“Investing in ‘experience’ for us is an opportunity, not a cost”, said David Darmanin, CEO of Hotjar, on the SaaStock stage.
What were the five critical components of Hotjar’s growth engine early on?
David shares the five components:
- Acceleration – “The wave” that made it possible for Hotjar to hit $10 million in a predictable straight line.
- Low friction – From the very beginning, the Hotjar team did B2C very successfully as they had always been frustrated by enterprise friction – this influenced how Hotjar was built.
- Efficiency – Efficiency of the channels Hotjar used and how they made sure to stay efficient.
- Traction – Identifying traction points within the product, analysing the data and leveraging feedback helped traction in order to improve and evolve the experience.
- Experience – A big, big driver in people talking about Hotjar and spreading the word. This is more than the UX, user experience and pixels. This is about investing in the right people who can deal with unhappy customers.
Deep-dive into these 5 components of Hotjar’s growth engine with David. Watch the full video on our YouTube channel. You can also read the full transcript of the video below.👇
Today I’m going to be talking about the growth engine that took Hotjar from zero to $10 million in one straight line. Before we do that, I want to say hello. This slide is not about me being an Apple fan boy, even though I am, but it’s actually about the first moment where I fell in love with what was going to be the thing I was going to work on for a long time. No, it’s not Apple’s.
When I was actually five years old, so this gives an indication of my age, my dad bought this device. We were living in Australia and he used it for publishing. I remember falling in love with the interface and falling in love with this idea of there’s a device and I’m on the other end and I’m communicating. I just fell in love with this notion that there is something in between. I think that has affected a lot my career to date. I ended up actually consulting and working a lot with big businesses on how to develop and grow the business on the back of their experiences. It eventually led me to the biggest idea I could have done, which is actually transform and improve, and we use the word “democratize”, the tools that I was using to do this job. There was a big problem I had and Hotjar was me working on that.
The interesting thing is that the topic of today, Alex asked me a few months ago, “What should we talk about?” I was hesitant to say zero to 10 million because we were nearly there, so it’s like hopefully nothing happens because otherwise that would be a very interesting session. I also said, “In one straight line,” but it’s not exactly a straight line. But it’s kind of. It’s more than the straight line idea. It’s more the predictability of it. An upgrade is that actually we hit 10 million euros in the ARR yesterday, so we did some celebration. We timed it on purpose for SaaStock obviously. Took a lot of planning, but we pulled it off, and in a relatively straight line.
I guess you’re going to be disappointed if you’re expecting that I’m going to be talking a lot about maybe growth hacks or raising or whatnot, because we actually did this bootstrapped. Even though my background isn’t in conversion and growth and all this stuff, I actually didn’t get to use a lot of the things I know much so far, but let’s jump into it. Before we do this, quick show of hands so I can get a better feel for the room. How many of you are here pre 1 million in ARR and in pre-traction, like in the beta stage. Okay. Good presence. How many of you are after 1 million but before 10 million? Okay, good. I have lots to share with you guys. Any of you post 10 million? Okay. A few, good, because you’re not going to get anything out of this. No, no, I’m joking. It’s a good time to look back. So yesterday, 10 million ARR, yay.
It’s interesting to break it down. For us, it was nine months of that pre-traction beta phase. It took us nine months to build that up. It was six months in the initial traction. It took us only six months to hit 1 million in ARR. And then it took us 24 months to complete the rest of the way, the other 9 million. Obviously we have no clue, but now obviously as of today, we’re talking about 100 million. That’s the next milestone.
I thought it would be interesting to share with you one thing about this engine that we’re talking about, which is what were the main factors that got us there. The interesting thing as I did the retrospective for the session, looking back and seeing what actually happened, is that most of the things… these have green dotted lines because they drove those green bars. Actually, the launching and positioning, and the building of the core of Hotjar that we did in those nine months, actually drove most of the growth that got us to 10 million ARR where we are today, which is interesting.
What did we do in the meantime? We weren’t just looking and just logging into ChartMogul every day. Instead, what we were working on during the time is actually scaling up paid, which we’re going to look at later on, which is one of our main channels that we used, and scaling for data. Because when you’re ingesting data from 50, 100, 200000 sites, that’s a big problem, so we’ve been very busy with that. More importantly, what we’ve also been busy on a lot during our process of getting to 10 million, is preparing for what’s coming next.
