MNDY ad spend

Investment Analysis Clubs Saul’s Investing Discussions
1

Some smart people have shared their thoughts about MNDY’s upcoming ad spend. BroadwayDan expressed his concerns and I am inclined to agree.

MNDY is going to be advertising in a Superbowl spot. (MNDY’s video promoting their upcoming superbowl ad: https://m.youtube.com/watch?v=rZysQu8MOIM)

https://www.campaignlive.com/article/mondaycom-makes-its-sup…
MNDY has contracted with an agency to create the ad:
While the spot marks the first time Monday.com will appear in the Super Bowl, Mann hinted it won’t be the last. Given that the company has an in-house marketing team of 90 people and a fully-fledged production studio that makes all of its marketing materials, there could be a day when Monday.com makes its Super Bowl ads in-house.
Monday expects to double its marketing team in 2022 to bring in more designers, producers, animators and creative managers.

This insightful article was also very graciously shared with me: https://www.adexchanger.com/advertiser/why-b2b-monday-com-is…

Monday.com is spending more than 10 times what it’s ever invested in a campaign before to pitch itself during the game in hopes that the spot will spur the company into a new stage of growth and usage of the platform…

[That sounds like a big budget. Are they somehow expecting that high of ROI for the 10 times extra they spent?]

Monday.com is a B2B company, but this campaign’s goal isn’t to influence executives who make vendor purchase decisions – the account-based strategy that is the bread and butter of B2B marketing. The idea is to emulate a consumer-facing business and spur everyday employees with access to the platform to feel comfortable doing so even if they have no coding or experience.

[Wait, this marketing campaign isn’t really targeting new users? It looks like it’s aimed at existing users… And, even if this adspot was targeted at acquiring new users, wouldn’t most customers coming in from the ad be free tier users?]

“We want our end users to understand that they have the power to use monday.com to build workflow tools without engineering or a decision coming from the top down“

[Hold on…is MNDY seeing less than expected use of their platform and that’s why they’re pushing hard for this campaign?]

A few cities are explicitly left out of the campaign to function as control groups for post-campaign attribution and incrementality measurement, he said. For instance, a city that monday.com targeted for TV, social media and OOH billboards should see a big spike in new trial users or log-ins and first-time accounts within companies that already license the platform. Since some markets were held out of the campaign, there should be a measurable lift in platform engagement that can then be attributed to the Super Bowl push.
Monday.com has also started pre-campaign surveying to set a baseline for brand awareness and overall knowledge of the tool set, Shriki said. Another round of surveys in the weeks after the game should help construct a picture of where and how the campaign worked in raising people’s awareness of the brand name and what the tech does.

[This is interesting, the whole advertising is literally an experiment. Are they this desperate to grow in an increasingly crowded and competitive landscape that they have to throw marketing dollars in this manner?]

…"as a B2B company, we still speak as a B2C brand,” Aviva Sonenberg said. “It’s important to be part of the conversation.”

[Sorry - I’m not quite understanding what’s said here. Suppose their advertising is successful in spurring interest among enterprise employees. How much power would employees really have in compelling their employers to sign up for Monday.com?]

Not sure how much all of this costs them in total but ExponentialDave has cited 6 million just for a superbowl spot.
We all know MNDY’s quarterly numbers have been flawless. However, I think stuff like this should still be taken into account.
I don’t plan on changing my MNDY weight as it is my lower conviction allocation already, but I’m interested to see what the board thinks - is marketing like this a positive or negative hint on MNDY’s ongoing performance?

32 Likes
2

To measure the efficiency of S&M spend, I prefer to look at the “magic number”. The magic number measures how much incremental revenue and gross profit you are getting on your S&M spend - I think that’s the key rather than zooming in on a specific ad.

We can also look at its customer growth numbers (especially enterprise customer growth) to see whether MNDY is getting bang for its marketing buck.

MNDY actually (1) does quite well on the magic number and it is also trending up in each quarter; and (2) from their NRER of 130% for customers with more than 10 users and best-in-class enterprise customer growth of 20% quarter on quarter, I wouldn’t be worried about their S&M spend.

