The unprofitable SaaS business model trap • Hacker News Board

Re: The unprofitable SaaS business model trap

#21

Post by rrwhite » Tue, Jul 23, 2013, 6:47 PM UTC

Major_Grooves wrote: post #11

Interesting given Get Satisfaction's recent approx. 10x price increase: http://blog.getsatisfaction.com/2013/07/16/the-latest-about-... I just exchanged tweets with them this afternoon saying it would be interesting to see how this change affects their revenues (maybe if/when they IPO).

Wow. I hadn't seen that at all. That's simply reflective of the enterprise-focused path they've been on for the last few years. Micro-ISVs and SMBs don't pay real money for community software only the big guys do.

Re: The unprofitable SaaS business model trap

#22

Post by olegp » Tue, Jul 23, 2013, 6:48 PM UTC

lifeisstillgood wrote: post #18

Edit: following downvotes. There is a seemingly sudden rush of SaaS companies at IPO / major growth levels in the B2B marketplace - how do people track them, or know about them? Is there a news outlet I am missing? Add to that, the underlying sell for SaaS companies is either ease of implementation (which is a non-differentiator) or it is a genuine new activity (cross enterprise, co-ordinated 3rd party cookie trackin…

Here's a list of SaaS companies sorted by popularity: https://starthq.com/apps/

Popularity is calculated using a combination of the number of likes of the profile page and Alexa reach, so the first few pages aren't particularly useful, but once you get to page 15 or so you'll start seeing major SaaS players in descending order.

Edit: Marketo is on page 32

Re: The unprofitable SaaS business model trap

#23

Post by rubinelli » Tue, Jul 23, 2013, 6:50 PM UTC

programminggeek wrote: post #8

It doesn't matter what business you are in, if you aren't turning a profit on each sale, you won't make it up in volume. In fact, volume will kill you fast. I remember when Sony was selling the PS3 at like a $200+ loss at launch. I was surprised that Microsoft didn't take a couple billion dollars and buy PS3's. It would have cost Sony hundreds of millions of dollars and would have made the PS3 a money sink hole for e…

Sony didn't see the PS3 as a console. It was a heavily subsidized Blu-ray player, that also happened to play games. So they lost that generation's console war, even though they were losing money on every sale, but won the much more strategically important video format war.

Also, thankfully for them, the PS3/Xbox360/Wii generation lasted twice as long as previous generations, so they had plenty of time to recoup this initial loss.

Interestingly, now the roles are reversed, with Microsoft trying to push a post-disc content delivery system that plays games, and Sony releasing a console hardcore gamers are already raving about.

Re: The unprofitable SaaS business model trap

#24

Post by vijayr » Tue, Jul 23, 2013, 6:51 PM UTC

wikwocket wrote: post #16

dllthomas wrote: post #10

Earlier quoted context omitted.

You can sell razors at a loss if people buy your razorblades at a substantial profit.

Printers and ink cartridges is the other example that comes to mind.

Same with ebook readers and ebooks. There are multiple examples of this. This is true even in software - sell the software for cheap, but charge heavily for maintenance and upgrades.

Re: The unprofitable SaaS business model trap

#25

Post by lifeisstillgood » Tue, Jul 23, 2013, 6:52 PM UTC

This kind of feeds into a theory of mine (not well expressed I fear):

The earthquake so far has been Google's effect on Sales and Marketing:

- each person online is just one click away from every other (person?) web presence (business sites mostly, but other people increasingly)

- So if you were the most attractive business on the web you would get all the customers. The mechanism through which your attraction was discovered was search / linking.

The person with the most attractive business process will win next - as businesses make their next step in a chain open to all comers.

So any business process that can be digitised, and can be given defined interfaces, will find itself eviscerated from internal to a company and placed in a network of auctionable providers.

So, that's bookkeeping, accountancy, most of HR, calendering, scheduling, travel, hmmm....

The old idea of outsourcing all your non-core activities is looking like it really will come true.

Wish I had written that book on ebXML now.

Re: The unprofitable SaaS business model trap

#26

Post by mbesto » Tue, Jul 23, 2013, 6:54 PM UTC

I still don't know a single SaaS B2B company - at scale - that is actually profiting right now.[0] The general assumption is that the cost of sale will continue to go down (and thus become profitable), but once the market gets saturation (it is in CRM-SaaS for example), then the cost of sales goes right back up.

> The other company has to bust ass for measly 20%/yr maintenance fees.

This is a funny assumption. On-premise maintenance fees for the likes of SAP, Oracle, etc sit on a nice ~80% gross profit margin.[1] This model is obviously broken today, but has been a major source of revenue for traditional software.

