The SaaS Trust Crisis: How We All Got Here (And How We Get Out) with G2 Founder/CEO Godard Abel

Much to Jason Alemkin and the Saster team for putting on this event in a very tough time. And what I'd like to talk to you about today is the SaaS Trust crisis. We're seeing both how did we get here today? And more importantly for us in the SaaS community, how do we get beyond it? How do we win back the trust of our customers? Today I'm going to start by telling you a little bit more about me, my background as a SaaS entrepreneur and then share the big trends we're seeing in the world of SaaS. Both what we're seeing over the next few years and then also zeroing in on what has changed in the last few weeks in the middle of this Covid crisis. Then I'm going to talk about the choices of crust that we're facing as SaaS industry and how can we as SaaS entrepreneurs, SaaS marketers, SaaS salespeople, how can we win back buyer trust so we can grow together with our customers? A little bit about me I've been building SaaS companies now since 1999. So for over 20 years. The first company I built was Big Machines. We started it way back in 1999 in the midst of the dot com era and that's actually shortly thereafter I looked through my first crisis, the bust the dot com bust. And Big Machines ultimately did have a lot of success. We partnered with Salesforce and with Oracle and the company was ultimately acquired by Oracle after a dozen years. Then we went on to build another company called steelbrick, another SaaS configure price quoting solution and that company grew very quickly and after just two years we were acquired by Salesforce. And then I spent a year at Salesforce working on Marc Benioff's extended leadership team and really had a chance to learn how important trust can be and also really learn from Salesforce from Mark, how do you really build a global SaaS leader at scale? And today I'm very excited to be the co founder and CEO of G2 where we're building the world's leading marketplace for SaaS software. And what I'm very excited about at G2 is we've been growing very rapidly. Just last month we had over 5 million SaaS and software buyers coming to G2 to find trusted SaaS solutions. And what those software buyers are looking at on G2 are trusted peer reviews. We have over a million of them on G2 and we validate every review on G2 both with LinkedIn profiles to make sure that these are real professionals that can be trusted. And we have a research team that vets all the reviews to make sure it's very high quality content for SaaS buyers. And we're also pleased now to have almost 100,000 different SaaS products listed there and being backed by $100 million from LinkedIn and some great investors that do allow us to keep investing in this marketplace. And in this time of COVID we're also pleased that we are able to give back. So we're supporting charities like Girls who Code, New Story Charity, the American Cancer society with our G2Kids initiatives and G2Gives. We partner with Philanthropies, we partner with some of our customers like AWS and Google Cloud, who can then make donations for every review to thank their customers. They can make donations to those charities. And just in the last year we're pleased to have donated over $300,000. And we're doubling down on those efforts this year to help where we can. And we're also very excited. At G2 we did just announce our best of awards and please check those out. But it includes many great SaaS vendors, starting with companies like Dropbox, SurveyMonkey, Atlassian, that based on amazing customer reviews, we've recognized as some of the best software products for 2020. And now what are the big trends we're seeing in global SaaS and how is that affecting software buyers and trust? And I was very inspired when we were starting G2 back in 2012 by this quote from Marc Andreessen. Most of you know him, but he was the founder originally of Netscape, Mozilla and really started the whole Internet revolution with the browser. And now he's an Investor. But in 2012 he coined this very famous quote that software is eating the world. And I think by that he meant that every business process in every industry is going to be automated by software. And this does create that tremendous opportunity for our Sastra community to help companies use that software to automate their whole business. And since Mark shared that quote in 2012, he was very prescient. The software industry is really booming. It's growing tremendously quickly. And when we started G2 in 2012, software globally was about a 295 billion dollar industry, already a massive industry. But what's amazing today the industry's almost doubled at 546 billion in total revenue. And what's really exciting for our Saster community and for me and for all of us as SaaS entrepreneurs is this industry is just going to keep growing. And this is data from Battery ventures. But you can see that in the next eight years we're expecting the industry to double to be a trillion dollar global industry. And even that's really just the beginning. This is a 30 year mega trend into the future. And you can see by 2050 this industry will be 10 times bigger. And so all of that is what's leading to the growth of the Saster