You would have to be sharp to see the pattern:
- SuperLemon bootstraps to $350k in ARR, and is 5-star rated with 500+ reviews
- Supermetrics bootstraps to $25m ARR, then raises $40m in first outside funding
- TSheets acquired for $340m
Can you figure it out?
They all dominated app exchanges. Shopify, Google Chrome, and Intuit’s app exchanges specifically.
If you’re building a SaaS product, it’s important to consider app exchanges in your distribution strategy to supercharge growth and fuel M&A. These platforms have already captured the attention of thousands of potential customers and can help your business in a number of ways:
- Launching into new markets
- Growing stronger user bases
- Generating significant revenue
- Becoming acquired for millions
It is my hope in this article to show a glimpse into the strategies, tactics, and potential targets for SaaS in app stores, exchanges, and marketplaces.
Launching into new markets
While the app ecosystem isn’t a new model, it is starting to grow rapidly as public and private industry leaders capitalize on the opportunity and create a more competitive moat. In a 2018 article by our friends at Point Nine Capital, it says that 70% of the twenty biggest public SaaS companies have an app store. Here’s a few of the leaders:
- Salesforce AppExchange
- Google Web Store / Workspace
- Shopify App Store
- HubSpot App Marketplace
- Intuit Quickbooks App Store
Pick one app store and dominate it. Don’t focus on all of them.
- Use the audience in your marketplace to identify needs
- Build software for those needs and cross-sell
- Fund the software development with marketplace revenue model
- Gather solid reviews in order to rank at the top
- Marketplace + SaaS makes your business moat larger because you own attention
[PRO TIP] Do research on heavily trafficked forums and marketplace reviews to help you identify user issues, trends, and gaps.
Growing a stronger user base
When it comes to enhancing user acquisition, there is no perfect formula or strategy. So it is important to try different things, be creative, and continually refine your user strategy. The key here is understanding what are the specific things that will make your users “sticky”.
Here is a collection of strategies and tools that you can use to increase your user acquisition channels, measure your results, and make changes fast.
- App Store Search Optimization (ASO) – This is SEO for mobile apps and the goal is to rank higher in the app marketplaces’ algorithm. It’s critical to be laser-focused on factors like keyword optimization, install/uninstall rate, app usage, and (of course) customer reviews. For this last one, ask your happy users to leave a rating on the app store at the right time – once they’ve purchased and/or engaged with the product. If they’ve had a great experience, they will more likely provide at least a 4-star review. We recommend using an all-in-one ASO tool to help you unleash the full potential, like App Radar.
- Website to App – As companies start to develop native mobile apps, many are looking for ways to convert their existing web or SEO traffic into new app users. We recommend utilizing web-to-app smart banners and custom audience targeting from a tool like Branch.
- Social Media – It’s fairly simple to reach a large number of people and potential leads. The challenge is engaging with an audience so that you become click-worthy and share-worthy. We recommend tapping into millions of social signals from a tool like Socedo.
- Email – ABC. Always be collecting email addresses for your list You’ll be happy to see the numbers growing. Make sure to include links to your app website, blog, and social media channels. This is tremendous for sharing the valuable content mentioned above. We recommend personalizing email messages to new subscribers and brand loyalists with a tool like Sailthru.
- Content Marketing – Getting leads to your app is half the battle. The next is proving you are the best solution, and providing valuable content is a the best strategy to lead them down your sales funnel. There are numerous forms of content that you can market to potential app users, including forums, videos, and blogs. We recommend creating a free website or blog with a tool like WordPress.
- Video Ads – This is a great way to bring your business story to life for the target audience. Consider creating videos for your app once you’ve proven your app’s concept, you’ve gained some traction, and you’re sure that it is a winner. We recommend the universally known, YouTube.
- Paid Strategy – Simple. Money talks. It can place your app high enough in the app store rankings to start to bring in huge amounts of organic traffic. We recommend the always mighty, Google Ads.
- Affiliates/Referrals – Incentivizes others to help you drive sales by giving them a cut of revenue for customers they send your way. First, put yourself in their shoes. Because the next most important thing is setting up an offer that other people are likely to then sell through to their audience. We recommend a tool that takes care of all your affiliate and referral marketing needs, while also syncing with the app stores, like Tapfiliate.
- PR/Press – Media and influencer mentions are great ways to create buzz and credibility. You can try to pitch tech bloggers/writers (though this can be tough) or promote yourself through product discovery sites like Product Hunt.
