HubSpot's Strategy for Winning the Marketing Automation Horserace

Back on September 20, I posted various tips from the Inbound Marketing Summit and HubSpot User Group. Naturally, the conference also included public and private discussions of HubSpot itself, but I thought those were best shared in a separate post. Here goes.

The conference yielded a clear picture of HubSpot’s business strategy for the coming year. This strategy has two main elements, which were set out by CEO Brian Halligan in his keynote:

- expansion to “middle of funnel” marketing. HubSpot originally focused on “top of funnel” or “inbound” marketing, which boils down to helping marketers to attract Web traffic. In concrete terms, it involves blogging, search engine optimization of Websites, and social media messages. The company is now doing more to help marketers nurture the leads its attracts.  This involves strengthening its “middle of the funnel” tools for more powerful email, better segmentation and content selection, and enhancing lead profiles with data from social media.

“Mid funnel" is the territory of standard B2B marketing automation, although HubSpot largely avoids the term. Indeed, CTO Dharmesh Shah said their goal is to “leapfrog” current marketing automation vendors by replacing their focus on email marketing with a focus on social media. HubSpot also plans to automate functions that are simply too hard for most marketers to do manually. These include segmentation, building lead scoring models, and content selection. To be clear, this isn't about building a simpler interface.  It's about having the system perform tasks without any user effort.

- allowing other companies to offer functions and services to HubSpot customers. This lets HubSpot extend its scope without developing all the features or delivering all the services itself. The key initiatives here are a “platform” program and app store that allow HubSpot partners to sell products that integrate directly with HubSpot’s data and user interface, and a “services marketplace” that makes it easy to find vendors for marketing tasks such as program design and content creation. Shah said the marketplace will rate vendor performance by looking at results captured within HubSpot.  For example, it might report how much traffic is generated by content from different providers. That’s an intriguing concept, although I’m not sure how vendors will feel about that sort of measurement.

Benchmarking in general is another aspect of HubSpot’s strategy. Like automation and use of external resources, benchmarking is aimed at helping marketers become more effective without consuming HubSpot resources. The company already provides benchmark reports that compare a client’s key metrics with averages for all HubSpot clients, for top 10% clients, and for similar companies. Shah said it is working on additional programs to help marketers measure their progress, such as comparisons among companies who start using the system at the same time.

- Halligan’s keynote also listed a third theme for the coming year: application maturity. He gave current HubSpot applications a C+ on his report card for the previous year and said blogging and Web content management are targeted for improvement. He also cited previous enhancements including custom fields in list imports, custom lists and segments, increased email limit from 5,000 to 50,000 messages, better email templates, optimized email for mobile and social platforms, and improved Salesforce.com integration. HubSpot's purchase of Performable  will also improve its Web analytics, event tracking, and email campaign capabilities. Performable is still largely separate from the main HubSpot application but is expected to be fully integrated by the end of this year.

Maybe it’s just me, but I see application maturity as table stakes, not a major strategy. HubSpot is quite clear that it isn’t aiming to serve the most demanding users, but remains focused on small businesses who want a single, simple solution to their basic marketing needs. (Well, they do sometimes admit they plan to creep upmarket over time.)  I appreciate the company’s candor in admitting that its applications could use improvement and hasten to point out that I haven’t heard  more complaints about HubSpot than anyone else. But it’s clear their goal will continue to be making simple things easy, not complex things possible.

What Does It Mean? As I’ve written before, HubSpot is one of those very well-run start-ups that define a sound, long-term strategy and execute intelligently and relentlessly. The top of the funnel, where there was less competition, was a good place to start.  Extending from there to mid-funnel makes perfect sense as a way to add value and to preempt or displace other marketing systems. Adding the platform and services marketplace both enable further growth with minimal investment, and (perhaps more important) make it easier to recruit allies in the sales process.

But, smart as those strategies are, they’re fairly standard. Much more intriguing are HubSpot’s bets that it can radically simplify marketing tasks through automation and that the primary marketing channel will be social media instead of email.

Although I’m a great fan of automation, it’s not at all clear to me that it can be more than a productivity enhancement tool for skilled marketers, as opposed to actually making skills unnecessary. Okay, I can already hear the rebuttal: “We’re not saying skill isn’t needed but that we can reduce the level of training and effort required.” Well, sure. But the question remains: can automation reduce those requirements enough to matter? For what it’s worth, the amount of work remaining for users was also my original criticism  of HubSpot’s SEO tools. Those do seem have pleased many users, so I’ll certainly entertain the possibility that HubSpot is on the right track.

Similarly, HubSpot would surely point out that they’re not abandoning email, but simply adding social media as an increasingly important alternative. Again, granted. But all other marketing automation vendors are also adding social media capabilities. So I think it’s legitimate to ask whether there is anything fundamentally different about HubSpot’s approach, or, setting a slightly lower bar, whether a mindset that sees social media as primary actually leads in a different direction. I haven’t seen anything so far to suggest either is true*, and think there’s a pretty compelling counter-argument that it’s more important to take an integrated view than try to treat any channel as primary. But the jury’s out on this one too – we’ll see where HubSpot goes with it.

Bottom line: like every marketing automation vendor, HubSpot is wrestling with the fundamental challenge of enabling marketers to do all the new things their system makes possible.  Expanding the product scope and its surrounding ecosystem will help, but others are doing the same.  HubSpot's hope that automation can close the skills gap is a fundamentally different approach -- and while the company isn't betting everything on that one horse, it will certainly win big if it's right.

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*For a good overview of HubSpot’s social media features and an explanation of why they bought social media marketing software company oneforty in August, see their blog post announcing the oneforty acquisition.