Their approach of marketing to individual employees from the bottom-up (hence those ads) and then spread its tentacles across the entire organization has worked well for them. Let’s hear it from them:

"So that’s how we find them and that’s how they start like with a specific solution like
that. That might be with a small team, but once they onboard onto one use case and they are a large enough customer, we give them a call, a consultancy group or sales team, and we help them scale to other departments to other use cases and then when they get it, we have that aha moment. When we say they have that aha moment where they get it, that they can build everything. And then what we end
up happening is that those kind of larger organizations have multiple champions across departments, across many, many different use cases and they use it for everything. I talked with one really large customer, large company that they kind of like had a team of people or four people implementing monday.com. And they kind of asked me like what else can we do? Like what else, they really wanted to replace everything they had to put it in every niche they could find that that will make something and make people use it."

“one thing that was very important for us and I feel very healthy is that we always wanted the adoption to be bottoms up. I think one of the problems with software today that’s top-down decision-making process where C-level executive makes a decision to use the software forces everybody in the organization to use it and you end up having what we call shelfware, a software that nobody actually is using within the organization. So we wanted from day one the adoption to be real. We wanted people to enjoy using the product so that’s why we can aim to have a bottom-up adoption pattern where people actually use it and then it spreads organically. And the sales teams’ like the sugar on top. We help you scale past that point but once we kind of reach out with a sales team you have so many champions in the organizations cheering for you. It’s a pretty easy sales process from that point on.”

51 Likes
3

"A few cities are explicitly left out of the campaign to function as control groups for post-campaign attribution and incrementality measurement, he said…

[This is interesting, the whole advertising is literally an experiment. Are they this desperate to grow in an increasingly crowded and competitive landscape that they have to throw marketing dollars in this manner?]

I think this is called “A/B testing” which is commonly used in marketing campaigns to assess its effectiveness. It doesn’t imply anything about desperation. In fact, it’s the responsible thing to do.

Cats

31 Likes
4

Catsunited, thanks for the post reply. You’ve changed my mind on this, if management has already seen lots of success selling bottom up then this might be a very good ad play.

15 Likes
5

The project management space is incredibly competitive and there comes a point where a company needs to build a brand that people can recognize and trust.

There are only so many eyeballs that you can win on Google AdWords (search) and that is the easiest conversion point since that involves people looking for you. However, once you’ve maxed out your AdWords budget, you need to look to other avenues to generate more awareness, which will then build the bottom of the funnel. This is often called a bottoms up approach in marketing. You build the funnel with the lowest hanging fruit conversions using search and then you go up the funnel to help build larger audiences that will ultimately search for you.

I think a Super Bowl commercial makes sense since Monday has a huge marketing budget and the Super Bowl is a great way to hit 100 M eyeballs. From there they can then rely on their search program to drive more branded conversions and this super bowl commercial can potentially help Monday differentiate themselves from the other project management tools.

6 Likes
6

Hi jonwayne235, I’m in agreement with your following observations.

"[Wait, this marketing campaign isn’t really targeting new users? It looks like it’s aimed at existing users… And, even if this adspot was targeted at acquiring new users, wouldn’t most customers coming in from the ad be free tier users?]

[This is interesting, the whole advertising is literally an experiment. Are they this desperate to grow in an increasingly crowded and competitive landscape that they have to throw marketing dollars in this manner?]

[This is interesting, the whole advertising is literally an experiment. Are they this desperate to grow in an increasingly crowded and competitive landscape that they have to throw marketing dollars in this manner?]

[Sorry - I’m not quite understanding what’s said here. Suppose their advertising is successful in spurring interest among enterprise employees. How much power would employees really have in compelling their employers to sign up for Monday.com?]"

There’s a lot of competition among these collaboration and productivity tools like Monday, Asana, Smartsheet and others. Hence, it’s quite logical that each of these companies will have to spend more advertising dollars. And all of them need adoption across teams at a rapid scale to be successful. And for products in these category, it’s not easy to sell from a bottom-up approach. Even if one person in a team strongly feels it’s really worth trying it out ( maybe a free trial) but the rest of the team feels otherwise, adoption can be hard.

As an example during the past couple of years, many organizations were switching among video conferencing tools like Zoom, Microsoft Teams, Google Meet and others. In most of these cases, the directive comes from upper management who has incentive to use one tool over the other.

Now contrast this with a very differently category of mission critical tools that enables the digital shift. Here a set of individuals ( primarily developers) have a great voice. Their choices are most often endorsed by upper management and adoption becomes viral. They don’t need to spend too many advertisement dollars. Two very good examples are MongoDB and Datadog.

And that’s also a reason why Monday is a lower conviction position for me.

