Why SaaS founders should take Marketplace Listing Optimization seriously

I wrote about the 3 things to do before your SaaS product launch to increase inbound leads before and also talked about How you can use Marketplace Listing Optimization (MLO) to increase your inbound leads for a SaaS product.

One of the things I forgot to mention was why you should take MLO seriously. I will outline that in this post.

The market for SaaS applications will be about $130 – $150 Billion by 2020 according to IDC. That compares to $5 Billion for IaaS (AWS, Azure – compute, networking, storage, etc.) and $12 Billion for PaaS (Meteor, Angular, etc.)

The second way to segment this is by size of company purchasing SaaS solutions. Enterprises greater than 1000 people will account for 48% of this spend, Mid-sized companies 100 to 999 people will account for 28% of this and 24% by companies with 1 to 99 people.

Another way to segment this is by type of SaaS application. Customer facing applications (eCommerce websites, etc.) will account for 59% of this spend and 41% towards internal, employee facing applications (ERP, etc.)

Yet another way to segment this spend is by location. The US is expected to be 37% of the spend, Europe about 29% and the rest of the world about 34%.

Finally if you segment by the “cost” of the application purchased by user per month, then SaaS offerings that cost < $25 / mo / user will account for 61%, $26 – $100 will account for 31% and > $101 per user, per month will be about 8%.

So, any way you cut it, SaaS is a large market, with global purchase capability focused on your clients customer, and for smaller $ per user per month.

One segmentation that none of the analysts cover is the segmentation for the SaaS provider by channel of opportunity. What I mean by that is what % of that spend will be direct, versus through a channel.

If you look at the top 100 software companies overall, in the B2B space, 64% of their revenues come from direct customers and 36% from channels (VAR’s, resellers, SI Partners, etc.)

In SaaS currently, that’s the other way around. Thanks to SEO, Google based search results, direct marketing and online digital marketing, 70%+ of the purchases are direct to customer. VAR’s, channel partners and others have yet to figure out how to sell and partner in this new era.

That will change though. There is a new class of larger partners (Salesforce for example) who have a large base of installed customers and can help SaaS and other companies sell “through” them.

The value add to the customer (buyer) is obvious – they get to buy from a trusted brand (Telstra, Microsoft etc.) and they have an existing relationship with the partner.

Cloud Marketplace Brokerage Services
Cloud Marketplace Brokerage Services (image credit)

The value add to the SaaS provider (seller) is also obvious – instead of having to go through a lengthy process of getting on the vendor list and get empanelled, etc. they can sell using the existing relationship the brokerage or large company has with the buyer.

This is what many of the analysts predict will happen by 2020.

So the Direct vs. Indirect business will again get to 70-30 mix.

Which means if you the SaaS company has a good relationship with the brokerage or listing provider, you can expect 30-40% of your revenues to come from that instead of direct.

This will lower your cost of sales, support and service.

Which will help you grow faster and bigger with lesser capital raised, and hence more profitable.