Enterprise software: Disruption through content and advertising?
Imagine this scenario: SaaS enterprise software vendor gives away their enterprise solution for free in exchange for access to the underlying (anonymized) data and /or their users’ eyeballs. While this may sound like a far-fetched scenario, I do not think it is. Let’s look at a couple of examples…
Content: According to Outsell, a leading market research firm dedicated to this industry, the data industry is worth more than $400B. While this figure includes categories such as news, search, education and directories, the addressable market for data consumed within the context of enterprise applications is more than $45B. Companies such as Nielsen, IRI, Thomson Reuters, and Dun & Bradstreet have built multi-billion dollar businesses on the premise of getting access to enterprise data (such as point-of-sales and financial performance data), aggregating it and selling it back to enterprises. In addition, a number of smaller companies such as ZoomInfo and Jigsaw (which was acquired by Salesforce in 2010 and is now integrated in data.com), leverage publicly available contact information to help sales and marketing professionals target their campaigns. And of course, let’s not forget LinkedIn with its recent forays to monetize its 150M+ user base beyond its core recruiting market. No enterprise software company however has been able to tap into its rich customer data at scale.
Advertising based monetization: This is an area that is largely untapped within the enterprise. The one glaring exception is Spiceworks, a company most of us have never heard of. Spiceworks was founded in 2006 on this very premise and has already raised $54M in venture funding. They provide a free network management solution for IT administrators, and have since built a 2M member community that they monetize exclusively through targeted advertising.
In my opinion, the largest opportunity lies in the enterprise SaaS market, both because of the implied consistency of the underlying data models across customers, but also because of the increased flexibility to serve this advertising. The four largest enterprise SaaS companies claim more than 125K customers and more than 18M users. Now imagine the value of being able to benchmark your sales, supply chain, financial, HR, etc. performance with that of your peers all from within your enterprise solution. Now also imagine that while you are reviewing the performance of your widget suppliers, you receive a targeted advertisement from a supplier you are not currently doing business with.
Now I do realize, there are many potential concerns for both
- SaaS enterprise software vendors: How can I fund my significant upfront R&D expenses if I can’t monetize immediately, and their,
- Customers: How could I ever possibly entrust a vendor with my sensitive data, how could I allow my enterprise software vendor to distract my employees with advertising while on the job?
But, are they really that insurmountable?
What do you think? Is this a far-fetched scenario, or is the SaaS enterprise software industry ready for disruption?