- User Experience and Onboarding – Always listen to your current users. They can provide amazing insight from their user experience and onboarding path. Some might share a great story for your future content marketing. We recommend that you focus on increasing retention and monetization by using a mobile optimization platform, like Apptimize.
[PRO TIP] Developing integrations are a must. Data from ProfitWell showed that products with 1+ integrations have 10–15% higher retention than products with no integrations.
Generating significant revenue
For SaaS companies, being on an app marketplace provides a significant boost in leads that can turn into additional revenue. The opportunity is only getting bigger as you can see by how much App developers are making on just Shopify.
If you are a listener of Nathan’s podcast, then you already know he’s interviewed thousands of SaaS businesses and collected granular detail on how they drove growth from app exchanges.
Let’s look at a three examples of businesses in different stages of growth:
- Startup – SuperLemon (Shopify App Store)
- Funded – Supermetrics (Google Web Store)
- Acquired – Tsheets (Intuit Quickbooks App Store)
SuperLemon Breaks 5k Leads from Shopify Monthly, $30k in MRR for Whatsapp Ecommerce
SuperLemon is a Shopify app for WhatsApp live chat, customer support, abandoned cart recovery, CRM, automated messages and more. It is used by 20,000 merchants, including 1700+ which are paid customers and gain them $29,000 in MRR (as of July 2020).
SuperLemon does a great job balancing the needs of customers. Instead of focusing too much on building the best product, their team focused on figuring out the distribution. In this case, they figured out the “WhatsApp” keyword and Shopify app store even before finalizing the idea for the product.
Where is most of their growth and customers coming from?
In Nathan’s podcast interview this past year, Founder Preetam Nath said that “100% of our users are from the Shopify Appstore. And to do distribution right, you have to be the best at customer support. So if you look at our listing we are 5-star rated with 500+ reviews which gives us a really good ranking in the app store. Also, we only wanted to rank for one keyword “WhatsApp.”
SuperLemon bet big on ranking, and targeted it as a key differentiator. They put processes in place to help them get to the top. When customers have reached a certain milestone inside the app (ex. recovered $1000), then automated triggers send an email saying “Your experience has been great. If you have some feedback, share it with us. But we would love it if you write a review for us on the Shopify App Store.”
The milestone is an anchor that proves customer success and therefore increases the likelihood for a solid set of responses and reviews. This is a critical differentiator because some competitors may have more reviews, but lower ratings.
The results have been 1,500-1,800 page views per day, 4000-5000 leads per month, and 200-300 new customers per month.
To continue growth, SuperLemon will want to go upmarket with product functionality and pricing, as well as expand on distribution channels.
Be on the lookout for them. (Shopify probably will be!)
Well-Funded Supermetrics is Focused on Growth via Google’s Marketplace
Supermetrics is a SaaS tool that helps marketers compile data in ready-to-use format to their favorite data crunching and reporting tools. They hit $20m in revenues, and 30%+ profit (104% you growth) in 2019.
Where is most of their growth and customers coming from?
On Nathan’s podcast interview this past year, CEO Mikael Thuneberg said that about 10,000 new leads a month were coming in from application galleries [marketplaces] where they were highly ranked. That’s right because you can see it’s one of the best marketing apps on Google, and just launched on Shopify and HubSpot.
So, is M&A in the near future?
Nathan: “If someone came to you today and offered to buy you for $40M, 3-4x current revenue, would you take the deal?”
Mikael: “Definitely no.”
Nathan: “Where does it start to get interesting for you….7, 8, 9x revenue..More than $100M?”
Mikael: “I would say yes.”
To keep the fast growth going strong, Supermetrics recently raised $40M and can probably look for product acquisition and talent acquisition from other companies in the advertising data space.
This sets up Supermetrics on a nice journey to become a unicorn, and an even bigger/better acquisition target!
Intuit Pays $340m for TSheets Which Helps Over 1m Employees Manage Time Tracking
Intuit is a recognizable brand in the financial software space and has one of the most popular tools in accounting, QuickBooks. TSheets is a time-tracking and employee scheduling app that has integrated with it since 2012 through the QuickBooks app store. Then in 2017, Intuit announced plans to acquire Tsheets in an all-cash deal which was valued at around $340 million.