community because businesses need this software, they need to automate their business more than ever. And what is also exciting is that SaaS customers are buying more and more software. And this is true across segments. On the left you can see data on small and mid sized companies. How much software are they buying? And we have a product at G2 we call G2Track, where with G2Track, we're tracking SaaS spend for almost 2,000 companies now. And what's been exciting over the last three years, we've really seen the number of applications they're using grow. So we're now seeing small mid sized companies using about 90 different SaaS apps. And what's also exciting is that keeps growing 20% a year as there are more and more great SaaS apps out there and in large enterprise, there's an interesting study by netscope that they publish, but that the average large enterprise now is running 1295 different cloud apps and services and that's also growing 10% a year. So the average enterprise is adding about 100 SaaS apps per year. And you can see marketing is the number one user of software. Probably no surprise, many of you are marketers. There's the Martech 5000 on G2 alone, we have about 10,000 different forms of marketing software because marketers are really going 100% digital. They're buying more and more software. But it's really every team now in a company you can see HR is running 100 apps, there's 87 different collaboration apps in most companies. And so really for every business now, in every industry, software is becoming more and more essential. And on G2.com where we're building the leading software marketplace, we're also seeing software booming. Where now we have 90,000 different SaaS and software products listed on G2. It's more than doubling year over year and it is in 1700 different categories. As software does keep getting more niche, new categories are popping up all the time. And you can see on the right the biggest kind of areas. I mentioned marketing software. The Martech stack keeps growing also. Erp, financial software, office and collaboration software, HR software. But again, I think this is very exciting. For us SaaS entrepreneurs, there is tons of innovation, tons of new categories being created every year. And we're seeing this as a global trend. And Last year at G2, we took our company global, so we opened offices in Bangalore and Singapore for Asia and we also opened an office in London. So now we're getting data really globally on how is the software industry growing. And what is really exciting is that especially in Asia. And I was just in January, I was in Chennai where they have a SaaS Boomi conference now, which is kind of the SaaS for India, I would say. And there were thousands of Indian SaaS entrepreneurs there. But what they're really seeing is in Asia and India, SaaS is really growing explosively as it is globally. But we saw just in Asia, 127% growth last year in software buyers. Europe also growing 120% last year. And of course it does keep growing here in the US but now SaaS is a global phenomenon and software buyers everywhere in the world are looking for better products. And what's changed more recently in the last few weeks, I think we've all seen it felt that hopefully you're all keeping healthy. But we've seen a tremendous impact on the economy and as we're all now forced to work from home. And so we did do a survey and we've been doing research to see how is the COVID 19 economy, how's that changing the state of software buying? And so I'd like to share a few insights. And what's interesting, we just did a survey of 676 different companies on how is Covid impacting their business, how's it changing how they're buying software? And no surprise, 88% of businesses. This was an unexpected shift that we had to go all remote. And so a lot of businesses weren't really ready. And I think those of us that are in the SaaS community, we're likely already using Zoom. We're using tools like Slack to collaborate. So I think all of us, whether we were totally remote or part remote, I think we all had the digital tools. But the reality is in most industries, most companies weren't ready at all. And so this has led to sudden increase in businesses looking for online collaboration tools and software. And specifically, here's the kinds of software that companies are not looking for based on our G2 survey. But no surprise. Virtual meetings. Zoom. We're on a Zoom. But I think apps like that, I think every business now, if they didn't already have them, they need them or they need better ones. Messaging apps, certainly apps like Slack so that people can collaborate virtually across the world. Remote desktop tools, screen sharing, webinars and time tracking so companies can better track their employees, work when they're remote, as well as collaborative whiteboards. And so no surprise here that now every business all of a sudden needs collaboration software. And we've also seen that on G2 where we really had kind of a nonlinear spike in web traffic in March. And just in March, web Traffic was up 49%, so almost 50% month over month. And as we're seeing more and more companies, businesses around the world shopping for software to help them get digital faster. And