In this masterclass, Wes Bush will interview Scott on how HubSpot approaches freemium acquisition. You'll learn what really drives users to sign up and how you can convert users into customers at scale.
Wes Bush:
Hello, everyone. So my name is Wes Bush. I'm the host of the ProductLed Summit. And today I am so excited to share with you Scott, who is the senior team lead of user acquisition at HubSpot. And today we're going to be talking about a really cool topic that I'm so excited about, which is all about how HubSpot approaches their Freemium acquisition. So, we're going to touch a little bit on Freemium, but also really just diving into how Scott really thinks about user acquisition like an investment portfolio. And what are some things that you could really do and walk away from, whenever it comes to setting up your user acquisition strategy for success? And so, before we really dive in here, I just want to hear from Scott, and really hear how he got into user acquisition at HubSpot. Tell us how you got to where you were, Scott.
Scott Tousley:
Yeah. The short answer is, it was one giant mistake. I guess I graduated from school and worked for a startup, in Los Angeles. And the original plan was, "Hey, go and run these events at different college campuses." So that was what I wanted to do. My dream was doing front of house audio engineering at a huge music festival, out of college. I was like, "Oh my God, that's the best job ever." And then I worked for this startup, and they're like, "Yeah, we're not actually going to do that anymore, but are you open to running our blog?" I'm like, "Like a mommy blog? I don't really know what that means, but sure. I guess I can read about it." That's how I got introduced to blogging, so to speak, and content marketing. Did that for six months, left, went to go work for a really, really good SEO and content marketing agency called Siege Media. It's ran by this guy, Ross Hudgens, who is amazing.
Wes Bush:
Great guy. Yeah.
Scott Tousley:
Yeah. Worked for him for about a year, and then got a job offer at HubSpot. And then kind of my evolution at HubSpot, I worked in content marketing. So we had a product called Sidekick. All that did is it tracked when someone else opened your email. And there's another very smart guy named Brian Balfour. I'm sure a lot of your listeners are familiar with Brian. He graciously, I would say, took a risk on me, and extended me a job offer for the ability to work remotely, which I have been at HubSpot for a little under five years now. Yeah, I started in content marketing, would work on the blog and trying to get as much engagement up as possible. And one really interesting takeaway, we actually had from that blog, is after focusing on it for probably a year and a half, and we're like, "Okay, this is going to be our customer acquisition channel." It wasn't. It actually didn't do a great job at acquiring users. What it did a great job with, is retention.
Scott Tousley:
And so, as we had more and more, we ran a correlation between who are the people who are reading the content, and who are the people who are using the product, and how does reading the content pull them back into the product. We actually did see a pretty significant correlation with that, which I thought was super interesting. And then kind of from there, went on from... My main job was, how do we automate the sales funnel in a very, very low touch to no touch way, to where we have thousands and thousands of people signing up every month? There's no way we can have a sales rep talking to every person. So how do we automate that? And then we built... I think, Wes, you've talked about this a little bit. The product qualified lead.
Wes Bush:
Yes, definitely.
Scott Tousley:
Yeah. We experimented with all these different product qualified lead touchpoints. Did that for a while, then we launched a customer service product. And then I worked on that with a guy at HubSpot named Alex Birkett, who is awesome. I've since transitioned to running more of the greater user acquisition for all of the different product lines at HubSpot.
Wes Bush:
Interesting. And so I love how you really just started with the blogging approach, and really just making that, and you thought at that point, you were like, "This is the channel." And then it wasn't the best driver for it. And so I'm curious, what was it for Sidekick where you started noticing, "This is driving the majority of our users."
Scott Tousley:
Yeah. One interesting one. There's another guy at HubSpot named [Rack Skelb 00:04:45]. He was the paid guy. He was the paid acquisition guy at HubSpot for a really long time. And you go back to 2013, 2014, and we introduce the idea of, "Let's use paid acquisition to pull a new users to HubSpot, which is, paid acquisition is the antichrist of marketing right now." Because that was how we positioned the entire business, is that paid is disruptive. It's not acceptable to be blasting out ads at people. And now we're acquiring most of our users through paid acquisition from Sidekick. We tried to get content marketing to work.
