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How to Create PPC Campaigns for Real Estate Marketing

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Even if you have a smaller real estate business, you don’t have to rely on third-party databases to get traffic to your listings through real estate marketing.

With pay per click (PPC) advertising, you can bring people directly to your real estate website, where you own the medium and are in control of how you present yourself. This means rather than your listing appearing—and perhaps being lost—among a sea of competitors, you can showcase your entire portfolio without viewers being distracted by others’ listings.

PPC campaigns aren’t usually difficult to set up. With a few tweaks, you may reach your target audience more efficiently and bring motivated buyers to your website.

PPC Real Estate Marketing Trends

With six million homes sold in the U.S. in one year, it’s no wonder competition between real estate agents is tough.

As you would expect in such a competitive market, real estate marketing plays a huge role, and the tactics businesses use are always developing.

Today, we see many realtors using trends such as virtual staging, drone photography, inbound marketing, and automation of lead verification. New trends come and go, the need for a good website never changes—and neither does the need to bring traffic to your site.

This is where pay per click (PPC) comes in.

One of the difficulties with bringing traffic to your site is competition from huge online real estate databases like Zillow (236 million monthly users) and Realtor.com. Let’s take a look at a search query for “buy homes in Naperville IL.”

As you can see, those large sites are dominating the search engine results pages (SERPS).

However, ranking organically isn’t the only way to get to the top of the SERPs, and PPC may grant you a route to the top of the listings. Through a successful PPC campaign, your website could feature at the top of the page for your chosen keywords, potentially bringing in a large volume of traffic.  

You pay a small fee for each click, but if you’re utilizing the latest real estate marketing trends well, then you could see a solid ROI. PPC allows you to bring traffic to a medium you control, which puts you in control of your marketing.

Selecting Keyword Phrases for Your Real Estate Marketing PPC

PPC could allow your website to appear at the top of the SERPs for virtually any keyword. Your real estate marketing isn’t going to benefit from featuring an irrelevant search term, though. This means you need to find the keywords that work for you and bring in people who convert into leads.

To do this, start by understanding your target audience.

  • What does their customer profile look like?
  • What information are your potential customers looking for?
  • How do they search for that information?

Think about your audience and write out a list of all the ways they might search for your business.

For PPC to work for you, you also need to ensure your landing pages reflect the keywords you’re advertising for. When someone clicks on your ad, the page they land on needs to directly address why they clicked in the first place. Take a look at your current pages and list all the keywords reflecting the content you have on your site.

Once you’ve built up a list of keywords, it’s time to narrow it down so the keywords you bid on are relevant to both your audience and the pages they land on.

Part of succeeding at this is understanding where someone is in the buying cycle. For example, someone searching the keyword “best Chicago suburbs” might be at the beginning of the cycle, where the buyer intent is much lower than later on. Later in the cycle, they may search for “buy houses Naperville IL,” meaning they could quickly become a lead. This distinction should help you understand each keyword’s value and focus your real estate marketing PPC on boosting ROI.

After you’ve narrowed down your list, go to Ubersuggest to find out the cost per click and level of competition for each keyword.

Optimize Your Site for PPC Campaigns that Use Local Keyword Phrases

With all our examples so far, we’ve used what’s known as a “location modifier.” For instance, in “buy houses Naperville IL,” the terms “Naperville” and “IL” allow us to target a specific area. Nothing is stopping you from advertising for “buy houses,” and you’d probably get plenty of traffic—but there’s no point if you’re selling houses in Naperville and the user wants to buy one in Ft. Lauderdale.

Local keyword phrases are vital to real estate agents because they’re selling a product with a fixed location. As location is one of the driving forces behind real estate purchases, many people use these modifiers in their searches.

When you use local keyword phrases, your landing pages must match the search intent. If your advertisement says “houses for sale in Naperville,” then it has to deliver on its promise. Many people will click back to Google if it’s showing houses for rent or homes outside of Naperville.

Setting Max CPC Budgets for Your PPC Campaign

When you set up your real estate marketing campaign, you’re going to be asked to set a budget and decide the maximum you’re willing to pay per click for a specific keyword (max CPC). Remember, you’re not tied into anything—it’s something you can adjust as you go and optimize to get the best results.

