HubSpot - An Integrated Marketing Platform

All you can eat - but is it enough?

In my last two posts, I covered Mailchimp and Segment, which form the core building blocks of a marketing strategy for a business. I thought I'd switch gears and talk about HubSpot, which provides a fully integrated Marketing Cloud, and which popularized the "Inbound" marketing term. This helps connect the dots on how some of these services fit together and create value for an organization.

Origin Story

Brian Halligan and Dharmesh Shah founded HubSpot in 2004 at MIT. These were the early days of the web, and people were still figuring out what was SEO, Google had introduced Adwords, and Web2.0 was yet to start. Brian and Dharmesh realized that businesses would need to adapt to this new way to be found. They were the early pioneers of the new category that they called Inbound marketing. They even published the eponymous book on the subject (a fitting example of Inbound marketing). They also started the Inbound conference in helping a new generation of marketers learn how to create demand using the web.

The core idea of inbound marketing is to create a steady stream of valuable, relevant content. When you publish content that your audience cares about, you naturally attract inbound traffic that can eventually convert into paying customers. It is never about shilling for your product. It’s about relevant, valuable content.

HubSpot was one of the early SaaS success stories, raising $125M at an $880M market cap in one of the first IPOs in the segment. It's now valued at $25B (and was almost double this before the recent market correction).

An Integrated Marketing Product Suite

HubSpot now has a lot of capabilities including:

• A basic CRM - helping you manage a list of contacts, enrich the data, establish associations, and create static and dynamic lists

• Content Management and Publishing Hub - which enables you to build this customer list - by publishing blogs, landing pages, email capture forms, etc. This has a lightweight tracking of how the audience engages on various pieces of content so that you can use the data to build smarter lists

• Marketing Hub - manage marketing qualified lists, live chat (including Messenger and other channels), email marketing

• Sales Hub - manage the entire lead to contract lifecycle including lead management and scoring, opportunity management, sales prediction, task tracking, sales collateral management, all the way to quote management and contracting and eSignatures.

• Service Hub - includes all the basic tools required for customer care, including ticketing, simple chatbots, knowledge base, and feedback management, all the way to managing meetings.

• Operations Hub - which provides more complex tools to import and export data, linking it to Snowflake and other data warehouses, complex authentication, and team management

Want to see a quick overview? This YouTube video has a reasonable introduction to the basics of HubSpot CRM.

So, what's the catch?

As one can imagine, this is what a business needs to get going -- from getting consumers to retaining and serving them. However, if you think this is all too good to be true, it is. This review sums it up well. Some highlights:

• Calendar Scheduler doesn't allow you to duplicate a meeting type

• Quoting tools cannot customize line-items

• Live chat doesn't let you collect an email before you start a chat

• You can't reply to emails from mobile apps (only send new ones) or add email attachments -- in 2022

• You cannot change your deal dashboard in Sales Hub

• Their customer support is not great either - asking the community is the preferred way to get support

As you can imagine, HubSpot is great for a small business that needs to do everything and doesn't have the technical skills for plumbing together more complex best-of-breed solutions.

This is where you also start seeing the trade-off between simplicity and advanced functionality - something that Mailchimp has navigated a lot better than HubSpot.

Extensibility: An App Marketplace

HubSpot has also built out an App Marketplace to add more complex functionality. It has a ton of apps, but integration is not the easiest. For instance, check out this integration with Pendo:

• You must manually create the mapping between the fields in HubSpot and Pendo down to data types (e.g., DateTime representation)

• The integration is only one-way (HubSpot -> Pendo) but you can't do it the other way down and have to manual CSV uploads

• If the IDs are not the same on both sides, there's a bunch of manual work to be done

The integration with Outreach (a drip marketing tool) is easier and supports two-way sync and automatic mapping of fields. The reviews for the integration were not great though!

The Messenger integration looks better with people happy with it and integrates well with their ticketing system. However, several customers complained about the setup experience (including conflict with Messenger settings like quick replies, delays in sending messages, and advanced functionality like lead qualification).

The complexity of a large product suite

A massive product portfolio like HubSpot is not a mean feat. They have over 3000 microservices that support the underlying infrastructure. Helping small business owners integrate with the myriad tools that form the backbone of the modern internet is not easy - you need to make sure you can get high-quality data from all the partner systems (e.g., e-commerce, website, etc.). Another major challenge is onboarding and selecting the right defaults so that a company can get value right off the bat - based on industry context the meaning of what is a good "lead" can vary a lot! At scale, this is a challenging problem: HubSpot crossed 100,000 paying customers and $1B ARR in 2021.

Closing out with the Financial Picture

HubSpot is still growing fast. In 2021, it ended the year with $1.30B in revenue, up 47% y-o-y and 135K customers. It's still unprofitable from a GAAP perspective - ($77.8M) net loss for the year, though it's throwing up free cash flow generating $203M in 2021 as compared to $79M in 2020. It spends about 27.5% on R&D and the rest on Sales and Marketing. It's trading at ~17X TTM revenues (~13X FWD) after the recent market correction.