Ah the death of yet another Free edition pic.twitter.com/5DBtQghaWO
— Jason ✨Be Kind✨ Lemkin (@jasonlk) April 11, 2023
So folks in general are under more pressure to hit numbers and the plan than just a few quarters ago, and at bigger startups, that brings up a question in so many investor meetings and board meetings I attend at $30m+ ARR:
Should we cut off our long tail? It just takes up so much time and resources, and just isn’t generating much revenue anymore.
What I mean is, in the early days, everyone is excited about your Free users, your single-seat customers, and the little guys. But later … that fades:
- Sales doesn’t want to deal with smaller leads.
- Marketing doesn’t get much credit for tiny opportunities.
- Customer Success wants to automate away small customers.
- Support is overwhelmed with Free and Small users if they get support at all
- Product is under pressure to ship the big features for the big dollars, and stops investing in the long tail
You just plain run out of internal champions for your Long Tail. I had two discussions just last week on this, one with a great SaaS company at $30m ARR, another at $140m ARR.
And the math in the short-term makes sense. I see so many SaaS and B2B companies end up with their long tail and smallest customers only contributing a single-digit percent of revenue as they scale, even if it starts off much higher. Here’s an interesting chart from Box that illustrates some of the point. As they crossed $800m in ARR, only 8% of their revenue was from self-service, and it’s even less today, I’d imagine:
The one bit of advice I have again and again is .. if you have a “long tail” of champions, of 1000s or more active customers or even just users, singing your praises left and right … that’s a marketing, PLG, and brand asset to protect at almost all costs. Not to take for granted. And importantly, not to be overmonetized. It’s far more rare than folks realize, and it’s part of the key to cost-efficient scaling. At the end of the day, almost every leader in software gets most of their new customers from word-of-mouth. And your long tail is the best, biggest, simplest, cheapest way to productize and scale word-of-mouth.
So when I’m in these meetings, where everyone on the exec team wants to cut back the long-tail, to cut back the Free edition, the cheap edition, the starter edition. To cut the free trial from 60 days to 48 hours. I always try to calmly ask for a pause.
Usually, the CEO is really the only one in the room that can stand up for real for the long-tail. Everyone else just has too many tough goals for this quarter and year to hit.
It’s gotta be you.
And let your long tail atrophy, stop investing in it, and … you lose that asset. If nothing else, think of your long tail as your community. Yes, if you have a long tail of users, you have a community, even if you don’t realize it. And community is just so powerful.
I saw this firsthand back in the day at Adobe Sign / EchoSign. After I moved on following our acquisition, the Free edition was immediately shut off. They took, on average, 8 months to covert to Paid, and asked lots of questions, and took up real resources on the team. While getting rid of Free made folks’ lives easier in the short-term, it also started a market share decline that was never arrested, and importantly, also a mind share decline. Too many champions, too many folks that wanted to calmly try before they bought, too many grateful folks in that long tail … just stopped signing up. The product still does hundreds of millions in revenue today. But with less than half the mindshare it used to have. What would it have been with that asset intact?
A deep dive on why GitLab sees community (and long tail) as its #1 marketing asset here:
And a related post here:
long tail image from here