SaaSletter - A New B2B AI Interest Index
Interest at the "Atomic" level for now, TBD on "Compound" AI applications
B2B AI Interest Index
We’re excited to debut a new research series: B2B AI Interest Index with data through November 2023.
We chose “Interest” instead of “Demand” to reflect that nascent AI-related search volumes have insufficient high-intent levels.
Reminder: this is a directional, free, and ever-evolving analysis → always do your own due diligence.
Incumbent SaaS AI Trends
Using the same 340 companies in our SaaS Demand Index, we examined AI-related search volumes (think “canva ai”).
Overall, interest peaked in March 2023 and has declined to a plateau-like state.
Looking at *company-level AI* search volumes has inherent limitations and volatility. Specifically, it will be heavily influenced by AI product announcements.
Unsurprisingly, the highest interest levels occurred in the spring of 2023 when many AI features were announced by incumbent vendors.
That said, there could still be a signal in decline - if new AI features were wildly popular and generating word-of-mouth buzz from happy early adopters, volumes would be more stable, if not accelerating.
A theme we see throughout: interest is at the “atomic” and “enabling” level (like Collaboration + Productivity) and not yet for “compound” applications (where multiple atomic AI features are aggregated to create a powerful, compound AI application).
Of course, this atomic:compound ratio reflects the relative user pools: the pool of Canva and Notion users (sometimes referred to as “prosumers”) far exceeds the number of specialists exploring RFP.io’s AI features.
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Blue Chip AI Trends
With a view to our many institutional investor subscribers, we zoomed in on a basket of 11 vendors as “blue chip” bellwethers for broad B2B AI interest.
Importantly, the Blue Chip Basket includes Microsoft Copilot and Google Workspace.2
Again, *company-level* search volumes are highly influenced by product announcements.
Microsoft announced general availability for enterprise access to Copilot on November 1, 2023, which surely contributed to November’s surge in search volumes.
Notably, Microsoft currently has a 300-seat minimum (at $30/mo list = $108,000/year) for enterprise Copilot → Depending on how well-known3 this minimum is, it will influence the number of SMB and Mid-Market AI searches.
September volumes were likely influenced by Microsoft’s September announcement of *consumer* general availability.
Dating back to December 2021, Salesforce has consistently had the second-highest AI interest levels.
Arguably, we see the themes of Atomic > Compound: clear #1 = personal, knowledge worker day-to-day productivity gains via Copilot in Office 365.
(Obviously, the sheer size of Microsoft’s user base relative to even Workday/Zendesk/Tableau distorts the analysis)
Native AI Trends
We also created a (non-exhaustive!) basket of 50 AI Natives. Interest in Native AI apps is below its 1H 2023 peak.
Just like our Incumbents, volumes are dominated by the Collaboration + Productivity and Marketing (especially copywriting tools like Copy, Jasper, and Writesonic) categories due to their larger (prosumer) user bases relative to specialized enterprise categories.
To be clear, the 50 AI Natives list includes vertical applications, such as Legal (like Harvey or EvenUp) and Healthcare (like Augmedix).
The mix of Native AI interest seems to again reflect the atomic AI > compound AI theme.
Category Level AI Trends
We also explored AI interest at the category level (n = 47 keywords, think “ai supply chain” + “ai network security” + “ai sales forecasting”) which a) lessens company-specific volatility and b) recognizes branded company search is less likely at AI’s maturity level.
Category-level AI interest is 4% below its May 2023 peak.
Comparative Trend Summary
In absolute terms, the Native AI 50 has the highest combined search volumes - 4x that of Incumbent SaaS.
Given very, very low starting bases, looking at relative interest growth is a flawed exercise. We will still include head-off questions.
Just like the saying “valuation matters,” AI narratives and expectations matter.
Relative to *my* perception of consensus and positioning, *this* B2B AI Interest data is underwhelming.
While less underwhelming at the Category Level, I will repeat an earlier Company trend comment: “if new AI features were wildly popular and generating word-of-mouth buzz from happy early adopters, volumes would be more stable, if not accelerating.”
That said, we are still so early in terms of B2B AI adoption. In a B2B context, perhaps a search volume framework requires a bit more marketplace maturity that you can’t expect in a matter of months since AI broadly “debuted”?
Nonetheless, the spirit of these Index research series is to provide a forward indicator even if only directional.
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Weaving In Morgan Stanley’s Latest On AI
A recent note from Morgan Stanley’s Thematics team definitely influenced my view on what AI narratives have been priced in: AI Enablers gained $6 trillion in market cap and were up 111% in 2023
As I was writing this, Morgan Stanley’s Q4 2023 CIO Survey (n=100, bulk in $1b-$5b revenue range) came in. Here are my relevant AI excerpts:
AI timelines delayed slightly vs Q3 2023 Survey (+800bps in 2025 and 2025+ adoption):
Interesting data on the funding pools for AI investment:
Adoption outlook for Microsoft AI offerings:
and Morgan Stanley’s “GenAI Precursors” interpretation aligns with our atomic > compound take:
CIO Priorities and Consolidation Preferences Align with our GenAI Precursors
As enterprises prepare strategies to incorporate GenAI innovations into their IT architectures, software geared at lowering frictions to building and utilizing this new technology, which we refer to as 'GenAI Precursors', is poised to benefit. In 4Q23, Datawarehouses / Business Intelligence / Analytics screened as #2 on the CIO priority list.
Search volumes are correlated but distinct from (freely available) Google Trends. For investing and research purposes, I strongly recommend volumes over Trends wherever feasible.
Microsoft and Google are not currently included in our SaaS Demand Index (n=340) work.
Calling out a representative quote on Microsoft’s GA announcement:
“I represent a smaller enterprise technology company. We use Microsoft 365 E5 licenses for all users. We would benefit greatly from Microsoft 365 Co-pilot. However, it looks like it isn't available to small companies with less than 300 users. It's a little disappointing that the marketing and all discussions have indicated that Copilot will be GA today, that is however not the case. We are hearing we must have 300+ licenses minimum. A lot of people are going to be disappointed to find that that GA only applies to larger enterprise clients and the rest of us are being left in the dirt. A smaller, enterprise company with less than 300 users could arguably benefit from the Copilot capabilities as much or more than a larger company to automate, simplify many tasks that a smaller company can't always for. If I may make a suggestion for your marketing and technical teams to be more transparent in what GA means. Your customers think it's available, when in reality it's not available generally.”