How we’ve built a profitable business in a highly competitive environment (and how you can do it too!)

Agorapulse is in the social media management space. If you know that space, you know how competitive it is. If you don’t know it, here are a couple of facts to illustrate what I mean by “competitive.”

  • An exact match search for “social media management tools” in Google leads to 945,000 results.
  • Hootsuite, the leader in this space (targeting SMBs), has raised north of $260M. Yes, you read that right. Its challenger, Sprout Social, has raised $60M. Sprinklr, the leader in the enterprise segment, has raised $239M.
  • The CPC bid you have to match to on AdWords to be displayed on “social media management tools” search queries is $12. That is $12 per click, not lead.
  • When you search for startups providing social media management tools in Crunchbase (the most comprehensive startup database), you end up with 1,025 results. That’s 1,025 companies competing in a space that’s not even 8 years old.

We launched Agorapulse in this space and we’re doing well, against all odds, and despite most investors’ opinions that we would never make it in such a highly competitive space.

How did we make it? This is our story.

A competitive market is a good thing.

That’s a very important point. I’ve learned this one the hard way.

In 2001, my co-founder and I started our first startup. It was a revolutionary new concept that didn’t exist at the time: online social networking.

I know, we were visionaries ;-)

But there was no market for an online social network in 2001. It failed.

In 2004, we pivoted to a B2B play, trying to sell our technology to large businesses and organizations wanting to build their own private social network.

Here again, there was little existing interest. It barely survived.

But when you enter a market with hundreds of thousands, or even millions of potential customers, there’s a big difference! When we entered this space, we no longer had to:

  • educate our market
  • convince them they need a product like ours or
  • fight on prices because there is a market value for your “thing”

Having fierce competition comes with its challenges, but the hardest of all challenges is not to find your market.

It doesn’t matter if the competition is fierce.

When I read the following post written by Alex Turnbull from Groove I had an epiphany:

In 2014, we were already operating in this competitive market and I had some serious doubts about where we were in it.

Business was painful. It was taking forever to get profitable. I wrote about our story (and past struggles) here:

It was only when I realized that playing in a huge market was our best chance that I started to relax about our future.

Accepting that growth in such a market will take time was hard at first for me to swallow. You might feel the same way.

But if you take the time to execute well, differentiate yourself, think out of the box, and fill the gaps left by larger competitors, you can only win at the end.

Getting a small chunk of a $1B market is doable if you execute well for long enough. It will lead to a good business, maybe even a great one if you’re lucky.

But the same amount of effort and the same quality of execution will only lead to a small business in a $100M market.

In a nutshell, if your market is huge, you can make it.

Look at email marketing, CRM, or invoicing/accounting software: all are very, very competitive spaces with a bazillion of vendors and very, very big (and rich) market leaders. Still, there are way more than one successful business in each category.

Pipedrive has succeeded in the highly competitive CRM market led (with a bullet) by Salesforce.

Groove has flourished in the intense help desk market dominated by Zendesk.

MailChimp has become a superstar in the (more than) highly competitive email marketing market with no VC funding at all!

These companies share the same three things in common:

  • They didn’t play “by the book” of their market.
  • They focused on differentiating themselves to stand out.
  • They identified a gap in the competition and filled that gap

Let’s dig in to these three crucial factors.

When you have bigger / richer competitors, you can’t play by their book.

If you enter a market where large and already successful competitors operate, don’t copycat what they’re doing.

If you do, you’ll immediately be outclassed. You can’t afford their AdWords campaigns. You don’t have the funds for Silicon Valley executive salaries, and you can’t shell out the cash for their fancy offices.

So don’t try to beat them at their own game. Change the game.

Our competitors buy AdWords keywords at $10 a click and they’ve built $200k websites with more landing pages than one can count. They’ve created offerings for everyone, from Mom and Pop businesses to Fortune 500 companies.

If we had tried to do all of that, our business would be dead by now.

