Business

HubSpot Business Model | How Does HubSpot Make Money?

Hubspot is a public company that offers inbound marketing services. The company develops and markets a cloud-based marketing and sales software platform. 

In addition, the Company provides integrated applications that assist with lead generation and social marketing.

HubSpot is a subscription service that offers B2B and Enterprise customers a choice of subscription plans for CRM (customer relationship management) purposes.

HubSpot, Inc. offers cloud-based marketing and sales software services to companies in the Americas, Europe, and the Asia Pacific. 

The HubSpot platform integrates social media, search engine optimization, blogging, marketing automation, email, website content management, sales productivity, customer relationship management (CRM), reporting, and analytics. Additionally, the company offers professional support via phone and email.

In addition to subscriptions, the company generates revenue through professional services. The company also provides professional services as onboarding and implementation to assist businesses in leveraging digital marketing channels to generate leads.

What is Inbound Marketing?

Inbound marketing is a process of attracting customers through a variety of channels. 

An inbound marketer attempts to convince customers after they enter a platform rather than promote their brand externally (such as banner ads or television advertisements).

Inbound marketing channels include various forms of digital marketing such as search engine optimization, content marketing, social media marketing, and email marketing.

What are the benefits of Inbound Marketing?

The following are the benefits of inbound marketing:

  • Multiply your customer acquisition channels (e.g., blog, YouTube channel, social media) to reduce reliance on a single track.
  • Companies can build customer trust by sharing content about their products and showing their expertise.
  • Creating content around specific search terms to reach a particular audience.
  • Businesses save money by not paying for advertising.

The term “inbound marketing” was first given by HubSpot in 2006, to some surprise. The founders created a book on the subject in an even more comprehensive way.

What is HubSpot?

HubSpot provides various (business-to-business) inbound marketing and sales software products. 

Their software tools give businesses the ability to generate leads, increase sales, and educate their customers.

HubSpot earns money by charging customers for the use of its premium features. The hubs have different stages of the sales cycle and are segmented accordingly. 

HubSpot Business Model

HubSpot also maintains a marketplace for third-party applications. Lastly, a small portion of its revenue comes from consulting services and event hosting.

Two MIT graduates founded the company in 2006, which has become the market leader in inbound marketing. 

In 2014, HubSpot was listed on the stock exchange. Currently, the company employs over 5500 people and serves about 115000 customers.

How Does HubSpot Work?

HubSpot provides a suite of software tools to help businesses use Inbound Marketing to attract customers. 

Business owners can generate new leads through their products, convert those leads, and close customers.

HubSpot identifies these tools as “hubs,” including a Marketing Hub, Sales Hub, and Service Hub.

HubSpot also provides a CRM solution for managing leads and customers. Users can track the status of a deal, gain insight into the client’s business, or create a tracking dashboard.

In addition, customers can opt-in via the marketplace platform to include third-party applications (such as Gmail or Jira).

How Does HubSpot Make Money?

HubSpot earns money by selling subscriptions to its software. The CRM software of the company is free and is primarily used to acquire new customers.

HubSpot’s Hub applications and app marketplace are used to monetize. The company also balances a healthy balance sheet through consulting services and events.

There are two primary sources of HubSpot’s revenue: subscriptions (available at various levels from B2B to Enterprise) and professional services. 

HubSpot Business Model

Subscriptions account for most of the company’s revenue (over $853 million in 2020), while professional services account for a much smaller portion ($30 million in 2020).

HubSpot’s business model was never profitable, despite increasing revenues over time. The company has yet to strike a good balance between offering a high-priced B2B subscription and (as we’ll see) professional onboarding services. 

The company does devote a significant portion of its revenue to sales and marketing. However, it makes effective use of stock-based compensation.

The marginal impact of professional services needs to be understood. HubSpot suffers financial losses as a result of them. Therefore, why does it provide them?

The purpose of professional services is to increase subscription sales, as they assist customers of all levels in better understanding HubSpot’s solutions.

HubSpot emphasizes that most of the revenue generated by professional services and other revenue streams comes from onboarding and training. 

Onboarding services typically involve an implementation specialist teaching customers how to attract leads and convert them into customers through search engine optimization, social media, blogging, and other content.

HubSpot’s primary source of revenue is the sale of software via subscriptions.

Let us take a closer look at each of these revenue streams.

Marketing Hub

Marketing Hub provides all the tools needed for converting leads to customers.

Marketing Hub is available for free or on three different pricing plans.

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Starter, Professional, and Enterprise versions are available. Some of the premium features include:

  • A/B Testing
  • Implementation of calls to action (CTAs).
  • Machine Learning Supported Content.

… and numerous others. In its simplest form, HubSpot’s Marketing Hub enables users to generate leads and convert them into paying customers.