To get an idea of your budget, set out the goals you want to achieve with your PPC campaign. For a simplified example, to make $5,000 a month from your advertising and the average value of your houses is $100,000 with a 1% commission, you need to sell five houses a month through your PPC.

The average cost per click for keywords related to real estate is $2.37 with a conversion rate of 2.47%—so, to sell your five houses, you might need just over 200 clicks at the cost of $494. While your numbers might vary from the industry average, you can always adjust your budget based on your average conversion rate and cost per click.

It’s also worth remembering that it’s not all about the price you pay per click, as your advertisement’s quality also plays a part. Google wants to send people to high-quality results, and if your ad achieves this, it’s more likely to be favored by the search engine’s algorithm.

Another way to maximize your budget is by boosting your click-through rate (CTR.) The average CTR for real estate ads is about 3.71%— but if you’re writing excellent ad copy, then you may find even better results. But remember, these are just industry averages, and your experience may vary. An ad budget of hundreds (or even thousands) doesn’t guarantee a sale, but PPC is worth a try for most markets.

Deciding Which Ad Platform is Right for Your Real Estate Marketing

When we think of search engines, our minds are naturally drawn to Google because it’s the biggest, with 3.5 billion searches per day. However, there are lots of different search engines and lots of other ad platforms.

Which ad platform you use should be decided by your business goals and your target audience. For example, if you’re selling sleek condos to millennials, your advertising will look very different than if you’re targeting seniors looking for a second home.

This differentiator is where you could help your real estate marketing campaigns by selecting the right platform.

Social media platforms such as YouTube, Facebook, Instagram, LinkedIn, and Pinterest are vital sources for real estate marketing, and they offer great PPC options. 99% of Millenials and 90% of Baby Boomers begin their real estate searches online, and with billions of people on social media, this could be a perfect way to reach them.

The great thing about PPC on social media is that they are highly visual media. Whereas with Google Ads you might be limited to text, social media allows you to incorporate video, images, and other effects. These tools can help your advertising stand out from the crowd, but you must choose the platform and message that resonates with your audience.

57% of Americans aged 25-30 are on Instagram, compared to 23% of 50- to 64-year-olds. However, the numbers look very different on Facebook, as 68% of 50- to 64-year-olds have accounts. This data shows people search for information differently, and your advertising needs to reflect this. You might find Google is the best way to reach your audience, or you may discover an alternative such as Instagram that offers you the most useful real estate marketing campaign.

Here you can see just how different a promoted post on Instagram could look from the traditional ads you see on Google. These various formats could give you the ability to appeal to particular audience demographics and potentially maximize the effectiveness of your real estate marketing.

Whichever platform you use, you’ve got to make sure your message suits the medium, and you’re giving people the experience they’re looking for. Various advertising platforms allow you to diversify your marketing, but you’ve got to focus on the techniques that work best for each campaign.

Deciding Which Real Estate Marketing Ad Format is Best

When you come to set up your ads, you’ll find you have lots of format options. The options vary depending on which platform you’re using, but for Google, you’ll have the following choices:

  • Search ads: These are the “traditional” ads at the top of a SERP. These are particularly useful for real estate marketing because they allow you to reach a targeted audience at the precise moment they are looking for your product.
  • Shopping ads: Shopping ads are product-focused advertisements that also allow you to feature at the top of a SERP. However, shopping listings are more commonly used for very specific searches such as “buy Barbie dolls,” where many retailers sell the same products.
  • Display ads: Display ads allow your listing to feature on other people’s websites. While this can be a cost-effective way to reach a broad audience, it’s more difficult to judge where these people are in the buyer cycle because they haven’t made a specific search.
  • Video ads: Video ads play between videos on YouTube and are a great way to incorporate a more interactive aspect to your advertising. Many people use YouTube as a search engine, so it’s another good way to reach motivated buyers.
  • Gmail ads: These advertisements appear at the top of someone’s Gmail inbox and allow you to reach a targeted audience. The difficulty with Gmail ads for real estate marketing is determining buyer-intent. You might be targeting someone because they are interested in real estate, but this does not guarantee they’re looking to buy a house.

The key to these different ad types is finding the ones that best suit your business goals. For many real estate businesses, this is likely to be search ads.

