State Of HubSpot: CEO Halligan Eyes The Marketing OS With His Company's Platform

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HubSpotBrian Halligan is CEO of HubSpot, a marketing software company.

His company has grown from generating leads exclusively for small business to embracing the same opportunity for mid-size companies. Halligan discussed his company's quest to create a marketing OS as well as recent company developments with AdExchanger.

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AdExchanger: In your 2009 interview with AdExchanger, HubSpot was positioned around the SMB and social marketing. How has your company’s positioning evolved?

BH: There have been a couple things that have evolved for HubSpot over time. When we first came into the market, we were focused on small businesses. We called the persona "Owner Ollie." He runs a small company, does a little marketing himself on the side. Typically it's a business with 20 or less employees. Over time, we were selling to Owner Ollie, but we've moved up a bit. There's another persona we've developed called "Mary Marketer." Mary Marketer runs a marketing department in a mid‑sized company between 20 employees and 1,000 employees. When we spoke a few years ago, we maybe had 80 percent of our business in Owner Ollie, and 20 percent in Mary Marketer. Today I would probably say it's 80 percent in Mary, 20 percent in Ollie.

Do you describe what HubSpot does as marketing automation?

A couple of thoughts on that. My first thought is that the last thing companies should do today is automate their marketing. There's been a big change in the way we all live, shop, learn and spend our daily lives. I think about my dad, and the way he lived, shopped and learned. He had six TV stations, and two newspapers, and a bunch of mail and phone calls. Then I think of myself, and I have six thousand TV stations, a people I follow on Twitter, a lot of people on Facebook - just a radical, radical change in the way I consume information and learn.

The last thing you want to do is automate the way you've been marketing for the last five, 10, 20 years. I just don't think the marketing playbook works well anymore. HubSpot's more a marketing transformation system than a marketing automation system.

When I think of marketing automation and the way the industry describes it, I think of the funnel. As you get the top of the funnel, how do you get found, how do you get leads into your system? That's really where HubSpot started.

Over time, we've helped our customers get lots of leads, and what they're asking us to do is "How do you help me segment them smarter, and nurture them by email and social in smarter ways?" I think of marketing automation as very smart email marketing. It works much better than traditional email marketing.

Hubspot's got that functionality. I just have an issue with "marketing automation." Folks should be transforming, not automating.

Do you have a typical use case you can share with me on HubSpot today?

Sure. When we started the company, there were basically two observations we had. One was this idea of the big change in the way humans live, and the marketers need to make the shift. The second big idea we had that is if you wanted to make that shift, it was just a "bear." The broad use case for HubSpot is about pulling all of that stuff together into one, simple integrated system. The marketer lives in HubSpot all day, kind of like the sales person lives in Salesforce.com all day.

Can you talk about a real world example of HubSpot in action?

Let's say you want to start a blog, or you've got a blog. Within HubSpot, step one is to write the article within HubSpot, so you type it out. Because HubSpot knows your keywords you're trying to optimize for, it automatically optimizes it for you, it suggests how you should write it in a way that'll be search engine optimized. Then when you publish it, you publish it to your blog, but it doesn’t just publish to your blog, it publishes it to Twitter and Facebook for you automatically. It makes sure you've got all the social media set up. When it publishes it, it'll give you a choice of which call to action would you like to put on the bottom of your blog articles.

You've got different landing pages. Which ones do you want to link to? It automatically puts a nice call-to-action on there. Then when the user clicks on that call-to-action, they land on a HubSpot landing page. You build that landing page out with HubSpot, you can AB test it within HubSpot. There's a form on that landing page. The customer fills out the form - once they fill out the form, then they get lead nurtured through HubSpot.

That flows gives you an opportunity to see HubSpot end-to-end and how we help a potential customer. Instead of having blog and software and social media tools, and landing page tools, and lead nurturing tools, it's all built into one really slick integrated system.

In terms of the target market and "Mary Marketer," what's next here? It feels that this is very much a B2B application. Do you get into B2C at some point? Or, ramping up to the Fortune 500 companies?