Scott Tousley:
The data didn't show us that it necessarily pulled in more users. Is there some dark attribution? Probably. And we also try to get virality to click, and we couldn't quite get that to the point we wanted it to. But we did do a pretty good job on cross-promoting through other HubSpot BDMs, because at the time HubSpot's getting millions and millions of page views every single month. So we can cross promote via other parts of the blog, the actual HubSpot blogs, because it was a separate blog at the time. Long story short, paid was actually a huge driver at the very beginning. And so much of it was actually spent... At least on the growth team, really working on retention and activation.
Wes Bush:
Okay.
Scott Tousley:
Yeah.
Wes Bush:
Interesting. So whenever you're thinking about how to acquire a lot of users, and also make sure there are actually good ones who end up using the product and actually purchasing it. How do you approach your user acquisition strategy? I know you mentioned, when you were talking a little bit earlier, you approach this like an investment portfolio. But I love to just hear your thoughts about this, and really kind of understand it.
Scott Tousley:
Yeah, totally. But depends on the product. I'll give HubSpot for the example. But anyone who's listening, who's not HubSpot, which is probably most people listening. My favorite framework for starting off with like, "Okay, how are we going to get people to find out about a product and sign up for a product if it's Freemium or maybe free trial. If it's free trial or whatever your goal is and whatever you consider top a funnel acquisition." My favorite framework is from Ramit Sethi. And it's this notion that he calls, "Go where the fish are." It's very obvious and very simple in hindsight, but it's such a good mental model and mental framework for thinking about user acquisition, to where... Imagine you have three different ponds, and you go fishing at one pond, and there's all these people fishing at one pond, and everyone's getting one or two fish.
Scott Tousley:
And then you go to the next pond, and you're getting no fish. And you're like, "Okay. Well, I guess that first pond was better." But then there's this hidden pond off in the woods, and you're the one who finds it and it's this secret fishing hole, and you're just pulling fish out left and right and left and right, and then you just stay there. You don't go to a different. You don't go to the first pond, you don't go to the second pond. You stay at that pond until you are pulling all the fish out that you possibly can. And that's ultimately his model for thinking about, how do I get people to find out about my product? If you're a startup that's done a lot more scrappy, you don't have a high domain authority, so you can kiss SEO goodbye. It's not going to happen anytime soon for you. But what you can do is go on forums, like Reddit, Quora, that kind of stuff. If there's any type of niche community that's out there building to that.
Scott Tousley:
And then paid of course is huge. And kind of getting some form of incentivize virality. Joe. We have a podcast called GrowthTLDR, and we did an episode with Joe, who's the founder. And he talks a lot about virality on that show and how incentivize virality sort of worked a little bit, but not great. And that was interesting as far as when you're early, because Loom, well, they're a little more mature now, but they were very early. And so that was one of the mechanisms that they used was incentivize virality. So anyone out there, I would say that is a very prominent one. But Wes, going back to your question, it's like, how would you think about user acquisition at the very start? Ultimately, use that go where the fish are mindset to identify, where are those ponds so to speak where my fish are at? But I can talk about how we think about it at HubSpot in particular with our model we have right now, if that would be helpful.
Wes Bush:
Yeah, definitely. Go for it.
Scott Tousley:
Okay, cool. Yeah. Ultimately we think about our user acquisition, like an investment portfolio, so to speak. So the majority of users come to HubSpot from two channels, Organic and Paid. So we have a lot of signups that are coming in from Organic, and a lot of signups that are coming in from Facebook AdWords and any variant of Paid acquisition that we have today. So it's awesome because it's extremely scalable, and we're constantly figuring out new ways to grow the number of users we're getting from organic, and grow the number of users we're getting through paid, through different experiment, so to speak. Paid, we run a ton of experiments. Organic, it's somewhat difficult to run structured experiments through that, because there's a lot of variables that are uncontrolled, that are kind of subject to algorithms. So we think about that. We have paid and organic, but we also want to diversify it. So just like with an investment portfolio, you don't want to buy... You don't want to have 40% of your stock and your portfolio in Tesla, and the other 30% of your stock in Amazon.
