PLG Weekly #9: Datadog's amazing growth, The emerging third category of software, and more.
Welcome to the ninth edition of the PLG weekly. We start this week by looking at the top dog of the monitoring and security space, Datadog.
💥 Exploring Datadog’s amazing growth story.
Datadog is a fantastic growth story that is growing at 75% YoY 🤯. Let's take a look at the key aspects of their growth story.
They mainly focus on adding value to developers and solving multiple problems around their workflows. This results in a deeply integrated product suite that competes against standalone products in APM, NPM, Log Management and wins against them because Datadog is more than the sum of its parts.
They announced the availability of CI visibility, session replay, funnel analysis, network device monitoring, digital apps, and all in archives for log management. In addition, they launched private betas for Cloud Cost Management, observability pipelines, universal service monitoring, and application security. Amazing product velocity!
This results in customers adopting multiple products and expanding usage across the Datadog platform.
31% of customers are now using four or more products, which is up from 20% last year.
And this quarter, about 70% of new logos landed with two or more products.
77% of customers are using 2 or more products, up from 71%, a year ago.
Customers using four or more products are over a quarter of their customer base but contribute to the vast majority of their revenue.
They have a profoundly segmented GTM approach based on the customer segment that they sell into. Its smallest customers go self-serve. The ones up to $50k-$100k go through inside sales. A dedicated enterprise team handles the largest ones.
Their GTM support structure has evolved to have sales engineers, solution engineers - Mid-Market and Enterprise, technical account managers. We've seen this play out across other multi-product companies that go upmarket as
As you get into more significant deals and multi-product use cases, customers expect solution support. You need to have a strong sales engineering and solution engineering org to help customers solve complex use-cases using your platform and unlock more usage.
Technical account managers are necessary as you don't want your largest customers explaining their setup repeatedly when they reach out for support.
Datadog has a usage-based pricing model for all its products.
Moving to a usage-based pricing model has allowed them to get more from the top 10% of their customer base that uses their product the most. 75% of their revenue comes from less than 10% of their customer base.
In most SaaS companies, the top 1% of the customer base represents 30-40% of the total platform usage. Companies end up charging them lesser because of seat-based pricing. Usage-based pricing allows Datadog to get more revenue out of this Pareto concentration than most companies have.
Be Product-led as a company. Take advantage of every opportunity to innovate for your customer and build multiple products that add value to your existing customer base. Building a deeply integrated product suite is vital here.
Frictionless, seamless product experience is the way to win.
Pay attention to Mid-Market and Enterprise deals early on and structure your sales team accordingly. Develop the support structure required for the different types of customers you have - to provide a great experience. This is important when expanding usage is directly tied to revenue.
Usage-based pricing helps you get more out of your top customers. Figure out if you can add a usage-based component to your pricing that directly to the value that they obtain from you. Your largest customers will grow as they are large, growth businesses themselves, and usage-based pricing helps you make more revenue for enabling their growth with your product.
🤯 Software needs to get out of the way
This read from Zapier co-founder and CEO, Wade Foster is thought-provoking.
Physical tools don't ask for your time—they just do their job. Software is also a tool, but lately, apps are demanding more and more of humans. Workplace software is just as addictive as consumer software, all in the name of "driving engagement."
For the sake of simplification, Tomasz Tunguz divides the world of Software into systems of record and workflow software.
Systems of record are the single source of truth about a particular department or company.
Workflow software enables you to do more. These are tools like Superhuman, Grammarly, all the chrome extensions that you can spot on a sales rep's browser :)
Zapier is workflow software but is different from regular workflow software because you set up a workflow once and never look back again. No wonder Wade is advocating for software to get out of the way, as his company is pioneering the third category.
What's this third category? Anti-engagement products which don't require constant human interaction and get out of the way. Automation, AI products are the common products that are beginning to form in this category.
Next time you think about engagement as a metric for your SaaS, think about how software can fulfill its original promise and not be in the way. Give people more time to do more.
🕸 Good PLG reads from the internet
Great read on how the SaaS billing and pricing infrastructure is evolving. If you’re thinking about your SaaS billing infrastructure, you should read this.
The anatomy of PLG SaaS from Clearbit.
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