  • Starter: $50 per month or $45 if paid annually, comes with features like Landing pages, conversational bots, ad management, email marketing, list segmentation, and ad targeting.
  • Professionals: $890 per month or $800 per month if paid annually for businesses with a minimum of 2,000 contacts. Additional features include A/B testing, multi-language content, and Salesforce integration are available.
  • Enterprise: $3,200 per month for businesses with a minimum of 10,000 marketing contacts. Partitioning, user roles, adaptive testing, and predictive lead scoring are all features unique to this plan.

Sales Hub

HubSpot Sales Hub is an extension of the HubSpot CRM software that assists teams in integrating data and closing deals.

As with Marketing Hub, HubSpot offers software suites to help businesses improve the performance of their sales teams. Sales Hub is the name of this product.

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In addition, it is available in three price tiers: Starter, Professional, and Enterprise.

Features of Sales Hub:

  • Sending quote requests to customers
  • Online conversations with active customers and prospects.
  • Roles-based permissions for employees with varying responsibilities

.. …and much more. Users can choose between monthly and annual plans.

Sales Hub features 3 different plans for its users, which are listed below:

  • Starting at $50/month or $45/month if billed annually. With this option, you can automate quotes, call, talk to a live representative, and the dashboard provides reporting.
  • For professionals, the monthly cost is $500 or $450 if you pay annually. Among the optional features are sales analytics, custom reporting and forecasting, 1:1 video production, calculated properties, and eSignatures.
  • The enterprise plan costs $1,200/month for at least 10 subscribers. Enterprise-level features include hierarchical teams, advanced permissions, playbooks, and call transcription.

Service Hub

The Service Hub is a customer service solution that converts customers into fans.

The Service Hub from HubSpot enables businesses to provide all of the necessary support functions to their customers. 

Again, these plans are available in three different configurations and are charged monthly or annually. They include the following features:

  • Sending out surveys on (Net Promoter Score).
  • Informing customers by creating FAQs.
  • Chatbots that provide chat support.

.. and again, lots more things.

Customers can book them through a Growth Suite in addition to subscribing to a specific hub. This is a package deal that includes multiple hub offerings.

Customers can also create their own bundles by selecting only the features they need for their business.

App Marketplace

Aside from hub offerings, they also offer access to third-party applications. Mailchimp, Outlook, and Slack are examples of third-party applications. Similar to the hub model, the monthly fee is determined by the different packages.

HubSpot shares revenues with third-party application owners in most cases.

Consulting

HubSpot offers consulting services relating to the software they offer, just like tech giants such as Microsoft or Salesforce.

HubSpot provides services such as onboarding or maximizing the value of the software. Services include:

  • Content strategy
  • Engaging lead conversion channels
  • Measuring website performance
  • SEO optimization of a customer’s website

A customer can again choose from various packages based on the services he or she has selected.

Events

HubSpot or one of its partners organizes events worldwide to promote the exchange and marketing of its products.

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Events are often customized to focus on specific topics, such as how sales are driven and how privacy policies are enforced.

There is a fee associated with the visit.

What is the Customer Base of HubSpot?

In their last financial report for Q1 2021, HubSpot reported having 113,925 customers on March 31, 2021. The customer base grew by 45% from March 31, 2020. 

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The average subscription revenue per customer was $9,886 during the first quarter of 2021, down 1% from 2020.

What is the number of employees at HubSpot?

HubSpot does not release official numbers, and the quarterly financial filing usually does not reveal how many employees it has.

According to HubSpot LinkedIn profile, HubSpot employs 5564 people in nine offices worldwide.

What is HubSpot Revenue, Earnings & Growth?

HubSpot reported revenue of $281.4 million in the first quarter of 2021. This is an increase of 41 percent over the first quarter of 2020.

For the same period, the company accumulated GAAP losses of almost 15 million dollars. Further acquisitions and significant changes to the software suite were mainly responsible for the losses.

The loss should not be too much alarm with a little over $1 billion in cash reserves with HubSpot.

What is the Success Story of HubSpot?

HubSpot is a developer and marketer of American software focusing on sales, customer service, and inbound marketing.

Brian Halligan (CEO) and Dharmesh Shah established HubSpot in 2006. (CTO). To this day, the two founders continue to play their executive roles.

Just four years later, the company generated $15.6 million and acquired the Oneforty Twitter app company. 

They also went from being used by small businesses to serving larger companies with up to 1,000 staff. She quickly acquired GroupSharp competitor and debuted in 2014 on the NYSE.

Initially, HubSpot served SMEs but was successful enough soon after its launch in attracting larger accounts. 

And HubSpot was able to make its first purchase one year after the company was founded by acquiring its competitor GroupSharp.

The company launched its IPO in 2014, and business success in the past years continued.

By buying Kemvi, a service that integrates machine learning and artificial intelligence, the company strengthened its product offering in 2017.

With over $ 1 billion annually in recurring sales, HubSpot recently eclipsed 100,000 paying customers.