Wes Bush:
Definitely.
Scott Tousley:
Well, Tesla is probably not a good example now. Maybe Google and Facebook, literally, because that's the same thing. While they both could grow continually, it's still risky, because if one thing happens to the company, it could completely tank. And it's the same thing for us. If we get hit with a penalty or if we get hit with some mass algorithm change that impacts, that totally contradicts all the work we've been doing, then that could hurt us. And so what we try to do is diversify a little bit. And so we want to come up with different acquisition channels, such as trying to get affiliate to work in some way, shape or form, trying to get virality to work in some way, shape or form. We have a third acquisition channel that I can't quite disclose, but we're trying to get that one to work as well. And then a fourth one which I can talk about a little bit if you want, called the Surround Sound Strategy, which is all from Alex Birkett, who's also at HubSpot. I think I mentioned earlier.
Wes Bush:
Yeah.
Scott Tousley:
Yeah. So it's like, we want to acquire as many users as we can and we want to double down on what works. We want to go where the fish are. We don't want to leave that pond until all the fish are pulled out, but it's also risky because once you pull all the fish out of that one pond, you need to hedge your bets a little bit, and you need to be able to know where the next pond is, so to speak.
Wes Bush:
Okay. And so, as you're thinking about developing some of those new channels, whether it's virality or even some of those secret ones, I mean, how do you really go about prioritizing and really even with your budget, for instance? I mean, if we're comparing this apples to apples with an investment portfolio, I know a lot of smart investors will put maybe five to 10% of their money in a place where they're just like, "If we lose it, that's okay. But this 10% could really be the next 90% of our growth." So how do you go about that from even budget planning perspective, and really diversifying your risk?
Scott Tousley:
Yeah. You kind of nailed it. It's almost like we have a VC mindset with acquisition, where it's like, probably most of the bets aren't going to quite work out, but if we can get one of them to work out, and there's a lot of potential for scale, that's incredible. And that's really what we're looking for, is finding that one that has a lot of potential for scale, and then doubling down on that. As far as budget allocation, how do we think about it? We still have most of our resources going into organic and paid, but we have a couple people and or small teams that are thinking through the small invative newer acquisition channels. So as far as budget goes, we're probably looking at about 10%-ish, is like obsessively thinking about new user acquisition through these particular channels versus just kind of keep cranking out on the two channels that are really working for us right now.
Wes Bush:
Definitely. And so one of the things that I've seen again and again, especially talking to so many people at the ProductLed Summit, is founders just using your product as the acquisition tool. I mean, at the last summit there was Olaf who's going through the way he really just built Mixmax off the back of Freemium users, hence it's really incredible just how you can really build your product and have it acquire more users for you that are also high quality. So I'm curious, how have you really tried to approach that and build a product that acquires users for HubSpot?
Scott Tousley:
Yeah. So, one of our VPs of marketing, his name's Kieran Flanagan at HubSpot. He said this before. He was just like, "Freemium..." I think Kieran has said this before. Hopefully I'm not misquoting him. If not, I'm saying it on his behalf. "Freemium is a marketing mechanism. It's not a product mechanism, because you want to ultimately... Instead of your landing page, selling someone that this is worth it, the product sells them that this is worth it." So people can actually sell themselves on the fact that, "You know what? I should buy this." Because of the value that they've actually gotten from the product, versus, "This landing page is pretty convincing. There's a lot of social proof. It seems like a lot of legitimate companies are using this. The reviews are really good. Okay, I guess I'll give it a shot." Which is good, but also not as productive. When we kind of introduced the Freemium model, we were getting ballpark 3X output.