This is because this method may best allow you to understand the searcher’s intent. Someone has put a specific query into Google—“find houses in Naperville”— so you more clearly know what they’re looking for and can judge where they are in the buying cycle.

With options like display ads, you can reach a targeted audience—for example, people looking at a house improvement website—but you don’t have control over searcher intent. As you’re selling something very specific that focuses on location, search ads are a good place to start.

Conclusion 

Pay per click advertising is an essential tool for your real estate marketing. If you’re to take back clicks from online real estate databases like Zillow, then you’ve got to find alternative ways of getting traffic to your website.

PPC is an excellent way to do this, and it could bring large numbers of targeted, highly engaged visitors with a strong buyer intent to your website. From there, you’re in control of the medium and not reliant on a third party who controls your interactions with customers.

If you’re investing in real estate marketing trends like virtual staging and drone photography and you want to maximize their effectiveness, a way you could do this is by getting them in front of a targeted, engaged audience. With good PPC, you could do just that because it may allow you to boost your lead generation significantly—and perhaps sell more houses.

If you do need help with your PPC campaigns, reach out to my team to see how we can help.

Has PPC benefited your real estate business?

Source: https://neilpatel.com/blog/real-estate-marketing/

Cannabis

Extra Crunch roundup: Antitrust jitters, SPAC odyssey, white-hot IPOs, more

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Some time ago, I gave up on the idea of finding a thread that connects each story in the weekly Extra Crunch roundup; there are no unified theories of technology news.

The stories that left the deepest impression were related to two news pegs that dominated the week — Visa and Plaid calling off their $5.3 billion acquisition agreement, and sizzling-hot IPOs for Affirm and Poshmark.

Watching Plaid and Visa sing “Let’s Call The Whole Thing Off” in harmony after the U.S. Department of Justice filed a lawsuit to block their deal wasn’t shocking. But I was surprised to find myself editing an interview Alex Wilhelm conducted with Plaid CEO Zach Perret the next day in which the executive said growing the company on its own is “once again” the correct strategy.


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In an analysis for Extra Crunch, Managing Editor Danny Crichton suggested that federal regulators’ new interest in antitrust enforcement will affect valuations going forward. For example, Procter & Gamble and women’s beauty D2C brand Billie also called off their planned merger last week after the Federal Trade Commission raised objections in December.

Given the FTC’s moves last year to prevent Billie and Harry’s from being acquired, “it seems clear that U.S. antitrust authorities want broad competition for consumers in household goods,” Danny concluded, and I suspect that applies to Plaid as well.

In December, C3.ai, Doordash and Airbnb burst into the public markets to much acclaim. This week, used clothing marketplace Poshmark saw a 140% pop in its first day of trading and consumer-financing company Affirm “priced its IPO above its raised range at $49 per share,” reported Alex.

In a post titled “A theory about the current IPO market”, he identified eight key ingredients for brewing a debut with a big first-day pop, which includes “exist in a climate of near-zero interest rates” and “keep companies private longer.” Truly, words to live by!

Come back next week for more coverage of the public markets in The Exchange, an interview with Bustle CEO Bryan Goldberg where he shares his plans for taking the company public, a comprehensive post that will unpack the regulatory hurdles facing D2C consumer brands, and much more.

If you live in the U.S., enjoy your MLK Day holiday weekend, and wherever you are: Thanks very much for reading Extra Crunch.

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

Rapid growth in 2020 reveals OKR software market’s untapped potential

After spending much of the week covering 2021’s frothy IPO market, Alex Wilhelm devoted this morning’s column to studying the OKR-focused software sector.

Measuring objectives and key results are core to every enterprise, perhaps more so these days since knowledge workers began working remotely in greater numbers last year.

A sign of the times: This week, enterprise orchestration SaaS platform Gtmhub announced that it raised a $30 million Series B.

To get a sense of how large the TAM is for OKR, Alex reached out to several companies and asked them to share new and historical growth metrics:

  • Gthmhub
  • Perdoo
  • WorkBoard
  • Ally.io
  • Koan
  • WeekDone

“Some OKR-focused startups didn’t get back to us, and some leaders wanted to share the best stuff off the record, which we grant at times for candor amongst startup executives,” he wrote.

