Early-stage SaaS Advertising is Bananas

What we learned in 2016 and what we’re doing differently this year.

Building awareness and marketing a new product is no easy feat — roughly one-third of Float’s revenue went to advertisers in 2016. It gained us some amazing customers and taught us a number of valuable lessons, but it also came at a significant price. Advertising early-stage SaaS is incredibly tricky, and there are a number of mistakes that most new businesses (us included) tend to make.

With a limited budget and resources, the general strategy is to drive as many leads as possible to deliver the highest return on investment (ROI). The theory goes that if you understand your customer acquisition cost (CAC), and it’s less than the lifetime value (LTV) of the customer, then it’s a wise investment.

Unfortunately, it’s not that simple.

• A growing SaaS business doesn’t have a predicable, defined LTV. How do you know how much to spend if you don’t know how much each customer is worth?
• Tracking the funnel from last-click to paid customer is neither simple nor entirely accurate. There’s also a lag due to your free trial period (ours is 30 days).
• New businesses don’t fully understand the effect that seasonality can have on conversion and other parts of the business like pricing and product updates.

Moreover, the matrix of advertising platforms, formats, and targeting options available is almost limitless. Let’s say you stick with the big guys (Google, Facebook, Twitter) — on Google alone, there are up to nine ad types to optimize, multiple bid strategies, and geographic and interest-based targets. We’ve seen creative performance for the same ad copy differ radically across platforms based on its format and placement on the page!

Relevant keyword buys are also ultra-competitive (large enterprise businesses and VC-funded startups can outbid you), meaning that for many early-stage SaaS, they can be cost-prohibitive. It’s like playing poker with the short stack.

Regardless, many startups find it easy to justify going this route. For founders uncomfortable with content writing or public speaking it can seem like the marketing path of least resistance. It also delivers immediate results, which is what many new businesses are chasing at this stage. Be forewarned — once that tap is on, it can be an addictive and expensive source that delivers plenty of waste and little in terms of compounding returns.

What about referral programs you say? Didn’t Dropbox generate a gazillion leads that way?!

While Dropbox did prove that referral programs done right can generate immense returns, the mechanics of referral programs aren’t easily replicated in business services. In Dropbox’s case, they offered an immediate gain (free storage space) for sharing something personal (your email network). Most business services aren’t suited to such an exchange.

Advertising is a series of tests through which your business learns and optimizes. There’s no question that we learned a lot from our advertising investments in 2016. We’ve improved our brand messaging, measured and optimized our conversion funnel, and we’re now more analytical and critical of the changes we make and their impact. As we look towards investing in 2017, we’ve also realized that there’s a smarter way.

We know great SaaS businesses succeed by delivering immense value to their customers — through their products, their support, by providing authentic content, and through contributions to their community. These are the areas we’re ultra-focused on for this year and beyond. Concerning the latter, we’ve also started a monthly donation to Doctors Without Borders, who are doing incredible work for the people who need it most.

It should be a great year for Float and our customers, and we’re excited to share more about what we have in store for 2017 over our next few blog posts.

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