Scott Tousley:
It was about 3X as efficient as not having a Freemium model, as far as upgrades go, just because we're... There's varying levels throughout that. Someone's signing up to be a new user, is some more or less a Lead Gen form, but once someone... The really interesting thing about Freemium, is you have these engagement factors that go into it. Whereas the old school inbound marketing playbook is, write a blog, have an ebook, people will download the ebook and sales reaches out. And so when people are downloading the ebook, what is their engagement? And how engaged are they with whatever it is that you're selling. And that can be a little difficult to tell if you... There is software that will help you learn what are all the different touch points on the website that people are going to? And how are they interacting on the website?
Scott Tousley:
But the interesting thing with Freemium is you can say, "How are they interacting with the product?" And we can look at correlations between features that people are using, and the likelihood that they're going to upgrade. And so then, with onboarding, we can push them towards those features and getting heavier and heavier usage of the ones that have the strongest correlation with likelihood to upgrade. So there's a lot of factors that have kind of gone into the Freemium model at HubSpot, but ultimately, it's one thing that we started off as one giant experiment with Sidekick and Brian Balfour kind of leading the charge on that one, and has evolved into the entire company slowly pulling more and more products down into a Freemium tier, just because it makes sense. And frankly, the numbers show that it works for us.
Wes Bush:
Yeah. You really made me think about one thing, just in terms of the market in general. I mean, there's content marketing, and I feel like it had its heyday, and now it's just getting like, you have the 10X, your 10X content. I mean, there's also growth hacking where you go look at that trends. And as soon as there's one big hack and everyone else finds out about it, it's not really that effective anymore. And so in terms of just like, what is the next lead magnet? Would you really say that Freemium or free trial is the top lead magnet to have, coming up, if you are building a SAS business?
Scott Tousley:
It depends. Huge fan of binary yes or no. Freemium is the future or Freemium is dead. Those kinds of clickbait articles that we're always seeing pop up. It just depends. It works for some business models, it doesn't work for other business models. It largely depends on who the audience is. So for example, if you have an enterprise level audience and you're introducing a Freemium product, it's like, "Yeah, sure. That's cool that they get to try it before they buy it. But ultimately, for an enterprise company to switch products like that, at least at an organizational level, not at a, this has helped me being productive in my personal job or personal life. Like a simple Chrome extension or something that is really quick time to value. If you have something that's a long time to value and requires switching from one platform to the other, and your audience is a larger enterprise or it's a bigger decision.
Scott Tousley:
If you have a Freemium product, it doesn't really make that big of a difference, because your audience is going to go through a full sales cycle anyway, a full B to B sales cycle anyway, analyzing what are the different options?" Everyone has a free trial at least. So they get to try the product, they get to feature compare. There's a lot more discussions internally that will happen. So if you have a full platform product, Freemium can work. HubSpot largely is a platform product, so it can work. But we have a larger segment of audience where we have really small companies that start to use Freemium, and then the bigger companies come in and they want the more advanced feature set anyway, so they go through a full sales cycle. So, is it the best lead magnet ever? Yeah, if small biz is your target audience, or if you're B to C, of course that's pretty solid. Headspace, for example. So it depends, but I don't like giving the answer, it depends, so hopefully that additional context is helpful.
Wes Bush:
Definitely. It is always going to be one of those questions where it gets to the point where it really just does depend. I like that view on it. But I guess it is a last question. If someone was just starting out for their user acquisition, what are some of the first things you'd recommend? Is there another mental model or something you recommend for someone to really dive into or apply to their user acquisition strategy.
Scott Tousley:
Yeah. We always have new people starting at HubSpot all the time, and then people will just reach out from other companies and just ask the same question. What should I do? What should I get involved in? The very first thing I would say is scratched the surface on everything, but put a time limit on it. So if you're just starting off your career, so to speak, in marketing or user acquisition, just dabble in SEO and paid acquisition. Those are the two, honestly that I would start in. And then with SEO, you can kind of subdivide that into technical SEO and more content driven SEO. My background is content driven SEO, and a little bit of the social SE or social content side of things of like, how do you get things to work via PR, via social or whatever? And then start to figure out, what is the most interesting for you, then double down on that, and get good at that, because you basically need to be able to provide some value to the company when you're first starting out.