But here are the things you CAN do in a competitive market:

  • Design an innovative UI/UX approach for your product. The competition is most likely relying on a product interface that’s several years old. THEREIN LIES YOUR OPPORTUNITY, as it did for Pipedrive, Slack and AdEspresso.
  • Focus on what makes you unique as people. Larger companies are way too big be seen as human beings anymore. You can. Rand Fishkin does a great job at that with Moz. You can definitely relate to him as much as to his company. So does Alex Turnbull from Groove. They both do it a little differently but the underlying principle is the same: the founder(s) behind the business create helpful content, readers/users appreciate, they become interested in the business behind the people.
  • Build an “unconventional” team. These larger players will probably hire local employees in their “big city” office. They will hire college graduates and people who have past experience in their job. They will be expensive. Very expensive. And they’ll have hundreds of them. As a new challenger in a market, you can choose a different path. Hire remotely so you can tap into markets that have less expensive cost of living. Hire people with great potential but no experience on the job (and train them). By taking an unconventional path, you can easily have a great team for more than half the cost of doing it the “conventional” way. It will come with challenges, for sure, but if you do it right, you’ll do more for less, guaranteed.

Smaller player = more agile.

We’ve grown from a team of 12 to a team of 37 in 12 months. 37 is still very small, but still, I can already feel the difference in our execution speed. It’s not slower, but it’s definitely not 3 times faster.

Growing a team introduces a lot of friction. Especially in a remote, worldwide work environment. And all large companies operate in a remote environment as they always have several offices / floors!

Expanding a worldwide team also usually implies operating in several languages, maybe even dozens of them. That adds friction.

It means going upmarket, down market, and expanding your reach to other niches. That adds friction.

In a nutshell, as your company grows, you inevitably become slower relative to your headcount.

That said, if you focus on the right market segment and the right part of your product, you’ll execute faster than the big boys and girls.

Focus on battles you can win today.

If you have a smaller team with fewer resources, you simply can’t fight head-to-head with your larger competitors on all fronts.

But you can win specific battles by focusing your agility on getting one thing better than them.

Pick a niche, pick a feature, pick a marketing channel, anything they are not great at and can have an impact on and do that better than they do.

Then rinse and repeat.

Doing this will eventually lead you to compete head-to-head and win the war. But for now, just win that war one battle at a time.

Use your competitors’ brand awareness to your advantage.

Larger competitors have probably been around for longer than you do. They definitely have a much larger marketing budget. Their SEO is stronger. They get a ton of organic referrals without lifting a finger.

That’s the magic of brand awareness. It’s great when you have it. It’s tough when you don’t and your competitors have it.

It doesn’t matter that your product is better. The one that people know is the one that gets all the toys. Awareness is everything.

So what can you do? While there’s no magic formula, let me share what we’ve done in that area.

First, identify your 2 or 3 “best” competitors. Those are the ones you keep being compared to when you’re talking to prospects. For us, it overwhelmingly was Hootsuite and Sprout Social.

There is a TON of other social media tools out there but these two kept popping up. (And they still do.)

These competitors need to have enormous brand awareness. Check out the organic mentions our two big competitors get on the Web compared to us. We’re in blue.

Monitoring of mentions of Agorapulse vs. Hootsuite and Sprout Social using Buzzsumo

Once you’ve picked the 2–3 competitors, identify what makes you stand out against them. Maybe it’s a set of specific features you have and they don’t, a market segment you’re serving better than they do, or a pricing gap you’re filling and they don’t.

Create assets that benchmark you against them based on these differences and use them to your advantage. If these assets come from third parties, it’s even better!

In our case, we’ve leveraged 3 different advantages:

1 — Our tool gets better user satisfactions than our competition.

Our guts knew it, our early users told us so, but frankly, it was very hard to let the world know: our software was more users friendly than the leader in our space.

What we did very early on was to invest a LOT of time in getting our users to review us on the major review sites. The one that worked best for us was G2Crowd. I basically reached out personally to all our users, as the founder and CEO and offered (free) advice. At the end of the call, I kindly asked if they would give us a review.

In the course of 5 years, we eventually got more than 360 reviews. But look how good we look on G2Crowd compared to Hootsuite (that has 1,022 reviews!):

I’d call that a home run. Best on every topic.

So now, it’s not our guts telling us we’re better, it’s hundreds and hundreds of real user reviews, most of which come from Hootsuite users themselves!