what categories particular are software buyers looking for and businesses are looking for? And we're on a webinar right now, but I think everyone now wants to do webinars because that's the best way to connect with people at scale. People are looking for virtual classrooms, both for learning. I know my three kids here in Palo Alto are home learning remotely right now. So virtual learning, but also in the business environment. I know we're taking all of our training, all of our enablement online. And so online learning platforms are really growing. Video conferencing, remote desktop whiteboards. And there's literally, I think almost 100 categories we've seen on G2, really surging. And so this does create some exciting opportunities if you're a SaaS entrepreneur in one of one of these categories. And what's also interesting, most businesses that we surveyed and most of the buyers on G2, they're saying they're going to keep this technology. So this will not just be a one time event, but this will truly be a shift where I think companies are going to. A lot of them are enjoying and seeing the potential now of remote work. I know I am, in some ways you can be a lot more productive. And so a lot of businesses are saying, 76% of them, 76% of businesses are saying they're going to keep this new technology in their business. And I think most companies, as you can see here, is that these new technologies, 32% of companies are saying the new processes, the new technologies are going to stick beyond this crisis. And so I think we will see a permanent shift towards more SaaS, towards more online collaboration. And that is an exciting opportunity for our industry. And companies in general are also right now investing more in software than digital. And you can see here 66% of the companies, so almost 2/3 of the companies we surveyed are actually going to buy at least one new product to help them manage in this new environment. And 25% of companies are even saying they're going to buy five or more apps to really help them get through this crisis and be more productive. Of course, on the flip side, we all know that there are major economic challenges. I know it's also challenging for G2. We mainly serve software marketers, and a lot of software marketers are cutting back. And so we're feeling pain like a lot of companies. And it's also been in the news a lot of companies are cutting back, A lot of companies are doing layoffs. So the reality is also a lot of companies are decreasing spend. It was 12% in our survey that are decreasing spend. So it does create some challenges for us as a SESTER community. And what we're seeing is that businesses are really scrutinizing their existing technology stack. They're scrutinizing their existing SaaS and cloud spend more than ever. And they are all trying to find immediate savings as well. As there's a heightened concern about privacy. And I think we've seen that with Zoom, where now everyone's using Zoom and it's an amazing technology, but it also does lead to some bad actors trying to find security holes, Zoom bomb, et cetera. And so businesses are also very concerned to make sure that their tech stack, that their software is secure and it's private. And from G2Track, we've gotten some interesting data where we're tracking SaaS usage and spend for about 2,000 companies. And from D2Track, we're seeing that 30% of software licenses are not used. And probably no surprise, but this is a combination of one team will buy an app, maybe the person leaves, they stop using it, or in some cases companies may bought too many licenses. But this is something companies are really going to be scrutinizing. And I think as a SaaS vendor, it's more important than ever to make sure that you're also secure, that your privacy is up to date, because companies are going to be looking at that. And we've seen from our D2Track research that companies are estimating about $7.9 million would be the cost if they have a breach. And so I think this does put heightened pressure on us as SaaS vendors to make sure our customers are adopting our technology and to make sure that it's secure and compliant. And here's some interesting data also on the challenge for SaaS vendors, for all of us, that we will, most of us will see increased churn. I know we're seeing that at G2, where some marketers are cutting back and a lot of them are saying, hey, we love G2, but we're not going to come back as a paying customer until we get through this crisis. And I imagine a lot of you are seeing similar things. And here is an interesting study from Nick Mehta, the CEO of Gainsight. And Gainsight is a customer success company that helps companies manage churn. But they were also studying in a recent survey, how are SaaS vendors expected to be impacted by this? And you can see here, across the board, SaaS companies are expected to increase churn. It's most severe in the SMB world. And I think small companies are having the hardest time in this crisis. We're also seeing that. But I think estimated here that churn in small ACV contracts, typically small business customers, the churn is expected to go up 15.8%. So quite significantly. And the good news is that in the enterprise world, it's a little bit less. But