The deal was a no-brainer because the two companies already shared 12,000 customers. So the deal offered a chance to pump up TSheets’ user base, improve the Tsheets’ product and make it easier to integrate with Quickbooks. The teams had already been working together, and both CEOs had a good relationship.
In a podcast interview on September 11th, 2017, Nathan asked TSheets’ CEO Matt Rissell:
Nathan: “Is there a CEO you are studying or following currently?”
Matt: “Yes. Brad Smith with Intuit.”
Nathan: “…if he writes you a $250 million check, do you sell the company?”
Matt: “Nope!”
Interestingly, on December 7th, 2017 (less than 3 months after the interview), Matt announced that he sold Tsheets to Intuit for $340M.
Cha-ching!
Becoming acquired for millions
Nathan just started FounderPath, which helps founders get capital to build their business without having to raise money or give up equity.
But, if you know Nathan, he’s always looking for businesses to invest or acquire. And he’s got a simple strategy that has worked well within the app ecosystem.
“I go entirely by reviews, number of users, and the date the software was last updated. If reviews and users are high and the last update was more than a few months ago, I consider it a prospect.”
This same M&A strategy works well for acquirers (Salesforce, Google, Shopify, etc) who are looking to expand their product line or acquire relevant talent (“acqui-hires”). They keep track of who is doing what, who has product-market fit, and who is at the top of their ecosystem. So it’s easy to find the best apps, and makes acquisitions happen more naturally and comfortably.
And as “software is eating the world”, more and more app stores are popping up. Everyone focuses on Salesforce, Google, and Shopify, but there’s a new one that hardly anyone is talking about…
Zoom Will Acquire a “Zoom App” For $300m+ In Next 3 Years
In fall of 2020, Zoom announced a third party marketplace that allows companies to develop apps on top of Zoom’s technology. This will certainly present a new wave of functionality within their platform and deliver new startup opportunities.
TechCrunch recently said “Salesforce paved the way for Zoom more than a decade ago when it opened up its platform to developers and later launched the AppExchange as a distribution channel. Both were revolutionary ideas at the time. Today we are seeing Zoom building on that.”
Zoom’s marketplace is going to be a very powerful – helping organizations to work faster and easier by integrating, automating, and collaborating. 100’s of fantastic partners are already involved like Asana, Atlassian, Dropbox, Hubspot, Salesforce, ServiceNow, Slack, SurveyMonkey, Wrike, and Zendesk.
So, who might join a meeting with CEO Eric Yuan and the team at Zoom?
M&A Predictions Going Into 2020-2025
While we’re showing you some research on how the most popular apps on these marketplaces are primed for M&A, we also want to share some predictions for who may be acquired for $$$ in the next 4-5 years.
Zoom App Marketplace (no reviews yet)
- Top Target: Vidyard is an online video platform for business which allows you to increase leads, accelerate your pipeline and delight your customers. Their latest move allows you to easily edit and share your Zoom recordings. They are running 2x YOY growth and have $70m in Series C funding. Their CEO Michael Litt has talked with Nathan before about the potential of going public, but said he won’t sell to Salesforce – even with a $300M offer!. Hey Michael, maybe Zoom is in your waiting room?
- Honorable Mentions: Appointlet is a cloud-based appointment scheduling solution that helps businesses to connect with their prospects through emails, landing pages and sales. Sococo is the online workplace where distributed teams come to work together each day, side-by-side. Chorus.ai is an AI conversation intelligence cloud platform for sales teams that can transform conversations into data and insights. Book like a Boss is an all-in-one solution for scheduling appointments and selling your services online.
- Wildcard Picks: Dialpad, Calendly?
- Top Target: Dialsource is the #1 Enterprise-grade communications, sales engagement, and customer service solution for teams on Salesforce. They have grown to $18m in ARR by using the Salesforce customer base. For many years, Salesforce was the only integration Dialsource promoted. It’s dangerous for the revenue of a business to be tied to one partner, but in this case it worked. It wouldn’t surprise me to see Salesforce acquire Dialsource sometime in the next three years. (5 star rating, 451 reviews).
- Honorable Mentions: Cirrus Insights is a plugin for Gmail and Outlook that automatically keeps Salesforce CRM up-to-date for sales teams. (4.4 rating, 2087 reviews). Onemob is a video engagement platform for Salesforce that makes recording, sending, and tracking easy for any professional. (5 stars, 12 reviews).
