Twitter is has a massive audience, making it a great platform for advertising products and services, or sharing your content.
If you aren’t using Twitter to boost your brand, you’re seriously missing out.
According to Statista, Twitter has amassed more than 330 million active monthly users.
But there’s a better reason to build your brand on Twitter, besides the capability to reach the large, diverse audiences it provides.
Search engines actually use social signals from social media to rank your website. Likes, shares, and comments can have a massive impact on SEO.
According to cognitive SEO, the higher the average number of shares, comments, and likes a brand has, the higher their website rank actually is.
That’s crazy, right?
If you use Twitter correctly, you can boost your brand’s search engine rankings just by posting on the platform.
That’s because Twitter lets you build a large following and gain the attention you need to boost brand awareness.
More brand awareness = more searches about your company.
You might be wondering, “Where do I start?”
Exposure is key. For starters, you need to promote Twitter trends, your tweets, and your account to get your name out there to as many people as possible.
Twitter for SEO Tip #1: Promote, Promote, Promote
Twitter ads are a surefire way to gain tons of visibility, generate leads, and grow your audience. Therefore, promoting content on Twitter can help you rank higher.
The best part is that you can target specific, custom audiences.
One brand that is currently using an effective Twitter strategy is Rothy’s, a sustainable shoe company. Their Twitter content is on-brand, impactful, and engaging.
Rothy’s shoes are not only made from recycled materials, but they’re also machine washable. And the brand doesn’t let their Twitter followers forget it.
One way to enjoy the same success as Rothy’s is to promote your own trends or “tags.”
Promote Twitter Trends
On Twitter, trending or “viral” topics appear on the Discover tab, within the Twitter app, and on the left side of the page.
When you promote a trend, it will appear in those locations.
The more people that use the tag, the more exposure you’ll gain.
Promoted tweets are just regular tweets that appear for users who don’t follow you on Twitter.
The only difference is that Twitter will add a tag to these tweets that read, “Promoted by (your brand’s name.)”
Users can like or retweet them like any other tweet, but you have to pay to have them show up in a targeted audience’s timeline.
Promoted accounts put your entire Twitter account in front of users you’ve targeted to help grow your audience.
As many as 85% of people say that they find new businesses on Twitter through promoted accounts.
Promoted accounts appear within people’s timelines in the “Who to follow” section and search results.
A small tag will appear under your account name that says, “Promoted.”
You shouldn’t just be promoting your account, tweets, and tags to targeted audiences, though. Be sure to add targeted keywords so Google is more likely to recognize your tweets.
Twitter for SEO Tip #2: Use Targeted Keywords
You optimize your website for the keywords you want to rank for.
Why not do the same with your Twitter account? Add keywords right in your Twitter bio, for example, so that Google associates your account with relevant keywords.
Use these same keywords within your tweets or as a caption alongside images you post.
Users who are searching for these terms on Twitter will then find your page. Your tweets will get more exposure, which will boost your SEO.
The best part is that keyword searches on Twitter account for misspelling, synonyms, slang, and more, just like on Google.
If a user searches for “love pizza,” broad match results might include, “loving pizza” or, “I love pizza.”
You know which tweets, tags, accounts, and keywords you want to promote. But which audiences should you promote them to?
Twitter for SEO Tip #3: Select Your Twitter Audience
You can target Twitter ads to certain audiences so they appear in search and in their timeline.
You can select additional audience features and add keywords to any ad campaign. You can even import multiple keywords.
Campaigns will show up in both search and timeline by default.
You can customize where tweets appear if you prefer one over the other, though.
And adding tailored audiences only takes a few clicks.
You can upload your own list or you can put a code on your website to collect visitors, purchasers, or downloaders.
It’s important to note that uploading your own list can take up to three hours.
In addition to promoting your content, using targeted audiences, and selecting a custom audience, you should also use relevant hashtags.
Twitter for SEO Tip #4: Use Relevant Hashtags
There are several ways to use relevant hashtags.
You can be on the lookout for trending Twitter topics you can use to generate more attention.
With this one, make sure that you research and understand what a tag means before you use it.
For instance, you might not want to use the tag “#WhyIStayed” to promote your pizza, since that tag originated as a way for people to share stories about domestic violence.
You can also create a branded hashtag (that you can later promote) as Toyota has done with the tag “#LetsGoPlaces.”
It’s right in the company’s Twitter bio.
