SaaS Interviews with CEOs, Startups, Founders
1124 Why BrandWatch Acquired BuzzSumo, Past $50m ARR
22 Aug 2018
Chapter 1: What led Giles Palmer to resist selling Brandwatch in 2012?
First off, he resisted the urges in 2012 to sell. He founded the company 2007. Really hard to stay disciplined in those early years when so much capital has to go into just building the engine to even make this thing run to get your first dollar in sales. Usually the pre-sales playbook is a good one to start. It's hard for him to do that, but he did it. Now 420 people full-time.
Again, Brandwatch helping enterprise brands, paying on average 30 grand.
in aecv about 1500 of them right now helping them monitor their themselves and competitors in their market space across uh online sources especially social growing about 30 year over a year up from about 40 million run rate in december 2016 up to you know over 50 million today 12 or less than 12 annual gross revenue churn about 100 annual net revenue churn obvious retention sorry that varies 28 grand cac 150 grand minimum ltv payback around 15 months
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple of hundred thousand dollars to 2.7 million. I had no money when I started the company.
It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers.
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Chapter 2: How did Brandwatch evolve from its founding in 2007 to today?
With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everybody. My guest today is Giles Palmer. He's the founder and CEO of a company called Brandwatch, a leading social intelligence company.
Formerly of BSkyB, Giles started Brandwatch and since its launch in August 27, it has grown to become one of the world's leading social media analytics and listening companies. Giles, are you ready to take us to the top? Ready to go. Ready to go, Nathan. All right, good. And correct me, by the way, if I'm wrong, your name, is it a hard G on the front or is Giles right? It's a hard G, Giles.
Giles. Sorry about that.
Chapter 3: What business model does Brandwatch utilize to generate revenue?
I didn't choose it. Don't apologize for your name. I just want to make sure I get it right. Giles. Okay, good. Giles Palmer. So tell us about Brandwatch. What's the company doing and how do you make money? What's the revenue model? It's a subscription business. It's a SaaS business, and it's basically a data business. So we crawl about 80 million websites and have feeds from the social networks.
We aggregate all of that, and we allow brands to kind of check out what the world is saying about them, their competition, and so on. And it goes back five years. So it's a research tool and a real-time insights tool. engine for brand managers primarily.
So if you went in there and I plot McDonald's against Wendy's, can you actually see in your trends when Wendy's hired that super witty social media marketer that just grills people on Twitter? Can you actually see the lift or the drop? Possibly. You can certainly see
Chapter 4: What insights does Brandwatch provide to brands about their market presence?
any changes in the conversation of anybody mentioning Wendy's online and what they're talking about. So you can even, the system will even tell you when unusual activity starts and an unusual activity could be when a certain phrase gets mentioned close to a brand for the first time ever. So there's this kind of this big, big kind of algorithmic engine behind the scenes that
watching for unusual activity. And then it kind of tells you, oh, look, this is a new thing that's happened today. We haven't seen this before. Interesting. We call them signals. I got a signal today about one of the companies in our space having made an acquisition within six or seven minutes of it going online because the system was just kind of watching for that kind of activity. Who was that?
Chapter 5: Why did Brandwatch acquire BuzzSumo and what are the benefits?
Falcon Social, guys in Copenhagen. Who they acquired? They're quite another local company. I can't actually remember the name of it because I hadn't heard of it. I was going to say, do you know enough about the deal to know if it was a good buy or bad buy for them? It looks like a sensible buy. It's a small buy, but it looks sensible to me. Interesting.
So give me a general sense of customer size. Are these folks paying $100 per month or $1,000 or $10,000 per month? What's general ACV? Uh, annual contract value is about $30,000. Okay. So 2,500 a month on average. Yeah. So it's, it's, it's enterprise grade. It's not cross enterprise. Um, you know, those systems tend to be more and more expensive, but it's, it's a high end professional tool.
Like it's not an, it's, it's, it's not Hootsuite. Yeah. No, it's like a BMW, not a whatever, mini Metro or mini Monster or whatever. When did you launch the company? What was your one? August 2007. So let me ask you a question. I would say the last big pop of any activity in this space was 2012 when you had Buddy Media going out, Vitru, Wildfire, all these guys. Yes, I'm sure you had offers.
You chose not to sell. Why? We had a lot of approaches.
Chapter 6: How does Brandwatch handle customer acquisition costs and retention?
We had one kind of pseudo offer. We didn't... Like an LOI or no? Yeah, exactly, exactly. We decided, I guess... We thought we were in a kind of up and to the right phase. And we didn't think that the deal that was being offered to us was representing that strong enough. And also we were kind of like, you know, we didn't do this to sell. We didn't start it to just sell it.
We started to build a company and we didn't feel like our job had changed. It even been half done at that point. I mean, and actually, if you look at those acquisitions, none of them really have gone on to meet to be meaningful. Oh, gosh, no, they're being wildfires shut down. Who even knows where buddy media is? And that, you know, I mean, in Salesforce, right? Who knows?
