Below-the-Radar ExactTarget Zeroes in On IPO with CoTweet Acquisition

ExactTarget this morning announced that it has acquired CoTweet, a customer relationship management tool that sprang up around Twitter in the fall of 2008.

The deal is a natural match. Ten-year-old ExactTarget is a powerful email marketing company with more than 600 employees and revenues north of $100 million a year, but it hadn’t yet delved into the world of real-time social media. The company, based in Indianapolis, is also sitting on tons of cash, having gathered around $155 million in venture funding from Battery Ventures, Scale Venture Partners, Insight Venture Partners, Montagu Newhall Associates and Technology Crossover Ventures.

Meanwhile, San Francisco-based CoTweet — a 14-month-old startup that employs 7 people and has raised $1.1 million from The Founders Fund, First Round Capital, Baseline Ventures, Maples Investments, Freestyle Capital, and Ron Conway — recently began building up a base of now 15 customers willing to pay it $1,500 a month for its CRM product and services. Those include a dashboard that helps them manage various Twitter accounts, knowledge sharing with non-competing clients and round-the-clock customer service.

In short, though CoTweet was off to a promising start, it needed some major help, as CEO and cofounder Jesse Engle acknowledged when I spoke with him this morning about why he didn’t try to stay the course a bit longer.

“The market is moving incredibly fast,” said Engle. “Companies have begun to wholeheartedly embrace social media, starting with Twitter, and while we saw massive interest and massive demand, we also wanted to tap into ExactTarget’s platform to be able to scale up that much more quickly to address it.”

Neither ExactTarget nor CoTweet is disclosing the size of the deal. Engle also wouldn’t answer whether it’s a cash or stock transaction, or what the terms of his earn-out might be. He did say that the immediate plans of CoTweet, which will continue to be run out of San Francisco as a business division of ExactTarget, include integrating Facebook into its platform for the first time, a move CoTweet hasn’t attempted sooner because demand for Twitter integration has been so much stronger.

“So far, working with our clients on whether they want us to go deeper on Twitter or broader on social networks, more have said to go deeper on Twitter,” said Engle. That’s begun to change because Facebook is a much bigger platform, he added. “But two-thirds of Fortune 100 companies have been [focused on] Twitter [before] Facebook, because on Facebook, you can choose whether or not to have a presence. On Twitter, you don’t have a choice. Conversations are public. Things can go really right, or wrong, fast.”

If the acquisition is a stock deal, it could prove a rich one for both companies’ investors, and soon.

ExactTarget registered to go public in December 2007, later shelving its hopes of an offering when the market began to fall apart. But ExactTarget CEO Scott Dorsey told me this morning that while ExactTarget will “continue to accelerate growth and enjoy doing so as a private company,” he also thinks it “likely that we’ll look for and IPO down the line.”