No longer just a feature — David Cancel on the explosion of SaaS companies
David Cancel is Co-Founder and CEO at Drift. He shares his expertise on SaaS and running product-centric companies. Follow his reading list on Quibb.
As the founder of five companies and former Chief Product Officer at HubSpot, David has seen the SaaS industry grow from nothing to a behemoth that commands the attention of the tech world. With Drift, a product to communicate with your customers, he’s looking ahead towards the future of the industry. We talked to him about the early days of SaaS, where it’s headed, and how marketing for SaaS products needs to change.
In a growing industry, features become products
SaaS products used to exist as small features, often inside of larger products. There were some standalone SaaS products too, but many questioned their ability to become full-fledged companies. These days, it’s easier and cheaper than ever to build a startup — including those that fall under the SaaS category. David says that the biggest driver of change pushing the consideration of SaaS features to full products to actual companies in the industry is the ever-growing market size.
“The size of the audience is changing. In 1996 it was people through dial-up, the amount of people on the Internet was pretty small.As we’ve expanded over time, the ability to create a viable business in a really micro niche has been really surprising. In 2009 I looked at so many companies and thought, ‘Well, that seems like a feature’. Now I look at them, and they are giant.”
David and Sandi chatted about Optimizely as an example, a product that allows you to do easy A/B testing. A few years ago, many in the industry thought it was just a feature, including David. But Optimizely has taken that feature and built it into a huge business. It’s due to the ever-constant rate of growth of potential SaaS customers that’s led to this change and expanded the market size for companies operating in that space. Companies like Drift and founders like David believe this is only the beginning of the adoption of these types of companies, and that these types of SaaS tools will soon become ubiquitous across many businesses.
Engagement is the future of SaaS
David has always been passionate about the use of data to help companies better understand their customers. It’s been a throughline in his career, and he sees Drift as an extension of that.
SaaS has consistently been about data, but it has generally been “sprinkled here, and there, and all over the place,” as David notes. In the last few years it’s settled down a bit, and now, “the tools like Segment, Zapier, or MuleSoft can all get to the same place, and everyone can now have a common set of patterns to get that data out.”
From there, the next step is visualizing that data:
“Then you see this next level of businesses that are being built on top of those systems, and those are the new BI systems, whether it’s Looker, or Domo, or Mode, there’s a ton of these businesses that are being built on this that are basically giving you ways to visualize the data, and interpret the data that is from all of these different siloed places.”
Once you have all of that data, and you can visualize it and see the patterns, the next step is asking, what do we do with that data? This is what Drift is focused on:
“Now that you can get the data all in one place, even if it’s in a million different services, and now that you can visualize and understand that data, the question is: how do you take action on that data? What does that mean for the customer? How does what we do affect the customer directly? That’s where we’re focused with Drift. What we want to do is tap into those systems, let you take actions that are meaningful to your customers.”
It’s a vital step in the process and one where people need a lot of help. Every marketer can look at data and analyze it, but not everyone understands what to do with that data. In fact, most don’t. There is a gap between understanding data and doing something meaningful with that knowledge: that’s where the future of SaaS lays: and that’s where Drift wants to help.
SaaS marketing is changing
David sees a huge opportunity for Drift in this space, largely because the way we think about SaaS marketing is changing — it’s outdated, and disconnected from the customers. It operates almost in-line with real-world interactions — clearly a model that doesn’t translate to online well.
“It’s bizarre. It’s like if you were to walk into the Apple Store, and say, ‘I want to talk to someone,’ and they say, ‘Fill out a form, qualify this, download this e-book, get educated on our stuff, watch this video, and maybe someone will call you back in a few days.’”
David believes this disconnect between the customer’s intent and the contact by the company is hurting businesses that operate online. Somehow along the way towards a data-driven, endlessly optimized digital marketing process, something got lost: human contact. Drift wants to change this.
“It’s very simple, and we think that conversations with your customers should happen in the place that the customer is actually visiting, whether that’s your website, your mobile app, your web app, whatever it is. That should happen there, but look at what we do today. We get someone to visit us, we force them to fill out forms, and we say, ‘Download this book, and download this guide, and download this thing,’ and then we go through a crazy process of qualifying people and sending them to the salespeople, who will probably call you when you don’t want to talk to them. That is effectively what we’ve been doing for the last decade on the web, which is insane, right?”
This shift has reduced customers to data points, and David argues that the system is broken. People need to talk to their customers instead of shuffle them down an anonymous funnel. Like most trends, David believes that now we’re starting to see hints of a chance in this approach. Products (like Drift) are starting to help companies actually identify who their potential customers are, in meaningful ways.
“I think we’re going to flow back out of that, and that’s what we’re trying to focus on at Drift: let’s move back to having conversations happen when people want them to happen, and in the place that they want them to happen.”
Establishing a base-level of communication is important, as it allows for more interactive and connected conversations and interactions to occur. This allows companies to really build thoughtful content for the people who care about their products and services. Drift wants to be there to help people get to that powerful point, a whole new, data-informed, yet personal approach to marketing.
“I think we see that happening in lots of different places, like the move back towards long form, writing, or the way brands are producing stuff as Snapchat stories. We’re moving back to the importance of the narrative, that is what people care about, the story. They care about the content, they don’t care about filling out forms, and downloading this, and qualifying for that. They are people who want to connect with other people and their stories.”