5 consumer hardware VCs share their 2021 investment strategies

For our latest investor survey, Matt Burns interviewed five VCs who actively fund consumer electronics startups:

  • Hans Tung, managing partner, GGV Capital
  • Dayna Grayson, co-founder and general partner, Construct Capital
  • Cyril Ebersweiler, general partner, SOSV
  • Bilal Zuberi, partner, Lux Capital
  • Rob Coneybeer, managing director, Shasta Ventures

“Consumer hardware has always been a tough market to crack, but the COVID-19 crisis made it even harder,” says Matt, noting that the pandemic fueled wide interest in fitness startups like Mirror, Peloton and Tonal.

Bonus: Many VCs listed the founders, investors and companies that are taking the lead in consumer hardware innovation.

A theory about the current IPO market

Image Credits: Getty Images/Andriy Onufriyenko

If you’re looking for insight into “why everything feels so damn silly this year” in the public markets, a post Alex wrote Thursday afternoon might offer some perspective.

As someone who pays close attention to late-stage venture markets, he’s identified eight factors that are pushing debuts for unicorns like Affirm and Poshmark into the stratosphere.

TL;DR? “Lots of demand, little supply, boom goes the price.”

Poshmark prices IPO above range as public markets continue to YOLO startups

Clothing resale marketplace Poshmark closed up more than 140% on its first trading day yesterday.

In Thursday’s edition of The Exchange, Alex noted that Poshmark boosted its valuation by selling 6.6 million shares at its IPO price, scooping up $277.2 million in the process.

Poshmark’s surge in trading is good news for its employees and stockholders, but it reflects poorly on “the venture-focused money people who we suppose know what they are talking about when it comes to equity in private companies,” he says.

Will startup valuations change given rising antitrust concerns?

Image Credits: monsitj/Getty Images

This week, Visa announced it would drop its planned acquisition of Plaid after the U.S. Department of Justice filed suit to block it last fall.

Last week, Procter & Gamble called off its purchase of Billie, a women’s beauty products startup — in December, the U.S. Federal Trade Commission sued to block that deal, too.

Once upon a time, the U.S. government took an arm’s-length approach to enforcing antitrust laws, but the tide has turned, says Managing Editor Danny Crichton.

Going forward, “antitrust won’t kill acquisitions in general, but it could prevent the buyers with the highest reserve prices from entering the fray.”

Dear Sophie: What’s the new minimum salary required for H-1B visa applicants?

Image Credits: Sophie Alcorn

Dear Sophie:

I’m a grad student currently working on F-1 STEM OPT. The company I work for has indicated it will sponsor me for an H-1B visa this year.

I hear the random H-1B lottery will be replaced with a new system that selects H-1B candidates based on their salaries.

How will this new process work?

— Positive in Palo Alto

Venture capitalists react to Visa-Plaid deal meltdown

Image Credits: Ana Maria Serrano/Getty Images

After news broke that Visa’s $5.3 billion purchase of API startup Plaid fell apart, Alex Wilhelm and Ron Miller interviewed several investors to get their reactions:

  • Anshu Sharma, co-founder and CEO, SkyflowAPI
  • Amy Cheetham, principal, Costanoa Ventures
  • Sheel Mohnot, co-founder, Better Tomorrow Ventures
  • Lucas Timberlake, partner, Fintech Ventures
  • Nico Berardi, founder and general partner, ANIMO Ventures
  • Allen Miller, VC, Oak HC/FT
  • Sri Muppidi, VC, Sierra Ventures
  • Christian Lassonde, VC, Impression Ventures

Plaid CEO touts new ‘clarity’ after failed Visa acquisition

Image Credits: George Frey/Bloomberg/Getty Images

Alex Wilhelm interviewed Plaid CEO Zach Perret after the Visa acquisition was called off to learn more about his mindset and the company’s short-term plans.

Perret, who noted that the last few years have been a “roller coaster,” said the Visa deal was the right decision at the time, but going it alone is “once again” Plaid’s best way forward.

2021: A SPAC odyssey

In Tuesday’s edition of The Exchange, Alex Wilhelm took a closer look at blank-check offerings for digital asset marketplace Bakkt and personal finance platform SoFi.

To create a detailed analysis of the investor presentations for both offerings, he tried to answer two questions:

  1. Are special purpose acquisition companies a path to public markets for “potentially promising companies that lacked obvious, near-term growth stories?”
  2. Given the number of unicorns and the limited number of companies that can IPO at any given time, “maybe SPACS would help close the liquidity gap?”