Scott Tousley:
So whether that's you're a great writer, which can work for content marketing or content driven SEO. You learn the technical SEO side of things. You learn about paid acquisition. And that kind of means segments, bidding, doing ad creative, copywriting, that kind of stuff. You can work on that. Just pick something and double down on it for at least like a year or two, and get good at that one thing. And then you can kind of pivot from there. If you're like, "You know what? Paid acquisition sucks. I'm not really into this anymore." Then you can always take the skills you learned and move on to a different area. If you want to stay in marketing or it could be a complete step shift.
Scott Tousley:
Do you want to go be a product manager somewhere? My favorite mental model, which I've learned again, from Brian Balfour, is one foot in the known, and one foot in the unknown. So do that thing that you're really, really good at, because you need to always be providing some value in one way, shape or form, but also you should be experimenting with these new things that are interesting for you, interesting to you and whatnot. You just don't have a great skillset in those yet, but you can learn them while you're kind of keeping one foot in the known, and one foot in the unknown.
Wes Bush:
I like it. And it really goes against a lot of people whenever they say, "Just niche down, niche down, niche down." And it's like, it's true. You should, eventually one point, but you should start broad first. And really just try some things, because you don't know if something like copywriting or SEO is just going to be your thing where you naturally just gravitate towards it. And so, I love that piece of advice.
Scott Tousley:
Yeah. Kind of the last thing that I'll just leave out on is, as far as career development goes, this is how I think about career development, and I think this is a framework that we continually use at HubSpot. So imagine a three part Venn Diagram. It's one, what are you good at? What do you want to be better at? And what is the business need? And so the goal is to find something that's in the intersection of all of those. You're good at it. You want to be better at it, and the business needs it.
Scott Tousley:
But if you fall into something where you're good at it and the business needs it, that's great, but it's short term, because you don't have that motivation to stick with it over the long-term, because you don't care about it. Whereas you want to get better at it, but you're not good at it, but the business needs it. You're not really providing any value because you don't have the skillset there yet. And so you need to spend your spare time working towards that thing, to where moving it from, "I want to get better at it and I'm good at it, and the business needs it." So kind of that three-part Venn Diagram has been a very helpful model for thinking through career progression and whatnot.
Wes Bush:
Yeah. And so, finding which one can you compromise on. [inaudible 00:26:07] the motivation is business outcome or is it the other one?
Scott Tousley:
Yeah.
Wes Bush:
Yeah, always that fine balance. And so, I know we're at the end of our discussion, but I really just wanted to ask, where can people learn more about you and some of the great stuff you're up to at HubSpot?
Scott Tousley:
Yeah. Thanks for asking. So I do a podcast with our Kieran Flanagan who works at HubSpot as well. That podcast is called GrowthTLDR. That's probably the fastest way, or the best way just to keep a pulse on the stuff that we're doing, and stuff that we're working on. And if you have questions and you want to me personally, my website's... It's just my name, scotttousley.com, and there's a little live chat widget in the corner, and you can just send me a message which goes to my phone.
Wes Bush:
Perfect. And one of the things that I will mention about the GrowthTLDR podcast, is that is just a really fun podcast. I mean, there is a lot of growth podcasts out there, but it's really hard to have that balance where it's like, "Where's that kind of entertaining really presenters as well as you're learning something from it." And so I felt like you guys, both Scott and Kieran, have done a fantastic job, of just finding that balance of, where is that entertaining side of the business outcome? It's not all serious, but it's also still really useful. So, kudos to you guys for putting that together. It's great.
Scott Tousley:
Yeah, thanks. And anyone who's not aware. Wes was on the show recently too. So go ahead and search for that episode with Wes, and definitely listen to it.
Wes Bush:
Perfect. Well, thanks so much, Scott, for hanging out on this call. This has been a great chat.
Scott Tousley:
Cool. Thanks, Wes.
Wes Bush:
All right, bye.