By creating a branded tag, you’ll encourage other Twitter users to use the same hashtag on posts that they share featuring your brand.
Rothy’s has accomplished the same kind of brand awareness with the tag “#LiveSeamlessly.”
You can even find out which hashtags influencers are using with the help of a few tools.
Finding trending hashtags in your industry at any given time is important, too.
Hashtagify is a great tool to try out since it will reveal the top 10 hashtags related to the keyword you search for.
For example, if you want to see the most popular tags related to the word “SEO,” type it into the search bar.
The site will show you the tag’s recent popularity and trend information.
From there, you can see a full list of related hashtags.
You can even view a list of top influencers related to that specific tag.
If that isn’t enough, look at Twitter’s tailored trends for more ideas.
Twitter for SEO Tip #5: Check Out Twitter Trending Topics
Tailored trends, which Twitter introduced in 2012, give you a list of topics based on your location and the users you follow.
Twitter trending topics can help you stay current on topics that are important to your audience. Keep an eye on these lists and make sure that your selections are as close to the audiences you’re targeting.
To change your location, just click on the “Change” button.
Then, enter the region/country and city that you want to see.
That’s all there is to following Twitter trends!
Now, if you aren’t already adding images and video to your tweets, you should. They will give you more exposure than tweets without them, which is great for SEO.
Twitter for SEO Tip #6: Add Images and Video
According to WordStream, tweets with images receive 18% more clicks than tweets without them.
More clicks = better rankings.
Make sure that you only include images that are relevant, engaging, and high-quality.
Mr. Peanut’s account using this image is a great example:
Video views can have the same effect as images.
According to Insivia, 82% of Twitter users watch video content on the platform.
Add a short video to your next tweet to promote your product, brand, or service, like this one from SMILF.
Giveaways and polls are another great way to interact with followers, find new followers, and most important of all, gain attention.
Twitter for SEO Tip #7: Run Giveaways and Polls
One simple way to leverage Twitter to boost your search engine rankings is to run a giveaway based on retweets.
To enter, people complete an action, like retweeting one of your tweets.
You can include a link to your website or your most recent blog post in the tweet to boost that page’s rankings.
Or, just add a branded hashtag like the Pittsburgh Steelers did in a Twitter giveaway.
Be sure to offer the winner a prize and announce to your audience the date that you will be choosing the winner.
Running polls is just as easy as running a giveaway, if not easier.
BuzzFeed has even created an entire Twitter account dedicated to polls, which currently has 119,000 followers.
You can use polls to settle a debate or interact with your followers by asking questions, like Airbnb.
The engagement you’ll gain from giveaways and polls will boost likes and retweets, improving your overall search rankings.
Remember how I said to include a link to your website when running giveaways? You should add those to regular tweets too, especially if you post blog content regularly.
Twitter for SEO Tip #8: Share Links
The power of links on Twitter is huge. Sharing them can maximize the reach of your content and web pages.
Since Google recognizes links, tweeting URLs is a quick way to use the power of Twitter to boost your rankings.
That’s one of the reasons I share links regularly to promote my new blog posts.
By sharing links, you’ll direct and drive traffic right to your site, which Google will love.
I like to use a URL shortener like Bitly to optimize my links before I share them so that my links don’t take up too much of my character count.
If you don’t have a blog, tweet out links to your products or web pages on a regular basis, like Free Radicals does.
Just be sure to share relevant and helpful information regularly, not just links to your products.
Twitter for SEO Tip #9: Tweet Consistently
You may think that more is better when it comes to tweeting.
But Google might actually see that approach as spam.
Plus, you don’t want to post too many tweets in a row to your followers, or you might annoy them into clicking that “unfollow” button.
Stagger tweets throughout the day and during times when your followers are the most active.
One tool that makes scheduling tweets easy and efficient is TweetDeck.
To schedule tweets, just write them out and select the date and time you want them to go live.
Another great Twitter management tool is Hootsuite. You can integrate other social media accounts with this tool, too.
You should also use a tool like Tweriod to determine when most of your followers are online. Buffer does this in their platform as well.
Those are the best times for you to tweet because your tweets will get maximum exposure and attention.
Aside from following all the rules I’ve already named for boosting your rankings through Twitter, the most important one is to actually interact with your audience and reply to them.
Twitter for SEO Tip #10: Interact with Followers
This tip might seem obvious, but people often overlook it.