The way I see it playing out is HubSpot started as an application to help you get found in Google and social media. That was step one. Step two was we moved into more of this suite where we can help you get found, and help you convert and do what you were referring to as marketing automation. We're in that phase now. The next phase for us is platform. We've opened HubSpot up, we've opened APIs, and we've got really interesting third parties building applications on top of HubSpot.

When you get HubSpot, you get your core SEO, social media, blogging, lead management apps, but then there's a hundred other applications built by third parties that you can download. That's the road map for us - how do we move from the suite to more the platform? How do we become the iPhone or Android of the industry?

There's some talk of either a marketing stack, an end-to-end solution and/or an advertising OS. Is HubSpot platform the advertising OS for your target market?

We call it all-in-one marketing software, but you could call it a marketing OS. I'd avoid using the term advertising OS, because advertising is part of the marketing mix. A lot of our customers mix the traditional outbound advertising stuff with a lot of this inbound stuff of "How do you create content?" and "How do you earn attention versus just paying for attention?"

…I cringe a little bit at the "advertising OS." It’s more a marketing operating system. And the companies who tend to win those games long term are the ones who pull in a lot of users and a lot of customers, and they use those customers and users to attract developers. They build this big ecosystem around their product, very similar to the way Android and iPhone systems are like that.

That's the game we're playing and we’re feeling good about the playbook. We're in the second inning of the playbook, too.

What do you think agencies can learn from what you guys are doing?

It's a great fit. Their world's changing a lot, and they've got an opportunity to become, instead of an advertising agency or a PR agency, to become that marketing transformation agency. How do they sell to the CEO and the CMO? How do they sell a bigger transformation story? How do they turn themselves from being in a pure services business into becoming a services business and a software business? We have an agency program at HubSpot, and about 40 percent of our new revenue comes through agencies. There are about 500 agencies that are part of our network. The agency world is going to through a radical transformation over the next couple of years. We're trying to "hand hold" our partners through that.

If you were guiding an agency right now, other than work with HubSpot, what do you think you might be doing to prepare the agency?

I'm a big Wayne Gretzky fan; I love his expression "Skate to where the puck is going." I would be leaning forward on my skis on the future of marketing. When I think of the marketing industry, I think of the horse and buggy industry a hundred years ago. In the horse and buggy industry a hundred years ago, there were thousands of businesses making horseshoes, saddles, whips, carriages, and so on. A hundred years later, that industry has been decimated by the auto industry. It's been a huge transformation. Similarly, marketing is going to go through a massive wave of transformation over the next 50‑100 years. Such a radical shift in the way humans behave, marketers have to rethink the playbook from scratch. I would be very aggressive in embracing all the new stuff that's coming out, and resist the old stuff.

Another thing that I would add, what agencies tend to want to do, particularly advertising agencies, is they have this advertising model that worked on television, or it worked on radio. They got it to work a little bit on Google AdWords. The traditional advertising model doesn't translate that well into social media. Just taking those dollars you spent on television and buying Twitter ads and Facebook ads - it's a very different way to think about it, and it doesn't apply as well.

My encouragement to service providers would be to...think about "How do we create a modern, earned media strategy?" Because that's what really works in social media – it’s more content creation on the earned media side.

What about cross-channel opportunities in mobile, video, display, etc? Does HubSpot have a cross‑channel approach?

The way I think of channels into a business is you have your mobile, Facebook, Twitter, Pinterest, LinkedIn, and all these channels lead back into your "hub" site or your website. We try to help people with all of that. Email is one of them.

I think of the top of the funnel as your channels in, your mobile, your Pinterest, your Facebook, your Twitter, your LinkedIn, your email channels which all pull into your website. Your website is essentially a ton of different well‑optimized landing pages.

So we help people with all of that - pulling it together and then provide reach across those channels. So, I'm a big fan of the cross‑channel stuff.

The one thing that I cringe a bit regarding across channel is that I'm allergic to stuff I can't measure. So I have a hard time with stuff like billboard ads. They're just so hard to measure. They may work but I went to MIT and I just love data. I get a little nervous about stuff like that. I get nervous about any television advertising. It's just so hard to measure.