Once you have an asset like that, you can create marketing materials that leverage these results and/or get bloggers to create them on their own.

Pretty darn powerful if you ask me.

2 — Our pricing is much better for teams.

In their path to more profit, our two biggest competitors have continually increased their pricing. It’s pretty common to go up-market as you grow.

It’s usually not a bad thing to do. We did the same by killing our lowest plans as they got us the highest churning users. The more a user pays, the more likely they’ll stick with your product.

But when you increase your pricing, you will create gaps that are not necessarily made of “bad fits” but who will suddenly find your product way too pricey.

That’s what has happened to businesses managing social media profiles with a team. As Sprout Social and Hootsuite basically have a “per user” pricing model, every time they increase the cost per user by $20, they’re actually adding a lot of cash to a team of 5 or 10!

We saw the opportunity here: a LOT of small and medium teams would soon find their plans unbearable. So we’ve engineered our pricing to be more team friendly.

Check out the results with price comparison tool build by Seriously Social. It’s mindblowing how expensive our competitors can become with 10 team members and 20 social profiles:

That move alone got us a lot of success with teams. They are also the ones that stick with us the longest.

Good bet.

3 — We have a useful feature that the “big” guys don’t offer.

Once you have the assets highlighting your unique advantages, use them in your marketing over and over. Retarget your traffic with them and reach out to bloggers mentioning your competitors to bring your solution (and its differences) to their attention.

If you leverage these assets consistently, they eventually help raise your awareness by showing your market that you exist. Again, like winning the war, this needs to be done one step at a time.

The bigger the competitors, the more opportunities are out there. Seize them.

As businesses become larger, they change course. They may start with a simple set of features but as they become bigger and more successful, they will add more and more features, leaving room for a smaller competitor to become better than them at one specific feature.

For example, as Zendesk was getting bigger and bigger, its product became fairly complicated to onboard and learn. Groove and Help Scout seized that opportunity and built help desks that were really simple and efficient for the needs most small businesses have. They created two very healthy businesses by leveraging the gap left by Zendesk as it was getting more and more complex to fulfill the needs of larger businesses.

Another area where gaps are created all the time is pricing.

Be careful: competing on “we’re the cheapest for anything you need!” is never a good idea. But having a pricing that’s better suited for a specific set of customers can be a great idea.

As I mentioned earlier, as Hootsuite and Sprout Social kept increasing their pricing on a “per user” basis, they became extremely expensive for teams.

We saw an opportunity here and decided to not price our tool per seat in 2015. Later on, we’d reintroduce a cost per seat but still included several team members in each plan, making our pricing structure a no brainer for large teams.

But we’re not cheaper for everyone. Hootsuite, for example, has a free plan for solo businesses that we can’t — and don’t want to — compete with.

Pricing is always a big decision factor and if you look carefully at your competitors’ pricing and listen to your market, you can always find gaps to fill.

The road to happiness is in your goal setting.

That will be my final take, but it’s a biggie.

If you operate in a market that’s already crowded and where the competition is big, strong and rich, having the goal to “dominate” that market eventually is probably the best way to set yourself for depression — not to mention financial ruin and a bunch of disgruntled employees.

But if your goal is to capture a good niche in that market, or a big enough market share to have a profitable sustainable business, then you stand a good chance and you may find the path to profit and happiness.

Our largest competitor has more than 450,000 paid users and our second largest has close to 17,000. If my goal was to get more than them without their already solid brand awareness and their millions of VC funding, I’d probably stress myself to death for the next 10 years.

That’s not the life I want.

I have the more reasonable short term goal to get to 5,000 paid users, giving us around $600,000 of monthly revenue. Nothing “huge” or unicorn-like, but a very, very profitable and healthy business that will make our 40 people team very well paid and beyond happy.

Once we’ll get there, we’ll raise the bar, probably to $1M MRR, and so on. I don’t have a big bold goal that I’m not sure I can achieve. I set my goals one step at a time.

Don’t chase impossible dreams, especially in very competitive markets. Chase a dream that you can reasonably achieve and grow from there. Who knows, you may become a unicorn, but don’t make that a goal. Is it really a good goal after all?

Remember what happened to the unicorn frappuccino?