
Key numbers
- A sharp contraction in B2B software and marketing spend is evident in the public markets, signaling budget cuts by CIOs and CMOs.
- Research and advisory firm Gartner's stock is down 71% from its peak, while Forrester now trades at a market capitalization of just $105 million.
- - Average marketing budgets have fallen to 7.7% of overall company revenue, a significant drop from 9.1% in 2023 and below the pre-pandemic average of 11%.
- While overall marketing budgets are shrinking, spending on martech has hit a decade low as CMOs prioritize investments in paid media, which grew to 27.9% of the 2024 marketing budget.
What happens next
- CIOs expect their IT budgets to increase, with top spending priorities being cybersecurity, business intelligence, cloud platforms, and artificial intelligence/machine learning.
- The overall B2B SaaS market is still projected to grow, with 85% of business applications expected to be SaaS-based by 2025, up from 70% in 2023.
Quick answers
What happened in B2B Software Spend Contracts Sharply?
A sharp contraction in B2B software and marketing spend is evident in the public markets, signaling budget cuts by CIOs and CMOs. Research and advisory firm Gartner's stock is down 71% from its peak, while Forrester now trades at a market capitalization of just $105 million. This downturn suggests buyers are scrutinizing ROI and consolidating vendors around platforms with measurable impact.
Why does B2B Software Spend Contracts Sharply matter?
Average marketing budgets have fallen to 7.7% of overall company revenue, a significant drop from 9.1% in 2023 and below the pre-pandemic average of 11%. While overall marketing budgets are shrinking, spending on martech has hit a decade low as CMOs prioritize investments in paid media, which grew to 27.9% of the 2024 marketing budget. In contrast to marketing departments, 73% of U.S. CIOs expect their IT budgets to increase, with top spending priorities being cybersecurity, business intelligence, cloud platforms, and artificial intelligence/machine learning. Higher interest rates increase the cost of capital, which pressures SaaS companies to raise prices and lengthens customer acquisition cost payback periods, contributing to more cautious enterprise spending. Despite the market contraction, venture capital funding for marketing technology startups saw a 34% year-over-year increase in volume, with AI and automation-focused companies capturing the largest share (38%) of investment. To adapt, marketing agencies are focusing on unifying their martech stacks to reduce resource loss from disconnected tools and are embedding AI to automate workflows and enhance personalization. The overall B2B SaaS market is still projected to grow, with 85% of business applications expected to be SaaS-based by 2025, up from 70% in 2023. Reflecting the pressure to grow more efficiently, equity-backed private B2B SaaS companies are spending a median of 107% of their annual recurring revenue (ARR), with sales (13% of ARR) and marketing (8% of ARR) being significant cost centers.
