Please forgive the length. If I had more time, it would be shorter. While I am currently spending a ton of time “in the business,” of Vendasta I am still maintaining some time for higher-level strategic thinking. 

From time to time, there are world events that are  important to Vendasta such as Covid or the Silicon Valley Bank situation. Many of you may have read the Reuters story that Google is considering purchasing Hubspot. I consider this potential event as one that could, in the long term, have an impact on Vendasta.  

After thinking about it carefully, I don’t believe a Google acquisition of Hubspot would be an issue for Vendasta but thought I would share my thoughts and get input. 

Thesis: Google views Hubspot as strategic acquisition

It has been reported that Google is considering purchasing Hubspot. Many feel this is an odd match with little strategic value. I believe that Google views Hubspot as a strategic acquisition and that such an acquisition could have strategic implications to our business.

By way of background, Google had $305B in revenue in 2023 of which $240B (78.8%) came from advertising revenue from 1.2M businesses and much of this advertising is sold and delivered to SMBs by channel partners. Hubspot had revenue of $2.17B from selling sales and marketing tools to 205K businesses. 

I believe there are three strategic reasons for Google to buy Hubspot:

1. Increase SMB advertising spend and base by showing rock solid proof of performance
2. Maintain and increase advertising effectiveness in the face of data privacy concerns
3. Expand revenue by upselling and cross selling into their existing advertiser base

Increase SMB advertising spend and base by showing rock solid proof of performance 

Google’s primary business is selling advertising to businesses (SMBs). SMBs purchase Google’s advertising, via channel resellers and direct, primarily to attract new customers.  

Over the years, Google has worked hard to build data analytics and tools to help show SMBs that there is a return on investment.  This “proof of ROI” has mostly been limited to ad impressions, clicks, and some actions like form fills or phone calls. This “analytics”  type of proof of performance can be enough for sophisticated advertisers to measure ROI and increase spends but is often not proof enough for many SMBs.  

Most SMBs want more direct proof. The problem is that it is difficult to directly attribute the advertising spend directly to consumer acquisition and sales without a connection to the SMB’s CRM. If Google owned a CRM they could plumb in any Google advertising to automatically provide attribution. This would allow the SMB to have that direct proof of performance of customer acquisition and potentially sales data. The end result would be more SMB customers and larger spends by those customers. 

Maintain and increase advertising effectiveness in the face of privacy concerns

Privacy law changes are impacting Google’s ability to target audiences with their advertising. 

In order for advertising to work effectively, advertisements need to be surfaced to an audience that is interested in that advertising.  In the past, Google would rely on third party data to build target audiences for an advertisement based on the online behaviors of users across the web. Ad providers, including Google, are able to track user’s web activity across the web and devices based on a third-party cookie and device IDs. Using this third-party data, Google could basically determine user’s demographics and interests and build an audience to serve relevant advertisements and increase the performance of their advertising allowing them to charge more. 

Due to the tightening of privacy legislation, Google will be phasing out all third-party cookies by Q3 of 2024. The effects of this will reduce the effectiveness of their advertising. More importantly, Google will not be able to build audiences and target ads as effectively as they could in the past. 

First party data offers a solution to this problem. Hubspot’s (and Vendasta’s) platform collect first-party proprietary data directly from customers via our CRM systems and connections and integrations with a host of other systems like point of sale systems. 

First party data is created when a customer visits a company’s website, reads a newsletter, fills a form, and/or makes an online or offline purchase at a retail location. The data includes phone numbers, email and postal mailing addresses, offline sales / transaction data, web interactions and behavior data, social media engagement, subscription information, as well as information like site visits and metadata from customer interactions.

With proper consent, a company can share their first-party data. This is in contrast to the third-party data (proprietary information about a customer acquired from another company) that advertisers have historically used to understand their customers. Because first-party data comes directly from (potential) customers, it’s less affected by changes in browsers, regulation, and user choice.

Google is under pressure from other advertising platforms, particularly those like Amazon, Instacart and Uber that have fantastic first party data. All of these networks have first party direct intent consumer purchasing data that they can use to help their advertisers target audiences across ad networks.   As an example, buy some taps or plumbing supplies from Amazon and you can expect to see ads from local plumbers across their network. 

If Google were to buy Hubspot they would be able to build a huge database of first-party data, meaning they would know the identity and details of the customer directly in a way that complies with consumer consent and privacy laws. 

