Traditionally, most businesses have followed the same marketing and sales playbook to generate leads, close sales, and support their customers. Today, however, customers are increasingly selecting their own communication channels and expecting personalized experiences.
They are blocking traditional marketing and sales tactics, such as cold calls, unsolicited emails, and disruptive advertisements. Instead, they use search engines and social media to research products and services before contacting a vendor. Customers are increasingly taking more control of the purchasing process and influencing the purchasing behavior of others.
Businesses need a more effective way to attract, engage and delight customers with access to abundant information and can block traditional marketing and sales tactics. To do this, businesses need to deliver an inbound experience that enables them to be less interruptive, more helpful, and more relevant to their customers.
HubSpot understood these challenges and decided to help scaling companies deliver a delightful customer experience through its cloud-based customer relationship management (“CRM”) Platform. In this strategy story, we analyzed the business model of HubSpot and understood what does HubSpot do and how does it make money.
What does HubSpot do?
HubSpot is an American developer and marketer of software products for inbound marketing, sales, and customer service. Brian Halligan and Dharmesh Shah in 2006 founded HubSpot.
HubSpot provides a cloud-based customer relationship management (“CRM”) Platform that comprises Marketing Hub, Sales Hub, Service Hub, a content management system (“CMS”) Hub, an Operations Hub, and other tools, integrations, and a native payment solution that enable companies to attract, engage, and delight customers throughout the customer experience.
At the core of the CRM Platform is HubSpot’s CRM that customers use, which creates a single view of all interactions a prospective or existing customer has with their marketing, sales, and customer service teams. HubSpot’s CRM shares data across every application in the CRM Platform, automatically informing more personalized emails, website content, ads, and conversations, and enables more accurate timing cues for HubSpot’s customer’s internal teams.
HubSpot’s CRM Platform was built to easily and seamlessly integrate third-party applications to further customize to an individual company’s industry or needs. In addition, an end-to-end payment solution, Payments, is built within HubSpot’s CRM Platform, which enables customers to streamline their payment process.
HubSpot’s CRM Platform
HubSpot’s CRM Platform features integrated applications and tools that enable companies to create a cohesive and adaptable customer experience. Each Hub can be used standalone, with HubSpot’s CRM Platform, a third-party CRM, and/or in conjunction with any version of the other Hubs.
Businesses that want to use software outside of HubSpot’s CRM Platform can leverage HubSpot’s ecosystem of third-party integrations from HubSpot’s platform application partners. Over 1,300 integrations and applications are available for HubSpot’s users across various categories, including integrations with leading social media, email, sales, video, analytics, content, and webinar tools.
HubSpot CRM: The core of HubSpot’s CRM Platform is a single database of lead and customer information that allows businesses to track their interactions with contacts and customers, manage their customer activities, and report on their pipeline and sales. This allows a complete view of lead and customer interactions across all of HubSpot’s integrated Hubs, giving HubSpot’s CRM Platform substantial power.
Marketing Hub: Marketing Hub is an all-in-one toolset for marketers to attract, engage, and nurture new leads towards sales-readiness over the entire customer lifecycle. Features include marketing automation, email, social media, SEO, and reporting and analytics.
Sales Hub: Sales Hub is designed to enhance the productivity and effectiveness of sales teams. Businesses can empower their teams with tools that deliver a personalized experience for prospects with less work for sales representatives. Features include email templates and tracking, conversations and live chat, meeting, and call scheduling, lead, and website visit alerts, lead scoring, sales automation, pipeline management, quoting, forecasting, and reporting.
Service Hub: Service Hub is HubSpot’s customer service software designed to help businesses manage, respond, and connect with customers. Features include: conversations and live chat functionality, conversational bots, tickets and help desk, automation and routing, knowledge base, team emails, feedback and reporting tools, and customer goals.
CMS Hub: HubSpot’s content management system (“CMS”) Hub combines the power of customer relationship management and a content management system into one integrated platform. HubSpot’s content tools enable businesses to create new and edit existing web content while personalizing their websites for different visitors and optimizing their websites to convert more visitors into leads and customers.
Features include website pages, business blogging, smart content, landing pages and forms, SEO tools, forms and lead flow, web analytics reporting, calls-to-action, and file manager.
Operations Hub: Operations Hub is designed to help businesses unify customer data in a connected platform, automate business processes, eliminate time-consuming data cleanup, and query and transform data to enable customer insights and connections. Features include programmable automation, data sync, data curation, and data quality tools.
How does HubSpot make money? What is the business model of HubSpot?
Value Proposition
HubSpot’s CRM Platform features a central database of lead and customer interactions and integrated applications designed to help businesses attract visitors to their websites, convert visitors into leads, close leads into customers, transact with those customers, and delight them, so they become promoters of those businesses.
Designed to Help Companies Grow Better: HubSpot’s CRM Platform includes a system of record for maintaining a unified view of the customer experience, a system of engagement for efficiently engaging customers through search engine optimization (“SEO”), web content, social, blogging, email, marketing automation, messaging, support ticketing, knowledge base, commerce, conversation routing, video hosting, and an end-to-end payment solution.