Flexible VC: A new model for startups targeting profitability

12 ‘flexible VCs’ who operate where equity meets revenue share

Image Credits: MirageC/Getty Images

Growth-stage startups in search of funding have a new option: “flexible VC” investors.

An amalgam of revenue-based investment and traditional VC, investors who fall into this category let entrepreneurs “access immediate risk capital while preserving exit, growth trajectory and ownership optionality.”

In a comprehensive explainer, fund managers David Teten and Jamie Finney present different investment structures so founders can get a clear sense of how flexible VC compares to other venture capital models. In a follow-up post, they share a list of a dozen active investors who offer funding via these nontraditional routes.

These 5 VCs have high hopes for cannabis in 2021

Image Credits: Anton Petrus (opens in a new window)/Getty Images

For some consumers, “cannabis has always been essential,” writes Matt Burns, but once local governments allowed dispensaries to remain open during the pandemic, it signaled a shift in the regulatory environment and investors took notice.

Matt asked five VCs about where they think the industry is heading in 2021 and what advice they’re offering their portfolio companies:

Source: https://techcrunch.com/2021/01/15/extra-crunch-roundup-antitrust-jitters-spac-odyssey-white-hot-ipos-more/

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How to Collaborate, Manage, and Work with Developers featuring Twilio’s Jeff Lawson

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Maybe you think developers are weird beasts that type on a keyboard pushing out code, and then as soon as they become indispensable, they quit. In fact, many founders and CEOs struggle with simply talking to their engineers and communicating their needs. You may ask, “When can we ship this?” and receive an answer that sounds like gibberish to you. The mysterious nature of engineers is also their superpower as they build products that make the seemingly impossible possible.

At his core, Jeff Lawson is a software developer first, and the CEO of Twilio second. He knows both sides of the executive & engineering equation intimately. He gets what goes on in a developer’s brain and the detailed process of building software, but he understands that businesses are motivated to move quickly. In turn, developers need to adapt.

Also, an all-time SaaStr fan-favorite, Jeff Lawson recently chatted with SaaStr CEO Jason Lemkin to discuss his thoughts on collaborating, managing and working with developers. Here are his top pieces of advice.

# 1 You don’t need to be big. The engine of progress is a small team focused on a particular problem that’s dedicated to the customer’s needs. Start small and do it well. Plus, the best talent in the field doesn’t want to be lost in the company. Make things meaningful.

#2 Keep close to the customer and the problem. Twilio’s developers take turns doing regular customer support to know what users are struggling with and to develop an intuitive understanding of what’s needed. You might also include developers on sales calls from time to time — it makes everyone feel heard. Your team must be intimately familiar with the customer’s problems.

#3 Assign problems, not tasks. Often, business teams decide what to build and send a blueprint to the developers. But if a developer doesn’t understand the customer’s dilemma, they won’t be motivated or able to adjust. Include them in the heart of the problem and leverage the breadth and ingenuity of your team. Twilio couldn’t match offers from Google and Apple. Still, they offered their developers problem solving, responsibility, and the awareness that they were vital for the company’s future, not just the back button on Chrome.

#4 Provide executive enthusiasm. The CEO of Dominoes recruited his Head of Technology personally, telling him that his realm was the most critical thing Dominoes was going to do in the next decade. He took the job and recruited an incredible team with the same enthusiasm, building his boss’s vision. A phone call goes a long way.

#5 A sense of ownership solves the small stuff. Instead of “I need you to fix bugs,” lead with, “I need you to own this item that our customers care about and make sure it operates at the level it needs to every day.” And review the different strengths of each member of your team to get the right people in the right seat. 

#6 Put the pieces within the puzzle. Help your teams understand where their projects fit in. If your developer builds what they think is a core feature, but it’s just a widget in the top corner, they might have to change things last minute, from fonts to framework. 

#7 Let your teams play with different toys. Many software tools require no real upfront investment, and developers can test different tools and see what really hits home. Jeff stresses that “experimentation is the prerequisite to innovation.” The more experiments you run, the more likely your developers are to make the next big thing. 