Just my 2 cents.

Cheers!
ronjonb ( @ronjonbsaas on twitter)

8 Likes
7

"There’s a lot of competition among these collaboration and productivity tools like Monday, Asana, Smartsheet and others. Hence, it’s quite logical that each of these companies will have to spend more advertising dollars. And all of them need adoption across teams at a rapid scale to be successful. And for products in these category, it’s not easy to sell from a bottom-up approach. Even if one person in a team strongly feels it’s really worth trying it out ( maybe a free trial) but the rest of the team feels otherwise, adoption can be hard.

As an example during the past couple of years, many organizations were switching among video conferencing tools like Zoom, Microsoft Teams, Google Meet and others. In most of these cases, the directive comes from upper management who has incentive to use one tool over the other."

I understand that an SB ad is maybe not a very intuitive use of marketing dollars looking from the outside-in; but I think we can assume that they have good traction with upper management, otherwise their enterprise customer numbers (>50K ARR) would not be growing like a weed since those deals involve hundreds of seats (@ their standard plan of $120 per seat per year) and likely not purchased by those at the bottom.

2 Likes
8

imo, Monday seems like the kind of tool that gets put into action by departments, and funded by their own budgets, not by an IT budget. These things spread like wildfire inside undisciplined companies and companies whose IT departments are constrained by capacity or overly frugal, or just perceived as unresponsive.

It’s a couple years down the road that someone higher up looks across the departments and says “Look how many of these homegrown workflows we’ve got all over this company…”

I am certain that Monday is capable of a lot more, in the hands of people with solid systems design instincts/training/experience, but land-and-expand for this tool is user-driven. Monday can make hay while the sun shines, and if it becomes half as ingrained as the Excel analysts… everyone could have another MS Office on their hands.

8 Likes
9

I know there are folks here from the advertising world, and probably understand the current advertising dynamics better. My thoughts here are related to Apple’s IDFA changes which are impacting advertising through social media platforms such as FB and its properties. I’m not sure if that impacts other media platforms and how much of those platforms is currently Monday using to advertise, but perhaps trying to branch out through billboard and TV commercials is not a coincidence.

I think you can develop a bullish and bearish case considering the direction they are taking with targeting TV and having an enormous marketing team - if well utilized and good ROI you can think that their sales could continue to grow with high rate, but if not effective and they are suffering from Apple IDFA than things can get hairy.

2 Likes
10

I see some points raised about MNDY and points raised from outsiders who don’t know the kind of investment style on this board. Note this is a club. So imagine barging in a football club and said: football is bad, let’s play basketball?

  1. Many tech companies failed because they advertised on Superbowl therefore MNDY will likely fail.
  • Logical fallacy. It’s no different than saying all german are bad people because nazi killed many people or saying spit on chinese living in US saying they caused COVID when COVID was originated in a food market in China.

Don’t compare companies selling physical products or tech companies from the 2000. There was failed pets.com from 2000. There’s also thriving chewy.com now.

MNDY is SaaS with $876m of cash and no long term debt with NRR of 130%, positive operating cashflow, quickly approaching net profit. That means without spending a single dollar on advertising. MNDY will not only survive for many years but grow revenue at 20% per year for many years.

  1. Advertising on Super bowl is desperation of MNDY.
    -I don’t think so.
    MNDY is metric focused. Their S&M as percentage of total revenue is trending down. S&M/revenue was 150% in 2019. It’s 80% as of last quarter. It’s trending down every quarter from past 2 years. It’s unlikely that ratio will go up. Super bowl is annual event. So $6m a year out of $67m marketing expense is not crazy. and this S&M budget is likely go grow 10% per year so next year, there’s $6m more available to spend on marketing.
36 Likes
11

Per the link-

https://www.campaignlive.com/article/mondaycom-makes-its-sup…

  • “ The 30-second spot, created by Mustache Agency, will air during the first half of the game in the 19 largest U.S. markets.”

This means Monday.com is not paying the $6 million+ NBC “network” rate but rather “local” rates bought on local NBC TV station affiliates in those select markets. Local ad rates vary and local commercials tend to run between quarters or at half time. The spend is likely to be 7 figures in total but less than $6 million

The article didn’t disclose which markets the spot will air other than suggest it will be in the largest markets, such as NYC, Chicago, LA, SF etc. which makes sense considering their service offering.

6 Likes