Here is what I think I will happen to SaaS models (note - it isn't pretty): http://www.techdisruptive.com/2012/11/28/how-are-we-going-to...

Anyone know a large successful Enterprise SaaS that isn't selling jackets?

[0] - http://finance.yahoo.com/q/ks?s=CRM+Key+Statistics

[1] - http://blogs.forrester.com/duncan_jones/13-02-14-saps_mainte...

Re: The unprofitable SaaS business model trap

#27

Post by lifeisstillgood » Tue, Jul 23, 2013, 6:54 PM UTC

olegp wrote: post #22

lifeisstillgood wrote: post #18

Edit: following downvotes. There is a seemingly sudden rush of SaaS companies at IPO / major growth levels in the B2B marketplace - how do people track them, or know about them? Is there a news outlet I am missing? Add to that, the underlying sell for SaaS companies is either ease of implementation (which is a non-differentiator) or it is a genuine new activity (cross enterprise, co-ordinated 3rd party cookie trackin…

Here's a list of SaaS companies sorted by popularity: https://starthq.com/apps/ Popularity is calculated using a combination of the number of likes of the profile page and Alexa reach, so the first few pages aren't particularly useful, but once you get to page 15 or so you'll start seeing major SaaS players in descending order. Edit: Marketo is on page 32

Thank you.

Re: The unprofitable SaaS business model trap

#28

Post by ryanbrunner » Tue, Jul 23, 2013, 6:55 PM UTC

olegp wrote: post #22

lifeisstillgood wrote: post #18

Edit: following downvotes. There is a seemingly sudden rush of SaaS companies at IPO / major growth levels in the B2B marketplace - how do people track them, or know about them? Is there a news outlet I am missing? Add to that, the underlying sell for SaaS companies is either ease of implementation (which is a non-differentiator) or it is a genuine new activity (cross enterprise, co-ordinated 3rd party cookie trackin…

Here's a list of SaaS companies sorted by popularity: https://starthq.com/apps/ Popularity is calculated using a combination of the number of likes of the profile page and Alexa reach, so the first few pages aren't particularly useful, but once you get to page 15 or so you'll start seeing major SaaS players in descending order. Edit: Marketo is on page 32

The majority of these aren't B2B, really, and of those that are, very few of them are "enterprise" players like Eloqua or Marketo.

Re: The unprofitable SaaS business model trap

#29

Post by ryanbrunner » Tue, Jul 23, 2013, 6:57 PM UTC

lifeisstillgood wrote: post #18

Edit: following downvotes. There is a seemingly sudden rush of SaaS companies at IPO / major growth levels in the B2B marketplace - how do people track them, or know about them? Is there a news outlet I am missing? Add to that, the underlying sell for SaaS companies is either ease of implementation (which is a non-differentiator) or it is a genuine new activity (cross enterprise, co-ordinated 3rd party cookie trackin…

It is often really difficult to hear about some of the enterprise players, unless you happen to work in a department they're targeting, simply because the vastly lower user base (usually orders of magnitudes below B2C or even SMB companies) generates a lot less buzz and mainstream coverage.

But you probably know about a few of them. If you're a developer, something like JIRA is probably roughly equivalent to Marketo or Eloqua in terms of size, market share and visibility. You've almost certainly heard of JIRA, but a good number of marketing professionals haven't. The reverse is true for Eloqua and Marketo.

Both of these tools (Eloqua and Marketo) do quite a bit more than just dashboarding, by the way. They both offer integrated marketing platforms, so they'll be sending e-mails, tracking visitors, running people through automated marketing programs like newsletters or drip onboarding campaigns, and a ton of other stuff.

(Disclosure: I'm an ex-Eloqua employee)

Re: The unprofitable SaaS business model trap

#30

Post by olegp » Tue, Jul 23, 2013, 6:58 PM UTC

ryanbrunner wrote: post #28

olegp wrote: post #22

Earlier quoted context omitted.

Here's a list of SaaS companies sorted by popularity: https://starthq.com/apps/ Popularity is calculated using a combination of the number of likes of the profile page and Alexa reach, so the first few pages aren't particularly useful, but once you get to page 15 or so you'll start seeing major SaaS players in descending order. Edit: Marketo is on page 32

The majority of these aren't B2B, really, and of those that are, very few of them are "enterprise" players like Eloqua or Marketo.

Having put the list together myself, I'm certain that 99%+ are B2B. It's true though that there aren't that many "enterprise" players, although Marketo is there.