Imagine if Wendy’s hadn’t replied to Carter Wilkerson? #NuggsForCarter would never have become a trending topic that brought Wendy’s tons of publicity.
It can be hard to gain interactions on Twitter. Considering that users send over 350,000 tweets every minute, your tweets can easily get lost in the crowd.
That’s why you should engage with the people who are already talking to you to gain the attention of users who aren’t yet.
By creating personalized replies that relate to your specific industry and audience, you’ll build up tons of engagement for a boost on Google.
Encourage users to interact with you by posting relevant tweets, talking to industry-specific followers, mentioning other Twitter users, and responding to mentions quickly.
By interacting with followers, you’ll gain more retweets, mentions, and likes. And that means better rankings.
You should also reach out to influencers who can share your tweets, brand, and account with their audience.
Twitter for SEO Tip #11: Do Influencer Outreach
Since exposure on Twitter is the key to gaining likes and retweets, look for influencers who can give you exposure to their Twitter audience.
Twitter influencers can boost your credibility quickly because they’re already credible within your industry.
When an influencer talks about your brand, products, or services with their Twitter audience, their trusted followers will head to your page to check you out.
When trying to reach out to influencers, it can be helpful to:
- Create meaningful content that is shareable and valuable to your industry
- Develop long-term relationships with influencers rather than viewing them as people who can give you a quick, short-term boost
- Retweet tweets from influencers with whom you want to engage
- Collaborate with influencers by writing guest blog posts for them or allowing them to write guest posts on your blog
Several tools help find influencers in your industry if you aren’t sure who to reach out to.
One of them is Klear.
Just select the social network you want to search through, the skill or keyword you’re interested in, and your location.
Another great tool for finding influencers in your industry is BuzzSumo.
Just search for a keyword, and you’ll find influencers that relate to that topic.
The tool will even show you the page authority, domain authority, number of followers, retweet ratio, reply ratio, and the average number of retweets for each influencer within the results.
Twitter is an absolutely massive social network.
But you should never think of social networks as being isolated from search engines. It’s actually quite the opposite.
Google pulls tons of information from social sites like Facebook, Twitter, and LinkedIn.
The more exposure your posts get (such as likes, comments, mentions, and retweets), the higher your search engine rankings will be.
That’s because Google uses social signs to recognize certain web pages and brands.
But you have to use Twitter in the right way.
It’s all about gaining exposure and attention. Start by promoting your account, your tweets, and your tags (sometimes known as trends).
Use targeted keywords on Twitter just like you do on your web pages and blog content. Google will recognize the keywords associated with your brand on Twitter, too.
Be sure to use relevant hashtags and research a trending tag before you tweet something that contains it.
Add images and video to your tweets to increase engagement, and be sure to share links back to your website to direct and drive traffic.
Tweet consistently and schedule out your tweets in advance to maintain a regular posting schedule. Post during times when your followers are most active.
Finally, don’t forget to engage with followers as often as possible and do some influencer outreach to get your name out there.
How do you use Twitter to boost your search engine rankings?
Extra Crunch roundup: Antitrust jitters, SPAC odyssey, white-hot IPOs, more
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.
Senior Editor, TechCrunch
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:
“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
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?
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?
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
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
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:
- Are special purpose acquisition companies a path to public markets for “potentially promising companies that lacked obvious, near-term growth stories?”
- 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
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
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:
- Morgan Paxhia, managing director, Poseidon Investment Management
- Emily Paxhia, managing partner, Poseidon Investment Management
- Anthony Coniglio, CEO, NewLake Capital
- Matt Shalhoub, managing partner, Green Acre Capital
- Jerel Registre, managing director, Curio WMBE Fund
How to Collaborate, Manage, and Work with Developers featuring Twilio’s Jeff Lawson
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.
5 Interesting Learnings from Qualtrics at $800m+ in ARR
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:
Doing 5, 6 or 7 Figure Deals? Don’t Forget the Services Revenue
25% of revenue from professional 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%.
— Jason ✨BeKind✨ Lemkin ⚫️ (@jasonlk) January 15, 2021
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.
This is really true. We tend to disregard service revenues like 2nd class. But well designed services speed up adoption, remove fear to change, lock in customers and provide customer insights to better design the product. Qualtrics (below by @jasonlk ) and Carto are good examples https://t.co/RJATL2EHot
— Aquilino Peña (@Aquilino) January 15, 2021
(note: an updated SaaStr Classic post)
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