SaaSletter - New Jan'23 Demand Index Data

Was January a "green shoot" for SaaS Top of the Funnel (TOFU)? Or seasonal?

With the latest data just in, I’m excited to update the SaaS Demand Index with data through January 2023.

PDF slides here.

Reminder: this is a directional, free, and ever-evolving analysis that I’m open-sourcing → always do your own due diligence.

Industry-Wide Data

January high-intent search volumes came in surprisingly strong.

Our data source is NOT seasonally adjusted. However, I’ve laid out a broader data set to set the context for January seasonality.

The January "spike” (likely a combination of moving past the holidays AND the fiscal year ending Jan 31 sales cycles) looks to be a repeating trend, including 2023.

Trends By Product Category

Once again, Development + IT Management and Security are the strongest performing categories on an LTM basis. That said, Development + IT Management is decelerating.

E-Commerce and Marketing continue to lag behind the industry but show some signs of rebounding.

A few comments on notably strong last 3 month + January trends:

• Industry Specific (aka Vertical Software): driven by Jobber, BuilderTrend, Bloomerang, Blackbaud, and Accelo

• HR + HCM: notable strength from Checkr, Paycor, Absorb LMS, and Deel

Selected drill-down pages are published below…

while all of the category drill-downs are available in this PDF.

Selected High-Performing Categories:

Selected Lagging Categories:

Ad Pricing + Competition

Comparing January 2023 to October 2022 (to eliminate the December lull impact), the weighted average cost per click (CPC) for the industry increased in the high single digits…

…and the level of ad competition declined in the mid-teens.

Methodology Refresher

• Driven by high-intent Google search data (i.e. "okta pricing")

• Developed using a commercial SEO software suite

• n = 340 SaaS companies - Selected for representation (by category, company stages, by customer type) to approximate the overall industry

• Given the typical sales cycle, consider this a rough PROXY for top-of-the-funnel demand ONLY and NOT indicative of near-term bookings/revenue

Even More SaaS Content

“The Dark Knight of Software's Multiple Floor” - Bullfight Cap Substack - an excellent, excellent post on software private equity, including these charts:

Matt Harney @SaaSletter

Great examination of Vista returns vs liquid software stocks -> Adjusted for leverage, no alpha /2

Matt Harney @SaaSletter

Very, very good look at deal profiles before 2016 and after 3/

The January 2023 sales quota attainment from RepVue continues to be weak:

Matt Harney @SaaSletter

Checking in on @repvue data as a real-time indicator for the state of SaaS sales: January '23 Update = GRIM: - Enterprise Reps: 41% hit quota, down 1% MoM, down 14% YoY - Mid Market: 45%, down 1% MoM, down 13% YoY - SMB: 42%, down 2% MoM, down 28% YoY

Matt Harney @SaaSletter

Checking in on @repvue data as a real-time indicator for the state of SaaS sales: 🆘December 2022 data update = 🔻down across *all* segments, esp SMB (🔻9% MoM) ENTERPRISE REPS - 42% quota attainment Down 7% YoY Down 3.5% MoM https://t.co/5eG2FuTKca

And efforts to contain cloud spend are on the rise:

Matt Harney @SaaSletter

In light of the "Big 3" earnings reports, a rough but directional analysis using Google Search data (via an SEO suite): Cloud Cost Optimization searches up +69% YoY thru Dec'22 As a line item grows, so do incentives to manage more closely $AMZN $MSFT $GOOG