really, across the board, companies are looking to save money. And so we will have additional churn challenges across SaaS. This really brings me to the crisis of trust. And I think especially in this economy now, I think winning the trust of our customers is more important than ever. And it's really this challenge for us as an industry is exacerbated by what's going on in the world. There truly is a crisis of trust. I think people in general are no longer trusting tech giants like Facebook. And there have been all the news about concerns, data risks with the large tech platforms like Facebook. Also government. It is right now in this time hard to know who to trust. You trust your county representative, do you trust the mayor, do you trust the governor, do you trust the president? Especially when they're all saying different things. And so it's very hard to trust government. And as a society, we've just had the me too crisis, which continues. So I think all power is being rightfully questioned. And this does also make it harder for US as a SaaS industry to win that trust of customers. And so at G2, we also studied specifically in SAS, do customers trust us? And the reality is most of them don't. Most of our customers and prospects don't trust us, especially those of us in sales. And as an entrepreneur, I do consider myself in sales and I believe sales is a noble profession. But the reality is, you know, 94% of SaaS buyers that we survey don't trust us. They don't trust our sales pitches. And if you're in marketing, you can't feel too much better because 93% of software buyers don't trust marketing either. And you know, we all make these beautiful videos, beautiful slides, beautiful websites. But the reality is the customer so much noise and so much beautiful marketing that I think the customers also tend to filter it all out. And as a result, when we did this survey last year, most of you in marketing and in sales are finding it harder to get a prospect's attention. 75% are saying it's getting more difficult. And 65% of SaaS sales and marketing people have said it's getting harder to do your jobs because the buyers tend not to trust you. And so who do people trust? Brian Halligan, the founder and CEO of HubSpot, really has an excellent perspective on this where what he says is, who do we trust? We really only trust people we know. We trust our peers and that's who we go to for advice in life. We go to our friends, we go to trusted friends. And in the work setting it's really going to our trusted peers either inside or outside our company. And we ask them, hey, what do you really think? Does this app really work for you? Or if we're recruiting someone, do you know this person? Will they do great work? And so it is really becoming all amongst. Trust is really only gained through peers. And so I think that really also changes how we as SaaS vendors can go to market. And what we've seen on the G2 platform, when we surveyed over 1000 buyers of software top of the funnel, what kind of information do SaaS buyers want when they're first making their short list, when they're doing their top of funnel research? And no surprise, vendor websites are a very useful source. And most of you probably already have great websites, but the other top sources are peers and colleagues. So people will go on LinkedIn, they'll ask their fellow marketers, hey, what marketing automation do you run? What are you using for abm? And so this is happening all the time. People are asking peers and colleagues in terms of which vendors to consider. And also what is interesting for us, sites like G2 are being increasingly used where it's now one of the top three sources also of building short lists, building the type of funnel. And also exciting for me is it's now ahead of the traditional analysts where that's kind of down to 30%. And obviously we believe at G2 is that people want more real time insight from peers. And that's what our data is showing. That's what people do at the top of the Funnel. And also when you get to the bottom of the funnel and you're about to make a buying decision, this is becoming even more prevalent where the number One source that B2B buyers are saying they're using at the bottom of the funnel to confirm their decision are review sites. And the beauty of sites like G2, you can obviously see the reviews, but you can also, through LinkedIn, reach out to those people and say, hey, what do you really think? I think the same shift has happened in recruiting. I know when I'm about to hire somebody, if I don't know them already, I'll go to LinkedIn, go to my first degree connections, see who knows them. And now with platforms like G2, software buyers can do the same thing. Find out which of their peers are running the app and ask them what they really think. And so really, top and bottom of the funnel, this trusted buyer voice, customer voice, is more important than ever. And so now how do you, how do we, as a community, how do you, as a SaaS entrepreneur, a SaaS market or salesperson, how do you win that trust of the buyers? And how do you do that in this more challenging environment than ever? And here I'm also very inspired by Marc Benioff. As I mentioned, Salesforce acquired my