I like to use with the team a lot this idea of … You’re sowing seeds. Today when you see the 10 million ARR result, it’s obviously not something that we worked on over the last few weeks or months. It’s something that you set the trajectory for it much longer time before. During this time, we’ve actually been working on the fundamentals, operations, and ops is not from a technical point of view. It’s the company operations. Structure, alignment. How do we share strategic objectives? How are we building up the team? Accountability. How do we hire? Build up the recruitment process? We have been very, very ruthlessly focused internally. That’s why many of you probably haven’t even heard about Hotjar. I’m not sure. How many of you, show of hands, have actually heard about Hotjar before? Shit, you have heard of it. Maybe we’ve been focused more outside, but that’s good. That’s good.
We’ve been preparing a lot for what’s coming next. That’s basically the main thing. And then as of a few months ago, we started working on the new architecture. We’re rethinking the way Hotjar is built, the cogs and the pieces which is, again, going to make it possible for us to do the stuff that we’re going to do much later. So, going from 20, 30, 40, 50, and whatnot. On the back of that, also rethinking pricing, which if many of you know Hotjar, it’s not exactly something we nailed in the beginning. We’re doing it right though, so any changes we’ve always been doing, we’re grandfathering. It’s part of our culture. You see more about that later on. But again, it’s preparing for that next phase. The main thing you’re going to take away from me today, and as we look at this engine that I’m going to break down, is that initially there was a lot of work that set the foundation for us getting there. I’m calling it the wave. We’re going to look at that later on.
What are the five critical components of this growth engine? In the title, I said the growth engine. The first one is acceleration. It’s this wave we talked about. We’re going to talk a little bit about how this wave made it possible for us to just hit that 10 million in that predictable straight line. Low friction. From the very beginning, our background, the Hotjar team, we actually did B2C very successfully. We’ve always been very frustrated by enterprise friction, basically, so it’s something that influenced a lot the way we built Hotjar. Efficiency. We’re going to talk about the efficiency of the channel we use and how we made sure to stay efficient. The experience, which was a big, big driver in people talking about Hotjar and spreading the word. Finally, traction. Has nothing to do with the Mini, don’t worry, so we’re not going to be talking about vehicles. I thought this was a cute way to break it down. Let’s go.
The wave. We like to use this concept of a wave because you remember, we looked at that nine month period in the beta, the initial traction. That was the period for us where we used … We said we’re bootstrapped, so we used our funds to basically build Hotjar and take our time to do it. It gave us this acceleration. There was a lot of people using Hotjar, speaking about it, and it built all this nice … I should avoid going there. It built this nice movement. It built this nice acceleration for us, which then later had quite a big impact. Part of that acceleration, how many of you actually heard of Hotjar when we were still at the beta stage? Okay. Some of you, so this would be new to most of you.
Hotjar actually came around where … we came the idea. Rather than waiting, as I did previously my failed startups, building up something for maybe one or two years, and then we’re like, “Oh, yeah, there’s no market for this.” Instead, what we did was we actually said, “We have an idea. We think it’s fantastic. But what if we shared it with everyone as quickly as possible? And so, if they would be interested in getting it.” We had this very simple notion. Put in your email address and you’re going to be one of the very first people to use Hotjar.
But then on the back of that, we created some great positioning of why you should actually use Hotjar. The positioning piece definitely helped us a lot with acceleration because it allowed people to very quickly understand what Hotjar was. And then as soon as you do get in there and you’re on the line, we obviously used our knowledge of how to get people to spread the word, which is we created this waiting list idea. Nowadays, you see this because it’s been a little bit used quite a lot, but back then this was relatively new. This was huge for us. We ended up getting around 60,000 emails of which 18,000 participated in the beta. It had a huge impact.
What started to happen during this time was we had so many publications. People write not just about Hotjar, the tool, and the positioning, we talked about the value, but also about the way we actually did the waiting list and everything. I would get replies to my emails. Ooh, we’re getting a bit more romantic. I used to get the replies to my emails from the team saying, “Hey, Craig, check this out. We have to do this.” It was getting a lot of people by mistake replying to me instead of CC-ing the team. It was interesting that just the way we even launched the acceleration in itself was actually accelerating us. I guess even though it wasn’t a traditional launch, but the way we launched actually had a big impact. We noticed that at that stage, this kind of spreading, the way it spread and the way it happened, definitely had a big impact for us.
