Social media transforms the investment landscape.

Transparency in SaaS providers' products and business practices, largely brought about by social media, means they're blowing traditional software providers out of the water - and the venture capital investors are paying close attention.

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David Carratt
April 24, 2014 - 3 min. read

SaaS businesses have seen huge growth in recent years. With potential for global distribution from a single website, there are few limits to how fast or how big they can grow. This online model has knocked traditional software distribution channels off their feet. Now the explosion of social media is changing the landscape again.

SPREAD NEWS FAST

We all know social media networks can spread news around the world like wildfire. There are plenty of examples of stories going viral. During this year’s Academy Awards show there were 14.7 million Oscar-related tweets. Most famous was Oscar host Ellen DeGeneres selfie with Hollywood’s biggest stars, which was retweeted more than 3.4 million times. While the tweet looked spontaneous, it was a brilliant promotion for one of the show’s sponsors, Samsung Electronics.

Oscar selfie

At first glance, social media provides the ability to shout louder and further than ever before. Successful software companies have always been ready to shout about their wares.

With social media there are some important differences. Effective social media is not a direct response medium to communicate offers and deals. It is about attracting the customer to you, based on the merits of your product and the values of the business itself. Optimistic marketing and sharp sales practices will be exposed quickly as potential customers compare notes on the reality of the product and how to purchase effectively. Discounts and promotional offers undermine brand values, as potential users discuss why the product is selling less well than expected and wait for a better offer next month.

Savvy marketers realise that the combination of 30 day free trial and social media means there is nowhere to hide. Your SaaS product and your business practices are extremely public.

SOCIALLY MINDED

Using social media successfully requires a different mindset and investors need to look for teams that have it. Successful marketers for SaaS businesses know how their customers think, in the same way as traditional consumer oriented businesses have deep insight into their consumers. CEOs are intensely interested in which product features create value for customers and which are only adding complexity and confusing the story. They make sure that the brand delivers on its marketing promises to be certain that there is no gap which could create criticism in the social media world.

“CEOs are intensely interested in which product features create value for customers and which are only adding complexity and confusing the story. They make sure that the brand delivers on its marketing promises to be certain that there is no gap which could create criticism in the social media world.”

For the same reasons, the product needs to be simple and easy to use, The more the software behaves in an intuitive way the more excitement and kudos will be created by the users on social media. This is very different to the world of traditional software where many products have been released too early with insufficient user testing just to gain early revenues. There is little difference today between a product designed for professional users and a consumer product because professional users expect their IT support to be as simple to use as their favorite consumer applications.

DISRUPTIVE INFLUENCE 

Investment-Landscape_800x500

Social media is having a disruptive influence on the venture capital investment landscape. Exits used to be driven by the desire to round out a product set–essentially software companies bought the functionality they lacked. Now, however, they are increasingly looking to buy SaaS businesses so they can tap into the social mindset of this new distribution model.

FURTHER READING

Investment-Landscape-small    Carlsberg-small

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