I was grateful to receive an invitation from Neal Polachek, Charles Laughlin, and the LSA to give my take on the Cloud Adoption Summit at the close of the day yesterday. Peter Krasilovsky did an excellent job moderating, and a lively discussion with the audience followed the panel’s thoughts.
For those of you who weren’t able to attend this year, I thought I’d summarize my biggest takeaways from the full Twitter stream — the intimate size and executive nature of the audience made it well worth the trip down the coast from Portland.
Ongoing debate around the size of the SMB market: 3MM? 10MM? 28MM+?
Neal Polachek asserted that the Primary Addressable Market (PAM) for SaaS products is about 10MM businesses in the U.S., while the Secondary Addressable Market (SAM) is around 18MM. But companies like Freshbooks and GoDaddy (and Tidings, FWIW) see the Secondary Addressable Market of entrepreneurs, consultants, freelancers, and other non-traditional business owners as their primary market. Others like Cisco focus on the M in SMB, which they pegged at around 3MM in size.
Perhaps the most interesting data point in the entire discussion of Neal and Charles Laughlin’s research was their slide showing that the average business in the PAM spends north of $600 monthly on SaaS-type products, while the average business in the SAM still spends north of $400/mo. From where I stand, that’s still a substantial DIY or assisted-DIY spend, despite being too low for a lot of managed service providers to find attractive.
Regardless of the ceiling you place on the market, it’s a big one. The important thing is to know which segment you’re targeting as you build products for that segment (which can even be micro-segmented by vertical).
Massive shift underway in SMB purchase behavior
Neal also presented data from his and Charles’ research showing that newer business owners are purchasing SaaS products directly (as opposed to through a sales rep). Among established businesses 20 years or older, direct sales represent a plurality of purchases, and among newer businesses (0-5 years old) they’re already a majority.
In the discussion of Alignable CMO Dan Slagen’s presentation on their quarterly NPS survey, Greg Sterling noted that companies doing heavy outbound sales tended to rank near the bottom of their respective categories, while those near the top were predominantly direct-sales models.
Numerous panels discussed the need for SaaS products to gain the trust of trade associations, chambers or business organizations both as social proof for the product and to help facilitate word of mouth.
And Stu Richards of Bredin noted the importance of strong content on the product pages and resource areas of your website in order to raise awareness, assist SMBs in their self-driven research, and even convert them in this new sales paradigm.
All of these signals point to a radically different sales model than the traditional “feet-on-the-street” that have dominated local / SMB sales for the past century. No one seems to have cracked the code just yet, but it’ll be an interesting space to pay attention to.
“Small businesses want to run their business from their phone; no one’s built the mobile-first, run-your-business application.” (Josh Melick, Broadly)
I couldn’t have said it better than Josh, but I may have a slightly different take–I’m not sure there is one run-your-business application for SMB’s.
A consistent theme yesterday was the trend towards increasing verticalization, and as Freshbooks and HomeAdvisor highlighted, even within verticals there are many tiers of customers, frequently with different needs.
Companies like Vendasta and Squarespace (and to some extent Square and Shopify) are working to allow companies to configure their own product bundles, which is an intriguing way to maintain the benefits of the best-of-breed point solutions that I see SMB’s continuing to prefer without the complexity of multiple vendors.
(Despite the consistent survey findings that SMB’s would prefer to work with a single vendor, Laughlin and Polachek’s research found only a “modest” appetite for this among their SMB audience, and I’ve literally never seen it among SMB’s I’ve worked with in the real world.)
What’s the role of the agency / reseller in an AI-first world?
Gregg Albright of iPromote expressed incredible skepticism that Google’s AI around Adwords creative and bid management would displace agencies’ and resellers’ own efforts in these areas. In my view, this skepticism is warranted based on Google’s past Adwords efforts, but Mike Blumenthal and I have seen major qualitative and quantitative improvements in Adwords Express, and there essentially IS no creative or bid management in Google’s newer Local Service Ads.
I posed the question directly to Google’s Simone Styr, what she saw as the role of agencies such as Google’s existing SMB partners, particularly since Google’s own website suggests
“[t]hese Google Partners can help you create and optimize ads that show up on Google Search. They can also advise on keyword strategy and budget planning.”
all of which Google is actively working to automate.
Styr sees *strategic* consulting as the role for Adwords resellers in the future — such as helping businesses identify types of customers to attract, new markets into which to expand — as opposed to tactical setup and optimization that is the bread-and-butter of so many of these agencies today.
Broadly’s Josh Melick highlighted a parallel trend in website development, stating that there were three basic price points around which website services seemed to cluster — $3/mo., $500/mo., and $5000/mo — differentiated more by business model than performance. Using a CMS like WordPress, the hard cost-per-month can actually be as low as $0, but there’s still plenty of value in choosing, configuring, and maintaining the right theme, plugins, and architecture of those sites on an ongoing basis.
This consultative, strategic position is one that Mike Blumenthal and I have highlighted in our bi-weekly StreetFight columns, though some traditional media companies may have a very rough time evolving their existing fulfillment programs to align with this new paradigm.
Tidings Named a Finalist for Best New Product by Streetfight
OK, so this one wasn’t actually announced at the LSA Cloud Adoption Summit, but I received an email from Streetfight’s COO midway through the morning that Tidings is one of three finalists (along with Waze and PlaceIQ) for best new product of 2017. It’s a great honor to be included in this group & I’m looking forward to attending the finals in LA next month!
Overall, the Cloud Adoption Summit was a unique day of both content and networking & I thoroughly enjoyed the opportunity to attend. Have a great weekend, everyone!