A new e-book full of fact published by Hubspot this morning shows the growing trend of B2B marketers who are shifting their marketing budgets to inbound, lead generation activities. One of the growing activities is search engine optimization (SEO), as well as social media and virtual events/webinars.
Companies are realizing now that not only do they need less “interruption” ways to attract new customers (like SEO), but they also need to nurture them (like webinars). Few consumers (businesses included) are ready to buy your product or service the minute they first meet you. It’s kind of like dating – you don’t ask the girl to marry you on the first date, right? We can probably thank Hubspot for paving the way for this trend over the last 5 years with their constant stream of useful materials for inbound marketing strategies and tactics.
On the decline were several “outbound” marketing efforts, including paid search (PPC), direct mail, trade shows and print advertising. You can get a free copy of the Hubspot e-book here.
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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.
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