Ease of Use of a Single, Extensible Platform: HubSpot provides a set of integrated applications on a common platform, which has one login, one user interface, and one database. In addition to being a comprehensive suite itself, HubSpot’s CRM Platform integrates with hundreds of external applications, making it easy to extend and customize the functionality of HubSpot’s CRM Platform.
Power of a Unified Customer View: At the core of HubSpot’s CRM Platform is a single CRM database for each business that captures its lead and customer activity throughout the customer lifecycle. HubSpot’s CRM Platform creates a unified timeline incorporating all the interactions with a particular customer.
Scalability: HubSpot’s CRM Platform was designed and built to serve many customers with demanding use cases. HubSpot’s CRM Platform currently processes billions of data points each week. HubSpot uses leading global cloud infrastructure providers and HubSpot’s automation technology to allocate capacity to handle processing workloads of all sizes dynamically.
Extensible and Open Architecture: HubSpot’s CRM Platform features a variety of open application programming interfaces (“APIs”) that allow easy integration of HubSpot’s platform with other applications, such as e-commerce, event management, and videoconferencing applications.
HubSpot’s Services
HubSpot complements its product offerings with professional services, customer success, and support. HubSpot offers the majority of services and supports over email, phone, chat applications, and via web meeting technology rather than in-person, which is a more efficient business model for HubSpot and HubSpot’s customers.
Professional Services: HubSpot offers professional services to educate and train customers on leveraging HubSpot’s CRM Platform to transform how their business attracts, engages, and delights customers. Depending on which Hubs and services a customer purchases, they receive onboarding guidance or one-on-one training from one of HubSpot’s onboarding, inbound consultants, or technical consultants.
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Customer Success: HubSpot’s customers have access to a Customer Success Manager (“CSM”), Channel Consultant (“CC”), or Customer Success Team (“CST”), which are responsible for HubSpot’s customers’ long-term success, retention, and growth on HubSpot’s CRM Platform. Depending on the customer spend, they will either have a dedicated CSM or be serviced by a CST in a team-based approach.
Support: In addition to assistance provided by HubSpot’s online articles and customer discussion forums, HubSpot offers phone and/or email and chat-based support, which is included in the cost of a subscription for HubSpot’s Hubs. Phone, email, and chat support are available starting at the Professional product level for all Hubs, while email and chat-based support is available for Starter Hubs.
Customers
HubSpot designed and built its CRM Platform to serve a broad range of customers globally. HubSpot’s CRM Platform starts completely free and grows with HubSpot’s customers to meet their needs at different stages in their life cycles. It supports multiple languages and currencies and offers an array of sophisticated features, including content partitioning at the enterprise level for companies operating in or serving multiple countries.
HubSpot focuses on selling to mid-market business-to-business, or B2B, companies. These mid-market businesses seek an integrated, easy-to-implement, and easy-to-use solution to reach customers and compete with organizations that have larger marketing, sales, and customer service budgets. HubSpot efficiently reaches these businesses at scale through HubSpot’s proven inbound methodology, HubSpot’s Solutions Partners, and HubSpot’s “freemium” model.
HubSpot has a freemium business model that attracts customers who begin using HubSpot’s CRM Platform through HubSpot’s free products and then upgrade to HubSpot’s paid products. As of December 31, 2022, HubSpot had 167,386 Customers of varying sizes in more than 120 countries.
How does HubSpot make money: revenue model
HubSpot made $1.7 billion in 2022. HubSpot has a freemium business model. HubSpot primarily makes money from subscriptions to HubSpot’s cloud-based CRM Platform and related professional services, including customer onboarding, training, and consulting services. Subscription revenue accounted for 98% of HubSpot’s total revenue in 2022.
HubSpot sells multiple product plans at different base prices on a subscription basis, each of which includes HubSpot’s CRM and integrated applications to meet the needs of the various customers it serves. HubSpot also generates revenue based on purchasing additional subscriptions and products and the number of account users and subdomains.
Subscription-based revenue is derived from customers using HubSpot’s CRM Platform for their inbound marketing, sales, service, operations, and content management needs. HubSpot’s CRM Platform features integrated applications that create a cohesive and adaptable customer experience.
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These integrated applications include SEO, blogging, website content management, messaging, chatbots, social media, marketing automation, email, predictive lead scoring, sales productivity, ticketing and helpdesk tools, analytics, and reporting. Subscriptions are billed in advance on various schedules.
Professional services and other revenue are derived primarily from customer onboarding, training, and consulting services. Depending on which Hubs and services a customer purchases, they receive onboarding guidance or one-on-one training from one of HubSpot’s onboarding, inbound consultants, or technical consultants.
Subscription revenue increased during 2022 due to the increase in Customers, which grew from 135,442 as of December 31, 2021, to 167,386 as of December 31, 2022. Average Subscription Revenue per Customer increased from $10,486 for the year ended December 31, 2021, to $11,163 for the year ended December 31, 2022.
The growth in Customers was primarily driven by HubSpot’s increased demand for HubSpot’s lower-priced Starter products. The increase in Average Subscription Revenue per Customer was primarily driven by continued demand for HubSpot’s Professional and Enterprise products, partially offset by continued purchases of HubSpot’s lower-priced Starter products.
