Technofile Europe

Freemium comes to enterprise SaaS applications

In his daily email digest, Richard Holway today pointed to an interesting new development in enterprise SaaS applications: Freemium-based lead generation.  UK-based vendor of accounting software IRIS announced it is giving away a basic version of its payroll software product (in partnership with HMRC no less!).

This was inevitable, given the ongoing restructuring of sales productivity in the software industry.  But I didn't expect to see it so soon among line-of-business applications.  Giving away free versions of software to generate leads has worked in the consumer market and in tools and infrastructure for SMEs (see NTR for example).  

But this approach historically relied on the vendor handling huge volumes of 'free users' for a very small fraction of paying users.  For example, when LogMeIn filed to go public last spring, the company had 22m registered users, of which 188,000 were paying an average of $153 per year.  That's a conversion rate of 0.85%, and represents a lot of servers to keep humming for the general populace!

They key for application vendors like IRIS will be to make their free versions sticky enough to drive a high conversion rate.  Any app that pulls in corporate data and stages it for external consumption (eg reporting or analytics) is a great candidate for this.  Once the app owns the data, the inertia to keep it switched on is huge.  The consumer analogue for this is back-up and sync services like Mozy or SugarSync.  I ran each as a trial and now I'm in year 2 of paying mostly because I can't be bothered to change providers!

It will be interesting to see what other application vendors go down this route.  It's not easy to: 

1. find the right split of functionality between free and paying versions; and 
2. get the upgrade sales process right so that expensive inside sales people don't chase too many dud leads.  

Today, only a small number of app vendors have really got this worked out.  I reckon the others have the rest of 2010 to crack it before a critical mass of competitors gets the better of them.

SEO basics and top tips, from the best

I've been a bit slow in blogging this, but a couple of weeks ago we held the second online marketing workshop sponsored by a group of VCs (Kennet, Accel, Advent, Wellington).  The concept was to get marketing professionals from a cross-section of European growth companies into a room to discuss what works and what doesn't in online marketing. 

Our first workshop last summer was all about search engine marketing (SEM).  This one was all about the more nuanced art of search engine optimisation (SEO). 

The evening revealed some interesting tidbits.  First, less than 30% of traffic and less than 20% of paying customers -- on average across the set of 25 participating companies -- is coming in via SEO.  The magic number being targeted is more like 30-40%.

Second, many Internet companies admit to being essentially underinvested in SEO and still being on the learning curve (unlike in SEM).  It doesn't help that SEO means wildly different things depending on what type of business you are: eCommerce, consumer web services, content publisher, B2B.  The general mood was that there is still a lot of low-hanging fruit, and this field is evolving all the time.

Below I summarise the other take-aways: top 3 SEO basics everyone should be on top of (perhaps obvious to many of you, but not to a neophyte like me); the most interesting specific initiative we heard about; the biggest mistakes; and the biggest unknown:

Top 3 SEO basics:

1. Get your URL structure and top-level domain strategy right.  If you operate in multiple countries with feet on the street, consider using country-specific domains like .co.uk and .fr, rather than declinations of the home domain, eg .com/en or .com/fr.  Make the most of SEO-valuable product categories and names within the URL.
2. Have an ongoing programme for generating links back to your site from high-quality partner sites.  This means building relationships with relevant partners whose sites themselves rank highly. 
3. Develop a content generation and renewal strategy that allows you to get your name (and the most expensive keywords) onto other sites and in context of relevant articles.  Think about articles or content pieces that are re-usable or can be refreshed easily.  That will keep new links coming as your content gets picked up virally.

Most interesting initiative: widget syndication - think about a piece of data or entertainment that your partners would be happy to present on their sites, which links directly back to yours.  The better the partner's own Google score, the more effective.  Here's a great example from Trivago.  

Biggest mistakes:

• Overuse of Flash or Javascript on home page.  Use CSS only so that Google can crawl everything!
• Cheap link-buying programmes.  Buying links en masse is not only worthless but can harm your ranking.
• Microsites.  Building lots of micro-sites on niche topics takes a huge amount of time and in the end rarely generates enough traffic to be worthwhile.  And you don't get the benefit of increasing the ranking score of your home page!

Biggest unknown: how to use social media, especially Facebook and Twitter to drive SEO.  Twitter links are fairly worthless, but reblogs from Twitter can be useful, so don't stop (start?) tweeting just yet.

Thanks to all the marketeers who participated and also to Will Critchlow of Distilled, for showing us some of the cutting edge of SEO (and some inexplicable stuff like this and priceless analysis like this).

Which KPIs matter in B2B customer acquisition?

I just came across a really useful primer on KPIs for SaaS companies here (thanks John Coldicutt at Fizzback for the link).  It's a piece by Joel York linking KPIs to the B2B customer acquisition process. 

There is no shortage of sources online for customer acquisition KPIs, mostly designed for the consumer Internet, although we are starting to see more science around B2B customer acquisition too.  What I like about Joel York's post is that it applies the language of process optimisation (bottlenecks, resources, critical paths, etc) to figuring out which KPIs matter to your business.  

This is much more useful to B2B companies who understand their processes, but have struggled to fit square KPIs from the consumer Web into round process holes.