- Wildcard Picks: Slack (Doh!), DocuSign?
- Top Target: Supermetrics is the easiest way to move your marketing data into Google Sheets. In fact, over half a million marketers use Supermetrics and it’s the #1 marketing add-on for Google Sheets. (4.4 rating, 876 votes, 545k users).
- Honorable Mentions: DocHub is an online PDF annotator and document signing platform. DocHub lets users add text, draw, add signatures and make document templates. They did $1.6m profit last year on $3.2m revenue. The founder rejected a $20m offer just recently and is probably looking to get $40m+ (4.5 rating, 13k reviews, 8M users).
- Wildcard Picks: Zapier?
- Top Target: Expensify is the world’s leading application for expense management, receipt scanning, and business travel. By the end of 2017 – when Nathan spoke with Founder David Barrett – the company had 45,000 paying customers and an ARR between $60 million and $100 million. David said he should “stop listening to VCs”. Maybe he should start talking with Intuit’s new CEO Sasan Goodarzi? (4.4 rating, 1441 votes).
- Honorable Mention: Bill.com is the only paperless bill pay service that works with QuickBooks Online. (4.2 rating, 704 votes).
- Wildcard Pick: Gusto?
- Top Target: PandaDoc is cloud-based document management software that helps users in creating proposals, quotes, human resources documents, contracts and more. From early 2017 to mid-2018, PandaDoc increased its customer base from 7,000 to 10,000 clients. Much of that growth has come from an integration with HubSpot’s app exchange and the natural virality that comes from companies sharing documents with one another. Their CEO Mikado said “If a certain merger is going to help us to learn, make an impact, and have a lot of fun, then sure, why not?” Now their web traffic is 2.8m monthly visits which is up 21% in the past 6 months. (2.7 rating, 26 reviews, 9000+ installs).
- Honorable Mentions: DataBox is a business analytics platform that pulls all of your data into one place so you can track performance and discover insights in real-time. (3.9 rating, 12 reviews, 10k+ installs). JotForm is an online form builder and survey builder that lets you create and fill forms & surveys for data collection even when you are offline. (4.2 rating, 35 reviews, 4000+ installs).
- Wildcard Picks: Grow, JustCall, Lucky Orange, UpContent, Qwilr, PhoneWagon, Aircall?
- Top Target: Printful is a 600+ person ecommerce company that prints t-shirts and other products for online stores. The company has already been approached by several investors, but they’ve yet to find a fit. Nathan’s prediction? “Printful will surpass $100m in revenue this year, and if they hold off investor acquisitions and figure out a way to crack the booming Asia Pacific market, they could be in a position to hold out for a billion-dollar acquisition of their own”. (4.3 stars, 3183 reviews).
- Honorable Mentions: Privy is trusted by small and large ecommerce businesses to improve website conversion, grow their email list, and drive more sales. While Jabbawy explained to Nathan that the company was not looking to sell, he does keep an open mind about acquisition talks. Going forward, he believes that his team of 20 full-time employees has a clear path to growth laid out and are focused on executing. (4.6 stars, 25k reviews). Omnisend is an email & SMS marketing platform for Shopify merchants who want to increase sales. They hit $6.5m ARR a year ago which was up from $2.5m the year before. They are in a hyper competitive email marketing space and already at the top of Shopify’s app exchange. CEO turned down a $50m acquisition, but maybe he’ll get the right number sooner than later. (4.7 rating, 3780). Judge.me helps you collect and display star ratings and reviews about your products and Shopify store. (5.0 stars, 3396 reviews).
- Wildcard Picks: Yotpo, Justuno, Plobal, SuperLemon?
Conclusion
In 2020, worldwide mobile app revenues are projected to generate over $580 billion, but M&A took a big hit during the COVID-19 pandemic. Unpredictability about future growth made a lot of companies reluctant to make deals.
As we approach 2021, a lot of profitable businesses that might have looked into M&A are now sitting on lots of cash. Those that want to generate substantial long-term value will start looking for top targets to acquire.
And, if you’re building a SaaS product, it’s important to consider app stores in your distribution strategy. These platforms have already captured the attention of thousands of potential customers and can help your business in a number of ways.
In today’s economy, attention is the scarce resource that everyone wants.
Author:
Adam Soccolich is a growth marketing consultant who helps software businesses to maximize revenue and reach. Connect on LinkedIn and learn more at GrowthView.
