HootSuite's core business is in licensing software for
social-media listening and management to large marketers like
PepsiCo, Virgin, Orange, Sony Music and HBO. Fees
charged depend on the number of employees granted access. CEO Ryan
Holmes said HootSuite is charging enterprise clients anywhere from
five figures annually up to the high six figures. He said he's
pursuing seven-figure deals where tens of thousands of employees
within an organization would be using the software.
But HootSuite -- which has about 320 employees, up from 140 in
March 2012 -- doesn't lack for competitors, running the gamut from
the slickly marketed Salesforce Marketing Cloud, whose component
parts include the former Radian6 and Buddy Media, to smaller, more
niche startups like Spredfast.
HootSuite's announcement also comes on the heels of less
auspicious news for another social-marketing startup with a
Canadian founder. Syncapse -- a firm that was competitive with
Buddy Media, Vitrue and Wildfire but didn't manage to find
a Silicon Valley tech company buyer like they did --
filed for bankruptcy this week. It's notable as the first well
capitalized social-marketing startup to go bust.
HootSuite is "cash flow neutral," according to a spokeswoman,
with all profits being reinvested in the business. Mr. Holmes sees
its "freemium" model -- where individuals can use the service for
free to keep tabs of their various social feeds -- as a significant
advantage over competitors. Over time, existing users have been
converted to paying customers, and Mr. Holmes said that 50% of
enterprise users once used the free version.
"This means we have a very low-friction way of onboarding
enterprise users," he said, noting HootSuite's 7 million users.
"This is a really unfair competitive advantage that we have."
Getting into the ad business
HootSuite also wants to get in on another crowded field: the social
ads business. It's eventually opening up a new revenue stream
selection as a Twitter Ads API partner; it was one of only five
chosen when the program was announced in February. The partnership
means HootSuite can build software on top of the Twitter ads
platform to let brand clients test campaign-performance factors to
gauge which ad creative works best and for which audiences, for
Mr. Holmes said HootSuite is slowly releasing its new Twitter
ad-buying tool to enterprise clients, but it's not charging them
yet. It's also working with Facebook to get approved as one of its
many Ads API partners. To be determined is whether it charges a
licensing fee, arranges to take a certain percentage from Facebook
or Twitter for buys that exceed a certain amount, or charges a
percentage on top of the ad units that marketers buy using its
The huge capital infusion will fund hiring and HootSuite's
international expansion, Mr. Holmes said. (The company already has
employees throughout Europe and in Australia and Hong Kong.) It
could also potentially bankroll acquisitions of analytics and
ad-tech companies. Finally, it intends to start doing marketing,
which will be a company first.
"Users got on board with the product through word of mouth," he
Founded in 2008, HootSuite wasn't awash in cash at the
beginning. It raised $1.9 million in 2009 from investors that
included Blumberg Capital and
then took on $3 million in debt bridge financing in 2011.