Why GoToMeeting’s SaaS Playbook Doesn’t Work Today
It was a decade ago that I led the sale of Expertcity (creator of GoToMeeting) to Citrix. During the early 2000’s, my team grew the company to one of the largest SaaS businesses of its day, with sales of $70 million.
In November of 2015, Citrix announced that it will spin out the “GoTo” Division, of which GoToMeeting remains the flagship product, as a standalone public company. At approximately $600 million in recurring, annual revenue, the new GoTo Company will rank as one of the largest pure SaaS companies on the planet.
The More Things Change, The More Things Change
Many of the tactics we deployed simply do not work in today’s market. We are all victims of our past successes and thus, as an early-stage venture capitalist at Rincon Venture Partners, I constantly must remind myself that just because something was effective in a bygone era, doesn’t mean it will be so today, such as:
- CPA — After the dot bomb crash, online advertisers were hurting. According to Nielson, Expertcity was a top-five online advertiser for an 18-month period, based on our total marketing spend. We spent so voraciously because we had a pour and stir business model. I knew that every dollar I spent to acquire a customer resulted in a 4x return. I couldn’t spend money fast enough.
Circa 2001, Yahoo publicly declared that they didn’t do cost per acquisition (CPA) deals. In reality, they loved doing CPA deals. I paid them a flat fee for every trial customer they drove my way. This was a no-lose relationship for me, as the average lifetime value of customers derived from the Yahoo was significantly more than the bounty I paid them. I was writing them multi-seven figure checks each month, because they were generating tens of thousands of customers.
- Download Sites — We generated tens of thousands of customers from sites such as Download.com. We paid a very small amount per download, which proved fruitful because our in-house drip email system effectively encouraged trailers to convert to paying customers.
- Co-registrations — We cut dozens of co-reg partnerships with other online solutions (such as anonymizers, firewalls, anti-virus tools, and toolbars). Customers who downloaded such products could opt-into a trial for our products, without filling any additional forms.
- Ad Network Popups — Remember the sleazy x10 camera popup ads? If so, you probably also recall the ever-present GoToMyPC ads that polluted your desktop ten years ago. Sorry, that was me.
Because of our aggressive CPA model, hundreds of partners gladly spent their own money to buy online ads (mostly through ad networks) on our behalf, in exchange for the hefty customer bounties we were willing to pay. This was years before ad exchanges democratized display advertising and thus the inefficiencies of the market lent itself to arbitrage opportunities.
Our biggest concern wasn’t trying to get more folks to market on our behalf, but to police the nefarious members of the community, who resorted to black and grey hat tactics which, if unchecked, would have impaired our brand.
- Spam — Email spam was an essential marketing tool during the early days of Internet marketing. Dozens of companies in Boca Raton would send hundreds of millions of unsolicited emails each week (I wish I was exaggerating). Because we were one of the few companies which was willing to pay a customer bounty, many of these outfits spammed consumers with GoToMyPC ads, without our consent.
- Run Of Site Banners — Because the online advertising market was so depressed, we were able to buy tens of millions of remnant banner ads each month for next to nothing. Publishers valued the fact that we were a solid credit risk and thus allowed us to buy extraordinary amounts of their inventory. Even though the banners converted at an abysmal rate, the economics still worked for us.
- Incentivized Traffic — We cut deals with a number of sites that incentivized users to sign up to trials, in exchange for coupons, prizes, etc. My personal favorite was FreeCondoms.com, that drove a ton of mostly worthless traffic, but still generated a meaningful number of trials that converted to paying customers.
Today, driving such traffic typically is not economical, unless the cost of your product is close to zero, such as virtual goods in the gaming world.
- Affiliate Marketing — In the early days of Commission Junction, there were enough credible publishers that it was possible to generate substantial sales of b-2-b software solutions. Although there are a handful of successful SaaS vendors within the leading affiliate marketplaces, most of the traffic is now comprised of low-quality, coupon seekers of consumer products.
The Wild West days of online marketing may be over, but today’s marketers have a number of tools that weren’t available to us when we were hawking our SaaS solutions. Off-the-shelf attribution and analytics, hyper-efficient ad exchanges, retargeting solutions, lead scoring funnel optimization algorithms, etc., more than offset the “everyone is still learning” advantage we had when the Internet was young.
Don’t despair. Just think how different things will be a decade from now, when you look back on “the good old days” of the present.
Special thanks to Dan Engel, CEO of Mobile1st.com. Dan is a serial entrepreneur and uber-marketer who contributed to this article and was instrumental in Expertcity’s online marketing success.
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Image: John Greathouse, all rights reserved