Transforming the Marketing Services Industry

by Brian Halligan

Date

Feb 18, 2010 9:30:00 AM

We started HubSpot three years ago based on two major changes we saw happening.  The first change was that people are getting sick and tired of being interrupted with traditional marketing techniques like email blasts, cold calls, advertising, etc and are getting better and better at blocking them out using things like spam protection, callerID, DVR's, etc.  The second change is that people learn and shop in a whole new way, living in Google, blogs, and social media sites like Twitter, Facebook, and LinkedIn.  What we set out to do with HubSpot was to help marketers transform from interrupting their potential customers with outbound marketing (email, cold calls, ads) and instead, take advantage of the new way folks shop and learn to pull them in with inbound marketing (Google, blogs, social media, etc).  Well, it turns out we had a pretty good idea as over 2,300 customers have purchased our product and over 20,000 people have purchased our Inbound Marketing book.

Today we are announcing two major new initiatives aimed at helping marketing services firms (SEO consultants, social media consultants, pr firms, ad agencies, web designers, etc) help their clients match the way they market their products with the way their customers' prospects shop and learn. We hope these programs will help marketing services firms grow their businesses dramatically by taking their customers to new levels as well as help end customers pick the best partners available.

HubSpot VAR Program:  We are formalizing (from beta to version 1) a HubSpot Value Added Reseller Program where we will spend significant company resources training and certifying marketing services firms on Inbound Marketing and on our products.  Partners who resell our software will receive a 20% margin on our software for the life of the customer.

We think this is exciting for a few reasons:

  1. As Wayne Gretzky said when asked why he was so much better than every one else, "I skate to where the puck is going, not where the puck is."  We want to help the marketing services industry "skate to where the puck is going."
  2. One of the biggest problems marketing services firms have is "lumpy" revenue and they end up having to layoff staff when they lose a big client.  HubSpot's renewal rate is 98%, so being a HubSpot partner will help reduce the marketing service partner's lumpiness.
  3. When marketing services firms get acquired or merge with another firm, they are typically valued at a low multiple of EBITDA or a low multiple of revenue because services revenue streams are relatively low margin and inherently lumpy.  By reselling HubSpot, a marketing service firm can build a recurring software revenue stream that is much (4x-5x) more valuable than their professional services revenue.  This recurring revenue model scales in a very nice way.  See HubSpot's recurring revenue graph above as an example.

HubSpot Service Marketplace:  We are building an eBay style exchange for marketing services.  HubSpot's 2300+ customers and many non-HubSpot customers want to do Inbound Marketing, but are pinched for time.  Now they can come to our Service Marketplace and pick out a partner to "do this work for them."  The exchange is currently in beta format, but we have already done 130 transactions for services totalling more than $100,000.  The services offered are blog writing, marketing video creation, modern website redesign, landing page creation, call to action button creation, and "do inbound marketing for me".  There are more offerings to come this month, including as "do social media for me" and "do lead nurturing for me." 

The service marketplace brings much needed transparency to an industry that has sadly become accustomed to getting burned by fly-by-night consultants.  Each provider on the exchange is certified by HubSpot to ensure baseline quality.  Each partner on the exchange has the number of customers it is servicing displayed and it has its CHI (Customer Happiness Index) score displayed from 1 to 100 that is calculated by the HubSpot software by looking at things like the amount of lift in leads their customers are getting.  This transparency is very useful for a few reasons:

  1. It helps the end users pick the very best partner to help them do inbound marketing.
  2. It creates a strong incentive for the service provider to do an excellent job for the end customer because they want to maintain high ratings as those ratings attract new customers in a similar way that high ratings work well for eBay sellers.
  3. It helps the providers who give excellent inbound service differentiate against less qualified providers.

We feel like HubSpot is uniquely qualified to create this services marketplace because we have several hard to acquire pieces of the marketplace puzzle covered.  We have "demand" from 2,300+ customers and are adding hundreds a month. We have "supply" from over 70 certified partners and hundreds more who express interest every month.  We have the software to help the providers deliver great service and that impartially measures the value received by that provider's customers.

I asked David Meerman Scott, author of "The New Rules Of PR & Marketing" (translated into 24 languages) and leading thinker on these changing marketing landscapes, about HubSpot's marketing services transformation vision and he answered as follows.  "The old days of buying attention through advertising or convincing media to tell your story through PR are long gone.  Now, smart organizations use inbound marketing to earn attention by creating something interesting and valuable and then publishing it online for free: a YouTube video, a blog, a research report, photos, a Twitter stream, an ebook, a Facebook page.  HubSpot has been helping its customers through this transformation and now is going to bring it to an order of magnitude more businesses through its VAR program and its 'ebay for marketing services' program.  They have always had the inbound marketing torch and now they are adding the lighter fluid to an industry ripe for change."

Ross Levanto, vice president at Schwartz Communications, an early HubSpot partner commented as follows. "Lead generation and traffic are key metrics we use to measure success for our clients, and Hubspot is a great tool for tracking these metrics. In addition, we integrate Hubspot into programs, where appropriate, to help coordinate the inbound and outbound marketing efforts we manage on behalf of our clients."

If you are interested in being a HubSpot partner, please download the slides from our webinar where Pete Caputa and I walked through through the details of these initiatives.

- Brian Halligan

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