Today, we see an NPR-owned app go freemium, a social media management platform is sprouting an IPO (although not a profit), and Vendr raises $2 million to replace your enterprise sales team.
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NPR looks to freemium
Pocket Casts is a podcast app that can be freely downloaded, or for a $0.99 monthly subscription that allows you access to more features and storage space. The NPR-owned podcast app once charged a one-time fee of $3.99, but pushback from the public radio organizations has caused a pivot.
This subscription move is about maximizing the quality of the partnership with their public media partners and gaining new users. Although the move may make the company less money, this is a perfect example of an app (or a business in general) moving to the freemium model to lower the barrier for adoption.
And it could be a smart one. There are already plenty of podcast library apps out there to compete with: Luminary, RadioPublic, PodBean (to name a few). But this app in particular says it has plenty of premium features and claims it provides:
“Next-level listening, search and discovery tools, and human-curated recommendations.”
Although we’ve been on both sides of "the freemium debate" before, we now know freemium is ultimately an acquisition model, a measured strategy to unlock lower customer acquisition costs, and the top of your funnel. By opening up your product for free, you’ll improve monetization and can get customers through the door for little, let them experience your product, and then tell you where it needs to go next.
And that “next”—that you can charge for.
Sprouting a social IPO
Sprout Social, a team that has just filed to go public with an ARR of over $100 million, said in its filing that it has more than 23,000 customers in 100 countries, representing 380,000 social profiles and 350 million messages per day. Sprout makes money by licensing its platform on a per-user basis and upsells customers for additional users and product modules.
Sprout’s 2018 revenue was 99% sourced from software subscriptions, according to Crunchbase. The same percentage of its revenue came from software subscriptions in the first nine months of 2019. Sprout’s largest customers tend to spend a mid-teens percentage more each year they’re a customer. That makes growth for Sprout easier to achieve, and less expensive than it would be without upselling its existing client base.
Why do we care? Because Sprout is still not profitable. Much like the already public Slack and Zoom, sprout relies on the revenue of some high paying customers.
"While the nine-year-old Sprout's revenue nearly doubled between 2017 to 2018, the company pulled in $74.56 million in revenue for the nine-month period ending Sept. 30, representing a 32% jump from the year-ago period, according to its IPO paperwork."
For the same timeframe, the filing shows that Sprout's losses widened to over $20 million from a loss of almost $17 million during the comparable period in 2018.
Will the IPO end up being a whole lot of nothing?
We aired an episode of Pricing Page Teardown on Sprout vs. Buffer, but Patrick and Peter find it may just be a draw.
Replacing your enterprise sales team
Our Boston-based neighbors over at Vendr—a company that offers subscription-based software and helps fast-growing businesses buy and manage enterprise SaaS—raise $2 million in funding… and are already profitable.
But there are a few kickers here.
Its major claim is that sales conversations aren’t a good use of time, i.e. the buying process. It facilitates the commercial conversations with vendors so the company doesn’t have to. It also aids with auto renewal management. Essentially, we're looking at pro negotiators.
The company is only 14 months old and has already reached $1 million in ARR, growing 15% month-over-month with MRR at over $96,000. This goes to show: there is software for everything.
Vendr’s CEO Ryan Neu is a former HubSpotter, and it looks like essentially any big name he worked with is now a client: HubSpot, Toast, InVision. So is that where the impressive MRR is coming from? How long will it last?
The reality is, Neu knows he doesn’t want to take anymore outside investment, which is admirable. He’ll likely now place a focus on how quickly his operation has grown in the space.
The goal isn’t to eliminate the sales profession, but rather to put an end to “persuasion driven” sales, Neu explains, and to make enterprise software purchases as easy as consumer product purchases.
Pricing Page Teardown: Sprout Social vs. Buffer
Patrick and Peter put two of the most popular social media management tools head to head: Buffer vs. Sprout Social. While Buffer ranks as the better known of the two, they dive into which packs the bigger punch in one of the fastest growing startup segments.
As companies turn more of their focus and resources to building community and business through social media channels, pricing strategy, willingness to pay, and features will set industry leaders apart from the pack.
And that’s a wrap for your October 31 subscription news. Recruit your teammates into the subscription know: recurnow.com to sign up for episodes on the daily.
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