Vitru, who knows where they are involved? Or where are they? I mean, they mostly they got shut down. Yeah. And that would indicate to me that they were bought prematurely. They weren't mature businesses. They hadn't figured out why they existed and what they were trying to solve for. And I don't think we totally had at that point either.
So if we'd sold it, it would have been a kind of, oh, look, somebody's come along with a big amount of money. And actually, one of the reasons why we're still around and we're doing pretty well is because there's an honesty in what we're trying to do. We're not trying to build and sell. We're trying to build a great company.
company and and i don't think that we were ready to to sell it at that point so what have you scaled to today in terms of total customers using you uh just under 1500 1500 um you know this year we'll do more than 60 million dollars in revenue and there's 420 staff in the business so and it's profitable so we've got it to a good a good spot are you so where's growth at so you said you're gonna you will over the past 12 months you did 60 million ar or that's what you will do
uh last year's record recognized revenue is around 50 so this year we it'll be above you know well above 60 okay and take take me just so we can get a growth rate take me back 13 months ago december 2016 what was your run right then i can't remember but last last year we we you know we grew it healthily it wasn't 40 50 but it it wasn't like it was like 30 percent ish right Around there, yeah.
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Chapter 7: What is the significance of churn in Brandwatch's business model?
Yeah, yeah. Yeah, so if you ended the year at a 50 million, or you're going to do, or you're on a 60 million run rate today, right? You were somewhere in the 48, 49 million run rate December 16. Something like that. I haven't got the data in front of me. That's okay. But, you know, It gives you a sense of the scale.
I'm going to really love you if you tell me you're bootstrapped, but I have a feeling you're going to break my heart. Yeah, I know. Sorry about that. How much have you raised? We've raised 50 million bucks. Five zero? Yeah. Yeah, not all of that's gone into the company, but the majority of it has. How much of it went to secondary versus operating? I mean, four fifths of it went to operating.
Oh, good. Oh, okay. That's healthy. Yeah. I mean, the reason why we're not totally bootstrapped
is isn't because we've scaled sales and uh and all that kind of stuff and been super aggressive it's because we had to build the back end a way ahead of actually being able to monetize it and that's an expensive exercise that's hardware software and data so you know it's it's a big that we've got something like 1,000 servers that sit behind the live application.
I mean, we could put it on the cloud. Either way, it's an expensive machine to run because it's a massive data processing storage game that we're in. Well, it's a nice moat for you now, now that you're at scale. It's hard to compete. Exactly, it is.
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Chapter 8: What are Giles Palmer's future plans for Brandwatch after the acquisition?
That's true enough. Yeah, interesting. Okay, tell me about Churn. That's obviously critical in this kind of business. Churn is, yeah, and it's the... As the business gets bigger, it's an absolutely killer thing that you just have to get under control.
I mean, we're not one of those businesses, sadly, that signs on for like a dollar's worth of revenue, and in five years, that's $2 sort of thing, on average, taking account of churn and so on. I'm envious of companies like NetSuite and I guess Salesforce that just end up having this viral effect across once they get a customer. We have to work very hard for retention.
We have to make our products incredibly sticky. We have to onboard our customers in a really smart way such that they're successful. We have to keep innovating like crazy to make sure that our product is something that they're going to continue to choose.
In some ways, it makes us fitter as an organization, but it's also, you know, a huge challenge to scale a business because, you know, if you've got 1% per month churn. Is that what you're at right now? Yeah, not quite, but there or thereabouts. In terms of revenue or logos? either. It's very similar. That's a lot of revenue to replace. Now, obviously, we've got upsell. So that's gross churn.
So upsell and increasing your footprint with an existing account, that's going to reduce that on a net basis. What is your net? It varies, but we don't disclose that. Are you over 100 in terms of net revenue retention annually? There or thereabouts. It varies depending on the cycle. But my job is to think about how do we bring out new products that our existing customer base would like to use?
Or like last year, we acquired a company called BuzzSumo and Although it's not really aimed at the same sort of market space as our core product, that is something that our customers are actually taking as well. By the way, that move by you really confused me. It confused me even more now when you tell me what your ARPU is because I see Bosumo as like a –
growth hacker college student in their basement trying to hack their way into some extra seo value not a major brand that's you know paying your kind of money i mean so i don't like what was the reason your head behind that acquisition so both sumo have uh 3 500 customers um they have a lot of uh blue chips using their software but like on a credit card right like 100 bucks a month kind of thing
Yeah. Their average is about $130 a month. It's the best product on the market for content analysis. There isn't a better one, even if you pay 10 times more. They get a lot of people using it. The reason why we bought BuzzSumo, there's three or four reasons. Number one, it's just a brilliant product. It's very rare that brilliant products that have enormously loyal users
user bases come to market without being incredibly expensive. And so brilliant product, amazing team. And then two other core reasons. Number one is that they've got a data set with the, you know, the amount of the shared data, content shared data that is almost unique. It's just an extremely valuable aggregated data set. Did you guys hear the recent news?
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