company, Steelbrick, and I had a chance to be on Mark's extended leadership team at Salesforce. And how Mark really built Salesforce from the beginning was on top of trust. It's always been Salesforce's number one value. And I think he has a great quote here that especially in this world today, trust isn't your highest value. Something bad's gonna happen to you. And so it really has to be the foundation for almost any company that wants to serve and win customers and have success. And for Salesforce, this is not just a mantra now for Mark and the CEO, but also Stephanie Buscemi, the CMO of Salesforce, has also made it central to how they do marketing. And I think traditional SaaS marketing was all about, hey, how do I just generate some leads? And I think what Stephanie says today, you first have to earn the trust of your customers, of the market, of your prospects. And only once you have your trust can you engage them. And I think this is also where companies like HubSpot, who I mentioned earlier, do a great job rather than just trying to put lead forms in front of you. They want to engage you with compelling content, with compelling advice, and only then do you get to leads, do you get the customers and you get to growth. And so I think it's really changing how we market as an industry. And the B2B playbook specifically, how do we see it evolving? And I think there's a shift from vendor generated content whether, and I remember when I started my career it was all about white papers, it was all about your own website and you're doing very fancy customer studio videos, having amazing testimonials and then pinging your prospects by email or by phone. But I think today we're in a different world where software buyers, they no longer trust that information because there is so much noise and everyone has beautiful marketing. So, so yes, it's table stakes, but to really differentiate what software buyers are looking for are third party trusted sources of information. They're looking for content that really helps them learn how to be better at their job. And they're looking for peer insights from professionals they already know and trust. And I think also the shift in marketing, I think rather than just emailing or cold calling thousands of people, I think that the modern way to do it is to really go where the buyers are. And the buyers are on social Networks, they're on LinkedIn, they're on Twitter. And if in context you can share insights, you can help them learn, then that's proving to be the best way to engage in this new world, to engage them with trusted content at just the right time when they're shopping. And one great example of a company that is really built on trust is Zoom. And I had the privilege of interviewing Zoom founder Eric wan, also their CEO, at our G2 Reach conference last year. And Eric talked about how everything at Zoom is about delivering happiness to customers as well as delivering happiness to the team. And so Eric wants all his employees to think about that all the time. And he's also been very forward thinking in taking all forms of customer feedback, including platforms like G2. And he does see as a great way to, to get his team to be more customer focused. And what's also interesting about Eric, some SaaS entrepreneurs I meet, they get very concerned when they get a negative review and they say, hey Godard, can you take down that one star review? And Eric really looks at it the opposite way. Most of his reviews are five star. Most customers love them. But when he gets negative feedback, he sees it as an opportunity. He reads all the one star reviews, all the negative feedback personally, and then immediately turns into better product. And I think we've just seen that where Zoom has had some also challenging publicity around security and they immediately responded or Zoom bombing, they immediately coded waiting rooms, they immediately delivered solutions for their customers. And I think it is that customer obsession, that focus on delivering happiness that has made them such an amazing company. And what we are seeing thanks to companies like Zoom being so focused on customer success. And just last week they were also pointing people to G2 to write more reviews. But we are seeing our traffic keep growing. More and more software buyers are coming to G2 to see who can they trust. And just last week, we're up to one of the top 1000 websites in America because more and more software buyers are seeking that trusted information. Hey, Goddard, I'm so sorry to cut you off. We've actually run out of time, but we will be saving all of this Q and A so that we can answer some of these questions that people have asked in the next few weeks. And we'll be sharing them, of course, with your team. Okay. And could I just. I'll just go to my last slide, if I may. And to summarize this, I think for those of you in the Saster community, we have also created a playbook on how do you market in this time of COVID crisis. Step by step playbook. How do you amplify this trust? How do you engage buyers in this modern world? And so please come check it out and hopefully it can help some of you both survive and thrive in this crisis and win the trust of all of your customers. Thank you.