You can measure it. You can run something in one city compared to another. It's so hard though. So the offline stuff, it's got two disadvantages for me. One, I just can't measure it. The other is it just seems to me like attention is moving away from it.

Attention is moving away, for example, from television, not only because people aren't watching as much television but because they're getting so good at blocking the ads out. So the offline stuff I'm not as psyched about for marketers. But the rest of it, I couldn't be more excited about it. I love stuff you can measure.

I want to touch on revenues here. There was an article recently in Boston Business Journal reviewing some of the notes on HubSpot over the last 12 months. It sounds like revenues slowed in 2011 more than you expected. Is that correct? You originally thought revenues were going to double and then HubSpot made an 81 percent increase year-over-year. What's your view on revenue momentum today?

I'm feeling good. We were 86 percent year over year in Q1 on revenues and 117 percent year over year in bookings. I feel like we're doing great.

What milestones do you have your eye on for HubSpot in the next 12 to 18 months?

I would like to move from being a private company into a public company at some point. That will be an interesting milestone. I would like to move from a suite to a platform and be the first. We feel like we can standardize the marketing industry on our platform. How many apps can we get? How do we really crank that up?

That's where we're headed - how do we get lots of app providers and lots of users and make the product much better for our customers through that?

Is there a standardization need in the app world? It appears to be a model that's going to take over in the world of advertising and marketing.

I don't know actually. That's a good question. I would say that in more mature markets, if you think about CRM, email marketing or you think about even your own use of email or your document system, even in the move from client‑side software to web‑based software, there's been some standardization.

We certainly aren't there in marketing. There are a lot of different players in the marketing space and they're all doing things differently. I suspect within the next four or five years there will be some breakout winners, and hopefully HubSpot's one of those breakout winners, and that standard design will emerge.

I think of a car. You've got a standard design of a car where you've got the steering wheel on the left, you've got the glove boxes on the right, you've got the gear shift in between. I think that will happen in the marketing software industry like it has for others.

I don't think it's happened yet. We're trying to create that standard metaphor.

Finally, is there something that can be learned by the marketer with HubSpot as it relates to driving brand awareness either now or in the future? Obviously, this is what TV has been doing for years and now they're turning to online for solutions.

The key for brand awareness these days is around doing this inbound marketing stuff right. We've got 6,000 some odd customers. When I look at the ones that are doing great on brand awareness, it's the ones that combine creating brilliant content ‑ eBooks, webinars, blog articles, you name it - and they're very clever at marketing and engaging with other people around that content in Twitter, Facebook, Pinterest, LinkedIn, all these different social media sites. There is this one plus one equals 10 effect on the brand when you can do both of those.

What I've noticed people doing is they're getting active in the social media sites but they're not contributing original content to it. It's the content that's that multiplier effect and they're missing the piece of the puzzle that's dramatic.

I teach this class at MIT and I have a viral marketing lecture. It shows the map on what happens if you're active in Twitter and Facebook and LinkedIn but you don't contribute original content, versus you're contributing original content and you're active. The viral coefficient is just much higher and you just get so much more leverage.

Now what I like about all of that stuff is each piece of content is a permanent asset for you on the balance sheet versus an advertisement where you're renting space somewhere. When you own that blog article, when you own that eBook, that webinar, it's a permanent thing that continues to pull in customers over time.

So in my mind, the way to crank brand today isn't radio ads or television ads. It's about brilliant content and being very active in the social media sphere. The better your content, the more followers you're going to get on Twitter, Facebook fans, et cetera.

It's that one plus one equals three that creates awesome brand awareness. That's what we do here at HubSpot ourselves.

So you must agree that the marketer is becoming a publisher?

Yes, the marketer is the publisher today. That's how you win.

Another thing about marketing that's interesting, it used to be all about how much money you had. And money, if you could deploy that money through radio and television, you could get lots of brand awareness.

It's harder today. It's more about the width of your brain than the width of your wallet. You could still do a lot of with money, but it's how creative you are.

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