When it comes to measuring success, there are specific metrics that SaaS companies live by. These metrics indicate the company’s growth, potential earnings, and overall trajectory.
However, studies show that a significant portion of the internet is made up of fake traffic and bots, which not only impact security concerns but also have an effect on overall business objectives.
For this reason, SaaS leaders are beginning to reconsider whether or not the metrics they habitually monitor each day are reliable or even accurate. Throughout this article we will discuss some of the most common metrics impacted by the Fake Web, and how specifically they can become skewed.
5 Key SaaS Metrics to Keep a Close Eye On
#1. High volumes of bot traffic skew Sales Efficiency
Before Lifetime Value, Annual Recurring Revenue, churn, or any other bottom-line metrics are evaluated, it is important to monitor how efficient a sales team is at turning prospects into customers.
Sales efficiency is typically measured by how much a company is spending on sales and marketing efforts, versus how much revenue the sales team is bringing in. When we talk about sales costs, that can include everything from lead generation programs and advertisements to gifting and content syndication.
This metric initially seems like a simple one to figure out. But if an organization is unknowingly spending money marketing and selling to bots, this metric will become skewed in a way that makes the company seem less efficient than it actually is.
Bots can eat up marketing dollars by clicking on advertisements, polluting audiences, and interacting with campaigns. Additionally, when sales teams spend time and resources chasing unqualified leads, their attention is taken away from leads that actually intend to convert. This ultimately skews sales efficiency metrics in a direction that is not accurate or positive.
#2. Unidentified bot activity leads to inaccurate Quick Ratios
As SaaS leaders know, the Quick Ratio is determined by evaluating the revenue a company brought in during a given timeframe, versus how much was churned.
What some organizations might not realize is that sometimes bots can actually convert into ‘customers.’ Especially when it comes to low-touch or no-touch sales processes, bots and fake users can be programmed to sign up for a service, and even pay for it with a valid or invalid credit card.
This could be because they want to scrape information about a product, because they seek to hack into a platform and perform other fraudulent activities, or just because they want access to products and services for another unknown reason.
However, these types of malicious customers typically will not stay in the system for long and will likely churn after a year or less. This can skew the Quick Ratio and make companies think that a lot of customers are churning when in reality, those that are churning are primarily bots.
#3. Customer Acquisition Cost (CAC) appears higher because of fake traffic
Most SaaS leaders agree that CAC should decrease over time. If businesses can minimize the amount they spend on acquiring quality new customers, they can gain more revenue.
However, when bots are present, they can actually increase CAC without their knowledge. If organizations are unknowingly spending advertising and marketing dollars on bots, and then calculating spend against customers acquired, their calculations will be inaccurate and their CAC will be higher than it needs to be.
If bots are removed, those dollars could be put towards legitimate users and therefore provide them a more favorable CAC metric.
#4. Bots that don’t convert throw off CAC to Lifetime Value (LTV) Ratios
CAC inaccuracy goes further than merely taking dollars away from potential customers and putting them toward fake users. When calculating the CAC:LTV ratio, businesses typically want the end number to be higher than 3 for efficiency, but lower than 6 so that opportunities are not missed.
So, if bots are not converting into valuable customers, but the company is spending money on them, then CAC will increase and the CAC:LTV ratio will go down, which is unfavorable in both cases.
This can ultimately make an organization appear like it is not successful in maintaining a ratio in the preferred range, which can cause a complete overhaul on the operations front when perhaps it was not necessary. Additionally, since the CAC:LTV ratio is so crucial to investors, it is critical to ensure the accuracy of this metric.
#5. Conversion Rates appear lower than they actually are
When looking at a funnel holistically, it is not uncommon to see gradual drop-offs throughout the funnel. Typically, many valid human users will drop off early in the funnel if they are not qualified or realize the product or service is not what they are looking for.
But in many cases, bots and fake users do the opposite. Instead, they tend to convert at high rates until they reach a lower-funnel conversion point such as a payment request. That’s because they seek to stay in a funnel as long as possible and acquire as much information about an organization as possible in the shortest period of time.
As one can imagine, this scenario would lend itself to a higher percentage of bots and a lower percentage of humans throughout the funnel. Since conversion rates are supposed to indicate levels of interest from ideal customers, this can become highly problematic.
Overall, SaaS leaders are noticing how the Fake Web impacts their bottom line, and how it can skew the metrics that matter most to their ultimate growth. Everything from simple conversion rates to CAC:LTV ratios can become affected. For this reason, many are adopting Go-to-Market Security to protect themselves from these strategic issues.
