Posts Tagged ‘cost per acquisition’
Hubspot successfully analyzed over 1 million websites, 1 million Twitter accounts, raised another $16 million, and yet they only have 1750 customers.
Did anyone else notice this?
I’ve always been impressed with Hubspot, and I have much admiration for Dharmesh Shah and the other founders. I’ve read just about all of their stuff on inbound marketing, permission marketing, conversion tracking and other juicy stuff. But I was shocked to read the news about their $16 million in additional funding with less than 1750 total customers. Boy, with all of the inbound marketing webinars and conversion improvement whitepapers, it seems as though Hubspot may need to eat more of their own dog food. Don’t get me wrong – their customer growth rate looks like the “hockey stick” we would all love to have, and a 350% growth rate in revenue is not too shabby – but I expected more than 1,700 customers. And it looks like it takes 2-3 months to acquire 250 new customers, some of which will churn I would imagine.
After the first two rounds of funding, they’ve essentially spent $10,000 to acquire each new customer, but as you will see further below, their average annual sale is only about $6,000. As good as their product might be, I’m sure they are not counting on customers sticking around for 20 months so they can break even, so they will need to sign up more customers faster than ever to decrease their cost per acquisition and get this thing profitable – and fast. This is the risk by taking on so much funding – how much runway do I need to get our cost per acquisition down and our lifetime value up? They spent the first $17 mil on engineering the product, perfecting it, building brand awareness, positioning themselves as experts with endless whitepapers, webinars, videos and more, and understanding the model to where they could go and raise more money. Surely they know for every dollar they put into inbound marketing efforts, how much revenue and profit they will get on the backend.
The following is a blog post by Nan Palmero, Chief Inspriation Officer at Sales By 5, a San Antonio firm that helps companies achieve dramatic increases in sales.
Last December, seeking to enhance sales, Gary Vaynerchuk offered free shipping and promoted it three ways. As a result, he said, a direct marketing mailing cost $15,000 and brought in 200 new customers; a billboard ad cost $7,500 and won 300 new customers; and tweeting the promotion on Twitter attracted 1,800 new customers.
Are you using social media to get your story out there? You don’t have to pay for attention anymore.