SERP

Hubspot & Moz – A Tale of Two (Very Different) SaaS Business Models

  • 27 August 2014
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hubspot and moz
Spending time looking at Hubspot’s S1 SEC filing for a $100m IPO it’s hard not to think about the other “Inbound” focused leader, Moz.

Disclaimer: These numbers are estimated based on public sources to the best of my ability. They may be significantly off. Hubspot’s numbers are taken from their Public S1 filing. Most of Moz’s data comes from their own reports. Please email me: scott@serps.com with any corrections.

I’m fascinated and impressed by both companies for different reasons.

There are many commonalities between the two SaaS companies:

  • Both focus on company culture and transparency
  • Both have popular and mostly positive brand images
  • Both are the marketing tech space
  • Both started as SEO focused tools
  • Both are web-based subscription revenue models
  • Both generate majority of customers through non-paid efforts
  • Both have raised significant amounts of venture capital
  • Both are in major 2nd-tier tech coastal markets (Hubspot in Boston, Moz in Seattle)

equity funding
left vs right coast

 

Two Different SaaS Roads…

But even with those common threads, there are massive differences between Moz and Hubspot’s business models, and these differencing are what I find fascinating. Two companies with so many things in common have vastly different approaches to revenue generation.

revenue per customer

Hubspot’s average revenue per customer a year: $8,670
Moz’s avg revenue per customer a year: ~$1,352

revenue per employee

Moz has 127 employees (estimated from LinkedIn. Their team page lists 124). Hubspot has 719 (taken from the S1). Assuming Moz Generates $35m this year and Hubspot $110m, that’s $152,999 per employee for Hubspot and $275,590 per employee for Moz. If Moz comes in around their 2013 $30m, then Moz ends up at $236,220/employee.

cac

Hubspot spends $11,233 to acquire a new customer
Moz spends ~$500 to acquire a new customer

Calculating Moz’s cost was difficult and may be off significantly, but I doubt it’s over $1,000. I calculated the ~$500 number taking into account estimated personal and marketing costs divided by an estimated number of new subscribers. This is how Hubspot’s CAC is calculated in the S1.

To call or not to call? That is the question.

saas salespeople at moz vs hubspot

Hubspot has ~124 sales people
Moz has 0 sales people.

 

Both Moz and Hubspot target the SMB to medium enterprise market. While I’m sure both have many very large brand customers, that market is their sweet spot. My guess is the reason Hubspot needs such a large sales force is mostly due to pricing and a more hands on approach to customer on-boarding and retention. Signup for a Hubspot trial, and you’ll get a call within the hour. Signup for a Moz trial, and you’ll get an email series, but never a call.

Faster growth at a cost

last 5 years revenue

Moz made around ~$60,387,000 from 2009-2013.
Hubspot’s topline was $161,798,000 in the same period.

accumulated deficit

Hubspot has grown revenue much faster then Moz, but at a cost of nearly $123m of net losses. Both companies could likely be very profitable if they cut sales and marketing costs, but likely at the expense of growth.

Which model is better?

I think a lot of it depends on the goals and personality of the founders. Could Moz succeed with a sales force and an enterprise product? Possibly. Do they want to go down that route? It doesn’t seem so. Could Hubspot survive with Moz’s no sales-people model?

Heck if I know….what do you think?

Sources:

Last updated by at August 26, 2014.

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