HubSpot Business Model Canvas

Customer Segments of HubSpot

It is reported that Hubspot has around 113,925 active customers in over 140 countries. It mainly serves advertising and marketing agencies, recruitment firms, e-commerce companies, educational bodies, non-profit and corporate services provider companies, from small and medium-sized enterprises to businesses.

While the company is mainly in the US, it also provides companies throughout Europe, Asia-Pacific, and Latin America. NEC, Heron Global Partners, Randstad, Granite National College, Shopify, Talent Clue, and Bitdefender are among the partners of Hubspot.

Value Propositions of HubSpot

The primary benefit of Hubspot is that it enables users to manage and control all of their inbound marketing content across multiple channels from a single location, thereby improving the efficiency and manageability of customer relationship management, sales, and marketing processes.

Hubspot’s integration augments this with third-party applications and service providers, as well as the sale of third-party extensions and templates via the Hubspot marketplace.

Additionally, the Company provides ongoing support to its customers, both directly and through the user community. It has fostered and offers free training and learning resources.

Channels of HubSpot

You can view Hubspot’s products and accounts and manage your account via the company’s mobile and desktop websites, both located at www.hubspot.com. 

Also, you can purchase HubSpot software from its website and communicate with their sales team via their website chat option.

Additionally, the Company’s cloud-based platform is accessible via the Hubspot website and its iOS and Android mobile apps. 

Additionally, Hubspot functionality can be accessed via various third-party integrations, including the Zendesk, Salesforce, Eventbrite, and PandaDoc platforms.

Customer Relationships at HubSpot

Hubspot’s free trials and demos are self-serve via the Company’s website. Additionally, without interacting directly with members of the Hubspot team, you can use and purchase free Hubspot CRM and Hubspot Marketing subscriptions.

On the other hand, paid subscriptions necessitate direct contact with Hubspot sales representatives, who can be reached via online contact forms or by phone. 

After completing registration, users can access the Hubspot platform and manage their accounts independently via the Hubspot website and apps.

Key Activities of HubSpot

Hubspot is an inbound marketing company specializing in developing and marketing customer relationship management, sales, and marketing software for businesses. 

It offers three cloud-based software products – Hubspot CRM, Hubspot Marketing, and Hubspot Sales – that enable users to view, manage, and control their marketing content and channels, including social media activity, SEO, blogging, website content management, marketing automation, e-mail communications, customer relationship management, analytics, and reporting.

Additionally, Hubspot develops and sells add-on applications and provides ongoing technical support to its customers.

Hubspot partners with a network of marketing and advertising agencies in exchange for training, support, and resources.

Key Partners of HubSpot

Hubspot collaborates with a variety of advertising and marketing agencies through its Partner Program. These agencies provide search engine optimization, website design, social media marketing, and lead generation in exchange for Hubspot support, inbound marketing training, and exposure.

The Company’s partners are classified into tiers based on the number of annual sales and revenue they account for individually, with new partners at the bottom and diamond partners at the top. 

Between them are the silver, gold, and platinum tiers. Kuno Creative, New Breed Unified Marketing and Sales, Media Junction, Element Three, and Impulse Creative are among the Company’s agency partners.

Key Resources of HubSpot

Hubspot’s primary assets include its software and technology, its information technology infrastructure, its people – particularly its sales, support, and development teams – and its agency and reseller partners.

According to searches of the US Patent and Trademark Office’s records, no patent applications were filed in Hubspot’s name.

Cost Structures of HubSpot

The majority of Hubspot’s costs are associated with developing its software products, maintaining its information technology infrastructure network, retaining its employees, and managing its partnerships.

The Company employs over 1,000 people worldwide, all of whom contribute to salary and benefit costs. 

Additionally, Hubspot incurs operating costs due to its network of offices in the United States, Ireland, Singapore, and Australia.

Revenue Streams of HubSpot

Subscriptions to Hubspot’s marketing software are available in tiers, starting at $200 per month, billed annually, for the Basic package. 

The Company also offers a more advanced Pro package for $800 per month, billed annually, and a top-of-the-line Enterprise package for $2,400 per month. 

Additionally, Hubspot offers customized quotes to larger enterprises that require additional coverage.

Hubspot’s sales software is available for free, with the option to upgrade to a Pro package for $50 per month, billed annually. 

Additionally, the Company earns revenue by selling add-ons such as custom reports, advertisements, and website services, ranging in price from $50 to $300 per month.

Also checkout, How Does TurboTax Make Money?

Final Word about HubSpot Business Model

HubSpot is a developer and marketer of software. Brian Halligan and Dharmesh Shah founded it at MIT in 2006. With a variety of subscription plans, HubSpot is making money. Each project has its size categories, sales, marketing, customer service, and CMS options.

HubSpot also charges various onboarding, business support services, and training for businesses.

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About the author

Madhav

Hey Folks, I am Madhav! I lead a team of Marketers at Tech Startup based in Australia. In my free time, I dissect the business models of various businesses. And if there's any free time, I cook some new Dish!