They would then be able to utilize this data to improve their advertising. Google has been working with Boston Consulting Group (BCG) to study brands using first-party data strategies and found that those using first-party data for key marketing functions achieved up to a 2.9X revenue uplift and a 1.5X increase in cost savings. 

Expand revenue by upselling and cross selling into their existing advertiser base

Lastly, and most obviously, buying Hubspot would allow Google to market the CRM to their base of 1.2M advertisers. A 5% penetration would amount to 60K Hubspot users.  At Hubspot’s current ACV of $11.3K that would amount to approximately $8.1B dollars of revenue. 

For these reasons, I believe Google considers Hubspot a strategic acquisition.

What might a Google acquisition of Hubspot  mean to Vendasta?

The Vendasta platform and marketplace allows our channel partner to seamlessly whitelabel, package, market, bill, and fulfill a growing marketplace of products and services, including  advertising, marketing, productivity, customer engagement and billing products and services to their SMB customers.  

An important unique selling proposition for our channel partners and SMBs is the all-in-one platform that provides a branded, integrated, and seamless experience for channel partners and their SMB customers.

The main competitors to Vendasta are potential channel partner customers knitting together their own tech stack. Once a potential customer has invested in and built a working tech stack it is hard to replace. However, as we provide more and more integration ability we find ourselves connecting to these vendors in our customer’s tech stacks and are thinking about them less as competitors and more as frenemies that we can eventually replace. 

Today, approximately 75% of our channel partners sell Google advertising and about 30% use Hubspot in some way or another. We co-exist well, but as our own CRM and marketing automation improves we are starting to see some of our customers cancel Hubspot. The reason seems to be primarily our “all-in-one” solution, pricing, and the specific focus on the needs of the agency channel partners and their SMB customers.

The effects of a Google Hubspot merger could vary a lot depending on Google’s decisions:

• Would they integrate Google ads attribution more deeply?
• Would they allow Meta, Amazon, Microsoft, et al. the same integrations in Hubspot?
• Would they allow the first-party data a business collects to be used by other ad networks?
• Would they reduce the pricing of Hubspot in exchange for ad dollars?

What advantages does Vendasta provide our channel partners?

We have a number of structural and business advantages over a Google/Hubspot platform that will enable us to win in the channel partner space. 

• We are ad network agnostic and optimize spends across multiple advertising types: Google, Meta, Microsoft, Amazon etc. to provide the best ROI to the advertiser. 
• We provided a single combined dashboard for managing campaigns across all ad networks and ensure the advertising dollars are spent effectively in the time frame the SMB expects
• We can capture the consumer journey end-to-end across all ad networks (not just Google) for both our channel partners and their SMBs. From ad campaigns through to marketing, sales, billing, and fulfillment. Whereas Hubspot lacks the integrated inventory and fulfillment workflows. 
• We collect a broader range of first-party data with our foundational products (reviews, social posts, website), our marketing services interactions and our deep integrations into vendor products and services.  Hubspot relies on their marketing automation and CRM to collect first party data. 
• We have a white-label brandable platform with deeply integrated marketplace products and services that our channel partners sell including providing a branded SMB portal application (business-in-a-box) with one password access for their SMB customers.
• We provide a marketplace of not just products but white label services that can allow our channel partners to fully capitalize their trusted relationship and share of wallet for each SMB customer.
• Today, we already integrate with Google and Hubspot so we should be able to take advantage of any innovation they provide. 

What are the chances that this deal is approved?

Given the current political climate where both Democrats and Republicans have an anti-tech sentiment (albeit for different reasons), I believe an acquisition of this magnitude may be viewed as a Google Hubspot hegemony and would very likely not be approved. In any event it will take at least two years.

How might we adjust our strategy?

Given a Google acquisition of Hubspot there are few items on our roadmap that we may look at accelerating:

• Accelerate the integration of the Matchcraft platform for easy access and use by the midmarket and small agencies. This is scheduled for H2 2024 with initial work underway.
• Accelerate the ability for our channel partners to build end-to-end, lead to capture (from advertising campaign to sale), and attribution funnel for their SMB customers. 
• Accelerate combining our first party data we collect to build target audiences for our customers and enable them to be used across advertising platforms and networks
• Accelerate the addition of other ad networks such as TikTok, Uber, and Instacart that are important to our SMB customers and will give us further advantage over single-advertiser solutions. 
• Explore providing our base CRM and lead attribution for free to all our advertising-only partners with a clear and compelling upgrade path.  

If you made this far this subject must interest you. Please feel free to fire away, disagree, agree or comment. 

Brendan