Slack - it’s not really a consumer facing product. It’s a business facing productivity product. My point, my opinion, is that both Slack and Zoom are getting a ton of new customers, but the percentage of quality (paying or with the potential to pay) customers Slack gets will be higher than Zooms. So short term Zooms margins will be hit more than Slacks.
In SaaS type business, unlike manufacturing, the large costs are not in the cost of product sold, hence the ultrahigh gross margins. In SaaS the two major costs are R&D and S&M, neither of which is increased by free users. In addition, since Zoom knowns whether the user is or not a free account, it can take steps to throttle back free usage if paying customers are at risk of getting poor service.
Free users are not a threat, on the contrary, every sales organization needs a backlog of potential customers to sell to and Zoom has them in spades. If I may be permitted an anecdote from my days as an insurance agent, I attended a sales training course, it went like this:
1.- Make a list of 100 people you know
2.- Qualify the list, remove names of people you cannot contact, people who don’t have money to pay for insurance, people who don’t need insurance. What’s left are your prospects
3.- Contact your prospect
4.- If on the second visit you have not made a sale, don’t waste your time, drop them from the list
Now think about it in Zoom’s terms, they have a huge list of names. From the usage they can likely filter out the ones who are prospects. What a deal!
I downloaded a white paper from Datadog and got the following email
Hi Denny,
I hope you are enjoying working in the Datadog platform. I wanted to drop you a friendly note as your point of contact here. It looks like you have not gotten the chance to fully configure the platform and want to make sure I can help out as needed.
It would be great to learn a bit about your goals for the trial so I can share some of our documentation and KBs for best practices.
What are some of the things you’re trying to achieve with Datadog?
Hope to hear back from you soon,
Scott
I wish I had had it that easy when looking for insurance prospects!
Back to SaaS, according to David Skok the important metrics are CAC vs. LTV. Think how free users impact CAC and some of them can become lifelong paying users.
Denny Schlesinger