#8 Create a reliable infrastructure. You wouldn’t send your salespeople out with only a notebook. Equip your developers with the right infrastructure and processes to help them write code, ship it, test it, make sure that it’s stable, etc. 

#9 Take a point of view. Even if your developers are distributed across locations, make sure they have a working style they can unite around. Not every team needs to work the same way, but the people in them need to have a functional identity. And, ideally, keep within three time zones…

You can get more of Jeff’s wisdom and advice in his new book, “Ask Your Developer: How to Harness the Power of Software Developers and Win in the 21st Century,” available now.

Published on January 15, 2021

Source: https://www.saastr.com/how-to-collaborate-manage-and-work-with-developers-featuring-jeff-lawson-twilio/

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5 Interesting Learnings from Qualtrics at $800m+ in ARR

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Qualtrics is one of our favorite SaaS stories at SaaStr.  Like Atlassian, Qualtrics bootstrapped all the way to the growth stage, and did it outside of the SF Bay Area.  Founder and Chairman Ryan Smith is also one of the most engaging and transparent CEOs out there, and we’ve had 3 amazing SaaStr sessions with him:

And most interestingly … they’ve gotten a second chance to IPO.  After selling to SAP for a record $8 Billion at the time in the midst of an IPO roadshow, they then got the opportunity to spin out into a public company after all, at a far higher valuation.

How many of us get a second chance at an IPO?  Qualtrics did.  I’m almost jealous 🙂

They were at a $723m run-rate in Q3’20, so that should put them soon at $1B in ARR:

 Here are 5 Interesting Learnings for us founders and execs:

#1. Only annual contracts, and plenty of professional services (25% of revenue).  Qualtrics does have a long tail of 12,000+ customers, but many of its motions are pretty enterprise.  99% of its customers are on annual contracts, and 25% of its revenue is from professional services.  25% of revenue from services may sound high, but it’s a fairly standard ratio in true enterprise software.

Importantly, Qualtrics’ margins remain high so it’s not losing money on its services.  Gross margins on services are about 35%.  Not the 80%+ in software, but high enough to be profitable and not be a drag on the business.  Blended margins are 73%, which is plenty high enough.

#2.  Spending more on R&D at scale, not less.  Qualtrics as a stand-alone company was spending about 16% of revenue on engineering (i.e., R&D) … and that ballooned to as much as 44% under SAP (re-investing in product) … and now has come down to 31% as the company marches again to being a stand-alone company.  There are a lot of mini-lessons here on the ability to invest when you don’t have to worry about being public, etc., but the biggest reminder and take-away is you have to invest heavily in your product forever.

#3. From $35m in revenue in 2012 to $800m in 2021, leveraging 120% NRR.  Just think about that for a minute.  Let the power of 120% NRR and strong growth compounding over 8 or so years sink in 🙂

#4.  About $250,000 revenue per employee.  With 3,370 employees and $800m in revenue, Qualtrics does about $250,000 in revenue per employee.  This is pretty consistent with other Cloud leaders at scale.

#5. 64 $1M+ Customers, and 1,200 $100k+ Customers (a 1:20 ratio).  This is how a lot of us end up looking at scale.  Qualtrics grew from 27 $1m customers in 2018 to 64 $1m customers today.  Assuming they add up to say $100m ARR total, that means perhaps 15% of their revenue comes from $1m+ deals.  But for every $1m customer, they have 20 $100k customers.  That 1:20 ratio is pretty interesting and roughly what many vendors that sell to enterprises of different sizes, and in silos, see.

And a few bonus points:

#6.  NRR consistent at 122%.  We’ve seen some SaaS leaders NRR stay world-class, but decline a bit around $1B in ARR.  Not Qualtrics.  NRR is basically the same 120%+- for past 3+ years.

#7.  Largest customers not growing faster than smaller ones.  While Qualtrics has expanded its $1+ customers dramatically, growth in smaller customers actually has kept up nicely.  Overall growth rate for “large customers” is 29% Year-over-Year, which with 120%+ NRR, should fuel Qualtrics’ growth for years to come.  But smaller customers have kept up, and are still 90% of the total customer base of 12,000:

#8. The merger with SAP did seem to work. While I’m super excited Qualtrics is spinning out into its own public company, the company grew subscriptions an impressive 46% last year under SAP.  It’s very hard to be critical of those results the first full year after M&A.  Most folks slow down then, e.g. as LinkedIn did for a year or so after the Microsoft acquisition.

