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HootSuite: 7 million users, 3.5% pay, 320 employees.


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My notes from Ingrid Lunden's article:

1. With this fresh $165 million, HootSuite has now raised $187 million in capital.

2. Comparables: Salesforce bought Buddy Media for $689 million; Oracle bought Vitrue for $300 million.

3. HootSuite serves 237 of the Fortune 500 and big brand names like the WWF, PepsiCo, Virgin, Fox and Sony Music.

4. It has a particularly close relationship with Twitter (one of 5 companies with access to Twitter Ad API) and also incorporates 56 other social media services.

5. Revenues up 300% from a year ago, though they won't give us a number.

Here's the money quote on freemium monetization:

The company operates a “freemium” model for its services — in that it has a free offering, as well as a paid one. Holmes says this continues to work well for HootSuite. “The shift to paid services from free, as we have been building up over the past several years, has worked,” he says. “We’ve been with a cohort of companies that prove that freemium works in enterprise. Companies like Evernote, Dropbox and Yammer and Survey Monkey are all helping that concept.”

Having said that, the proportion of paid to free users at HootSuite today is 96.5% free and the rest are paid. “But that 96.5% is a great asset,” he says. “We see a natural upgrade into our pro product. Over 50% of those were free users who wanted extended features and functionality.”

Jim Edwards of Business Insider says HootSuite's raise suggests Twitter revenue could be $1 billion:

We know very little about the scale of Twitter's revenues, so new information — even coming by proxy from one of its ad vendors — is extremely useful. (Some people estimate it at $1 billion. But no one really knows.)

First, Hootsuite is one of only five Twitter Ads API partners — the companies who are allowed to sell dashboards that plus ads straight into the Twitter platform. That number will expand but Hootsuite has a huge advantage right now.

Second, Hootsuite says it has 7 million customers, although a majority of those probably use the interface for free. Hootsuite says it has 79 or more Fortune 100 companies using its tools.

CEO Ryan Holmes says his revenues have grown 300%. (But note that the company doesn't disclose hard dollar numbers. Hmm.)

One reason we should take the investment seriously is that it comes from Insight Venture Partners, the New York-based firm that already holds a substantial stake in Twitter, according to VentureBeat. One presumes that IVP has enough visibility into Twitter's business to know whether a $165 million bet on a vendor will pay off.

And then there's the risk. Ad Age notes:

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....

HootSuite is "cash flow neutral," according to a spokeswoman, with all profits being reinvested in the business.

Jim does math and concludes that HootSuite's annual revenue is between $50 million and $200 million.

Hootsuite only takes a fraction of the adspend that is passed through and spent on Twitter — so the size of its Twitter ad billing are multiples of that, making that $1 billion estimate look a lot more solid.

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