#9. No customer concentration, even with almost 100 $1m deals.  This is interesting as we’ve seen a lot of customer concentration in recent SaaS leaders.  But even being enterprise, no customer is more than 2% of Qualtrics’ revenue.

Also, while most value statements are pretty generic … I like Qualtrics’ a lot.  Take a look here:

And a fun back look at the earlier days at Qualtrics here:

Published on January 15, 2021

Source: https://www.saastr.com/5-interesting-learnings-from-qualtrics-at-800m-in-arr/

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Doing 5, 6 or 7 Figure Deals? Don’t Forget the Services Revenue

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If you’re doing SaaS for the first time (or even the second), the whole idea of charging for “Services” may seem an anathema.  It sure did to me.

  • If your product is so easy to use that you barely need sales people, why in the world would you need to charge for implementation?  For support?  For training and engagement?
  • And isn’t it a bit unseemly to charge for services?  Doesn’t it sort of say your product is Old School?  SAP-level clunky?
  • And isn’t services revenue a friction-full waste of time anyway?  I mean, it’s not recurring.  It’s not true ARR.  Does it even count?  I’m a SaaS company.

Maybe.  Maybe for the 15% of the world that is like you and me, charging for services doesn’t make any sense, perhaps even anti-sense.

Turns out though, that in the vast majority of six-figure contracts, virtually every seven-figure contract, and quite a few five-figure contracts … there’s always a services component.

And it almost always seems to average out to 15-20% of the ACV.

I remember the first time I experienced this confusion myself, on one our first high-five figure contracts.  We had a brutal negotiation over price.  And then, at the end, they sent us a Schedule for Services.  After getting beat down on pricing on the annual contract price … the Schedule for Services they sent us (without me even asking) guaranteed us another $20k a year in services, with $250 an hour as the assumed price for the services.

I didn’t fully understand what was going on here until I became a VP in a Fortune 500 tech company.

But the answer, it turns out, is simple once you get it.

First, in medium and larger customers, there’s always change management to deal with when bringing in a new vendor.  And they not only understand there’s a cost associated with that (soft even more than hard) … your buyer wants to do the least amount of change management herself as possible.  If you can do the training for her for a few bucks and saves her a ton of time … that’s an amazing deal.

Second, in medium and larger customers, they often have no one to do the implementation work themselves.  So even if you weren’t saving your customer theoretical money by helping with implementation, roll-out, support etc. … they probably have no one to do this internally anyway.  You’re going to be doing some, a lot, or all of this for them.  They are OK paying for this, in the enterprise at least.

And most importantly … it’s how business is done.  And — budgeted.  When most larger companies enter a new vendor into their ERP system, they typically add an additional budget item or two along with the core contract price.  One additional line item for service and implementation, in most cases.  And in some cases, an additional budget for other add-ons necessary to make the implementation a success (e.g., an EchoSign on top of Salesforce).  Both of these are often line-item budgeted at 15-20% of the core contract value for the product.

So net net …

  • You probably can’t charge another 15-20% for services and implementation and training for a $99 a month product.  Well, maybe you could, but it’s probably unprofitable and not worth it.
  • But, as soon as the sale gets into the five figures, considering adding 15-20% for Services.  You’ll probably get it.
  • And plan for charging, and delivering, additional services revenue in mid-five figure and larger deals.  The customers are happy to pay, and in fact, will expect it.

And if you don’t charge … you’re just leaving money on the table.  You’ll have to do the work anyway.  You may send negative signaling that you aren’t “enterprise” enough, that you aren’t a serious enough vendor.

And importantly, this extra services revenue still “counts” as recurring revenue if it’s < 25% or so of your revenues.  I don’t mean that literally (it doesn’t recur), but what I mean is that Wall Street and VCs and acquirers and everyone will still consider you a 100% SaaS company if <= 25% of your revenues are nonrecurring.  And you’ll get the same SaaS ARR multiple on those extra services revenues.

Same multiple.  No extra work.  10-25% more revenue.

Don’t leave the services revenue on the table.

(note: an updated SaaStr Classic post)

Published on January 15, 2021

Source: https://www.saastr.com/dont-forget-the-services-revenue/

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