You can see this also in tracking it. If you look at Google trends, it’s interesting to see the period of time of when we look at the comparison of other tools to us that we did in our positioning, to see how we broke out of nowhere, and within a period of a few months. We took off very quickly. The impact of that, I said, was that we had 18,000 users testing Hotjar. So, the impact from an acceleration point of view is not just visibility and people actually using Hotjar talking about it. It was also the ability for us to accelerate the testing process and making sure this product was battle tested really quickly. All this data and the changes we made, the bugs that we collected, this had a really huge impact on us going forward.
We took the opportunity of not just doing the quantitative thing, but actually doing what we believe in. Every conversation we had with every user during this phase was recorded. We put down what they said. We’d act on their feedback. We’d get back to them if we made a change. The acceleration was even more compounded by the fact that we took the opportunity to be persons, to actually speak to people, to take a note. These small details can make a big difference and compounded these, what we call “wow” moments. It’s someone saying, “Wow, I gave Hotjar an idea and they actually then acted on it. And then they send me an email saying thank you, that they did it. Asking me for feedback on that.” It’s these small details that can make a big difference. To summarize, we created demand quickly and early. We positioned ourselves in the market. Positioning is key. Highly recommend reading 22 Immutable Laws of Marketing. Fantastic book. Then we also built this wave during the beta period.
Number two, low friction. What do we mean by this? Very simple. We talked about the enterprisey non-enterprisey way of selling software. We came from a B2C background. We love to discover new tools and solutions, and to quickly just use them, see how they are. I think all of us feel that way. Yes, if you are in a big, big business, you probably want to speak to a sales team and get the exact explanation so you don’t waste a lot of time doing research. What we found was that the strategy based on what we know how to do best, so based on our background and our expertise, was actually to use the B2C model in the B2B environment. We said, “What if, instead of selling to the executives, what if we sold to the teams?” What if we just created a low friction solution that any team can get their hands on it, and then let them sell it to the organization. That worked really, really well for us.
We still don’t have a sales team today. We just have a newly formed CS team, which I’m actually heading myself. Yeah, it’s happened over and over. We have individuals who are huge Hotjar fans within really big businesses. A few of them, I can’t even mention. Really big businesses where they have now a thousand users on Hotjar, and just one person sold it internally. Actually in one really big business, hate not being able to say the names, but this person actually wrote most of the documentation needed for us to close the deal himself. It’s interesting to see the power of that. Low friction. Especially for us.
It’s very simple to create an account. Just fill out the fields. The plans, the pricing, super transparent. No complicated stuff there. But it goes beyond the site and the actual pricing of it, and it comes also to the product itself. We looked at the Apple in the beginning. I’m going to do another Apple reference here. It’s the perfect example of … I love to compare remotes in the past, like looking at the Apple TV remote today. This is an example of low friction. Even though the last version is maybe a little bit more friction but …
We wanted to do this in Hotjar. I say this quite often, which is maybe an extreme, but my dream in my head, I’d love to see Hotjar to become what is Netflix to our industry. What if I could just go in there and just hit play, and Netflix or Hotjar is telling me what to watch next. It’s that simplicity which we’re trying to strive for. That translates itself into the product. This is what I was using before we created Hotjar, which this is just a tiny example. And how we then executed on that with simplicity. While this looks simple, this took us, Jonathan knows, weeks of iterating on this and tweaking. How can we make it simpler, simpler, simpler? It’s still powerful. That’s part of the low friction. Just making it so easy for anyone to use. Especially as we moved on from early adopters more into mainstream, we didn’t want to create a tool that our early adopters could geek out on, but actually something that could scale. This, again, helped us go to 10 million a lot, because teams could spread and share it within very quickly.
Another example of a low friction is very early on, we realized that we were actually quite big with agencies, and we weren’t expecting this. The whole business model was geared towards in-house companies. But what we found was that there were many marketing agencies where they worked with multiple clients who wanted to use Hotjar because actually, the fact that you eliminate six tools and replace it with one, if you’re doing that with 10 clients as opposed to just yourself, is obviously compounded. They went bananas basically when they saw Hotjar. They were like, “We love it.” When we saw this and we’re like, “Oh no, we didn’t prepare for this.”
Again, we ate our own dog food. We did a survey with these agencies to understand what they wanted, what they wanted to look for, and we spent a lot of time thinking about how we allow them to bring people, how we allow them to bring clients on board. We made it extremely simple. An agency can quickly choose whether the client pays or they pay. It’s done literally with two clicks. It’s again, another example of very low friction that an agency can just bring in a client super quickly. Don’t need to speak to anyone. Don’t need to discuss pricing. It’s all very simple and easy to do.
The low friction aspect also comes in other things, such as the fact that we publish our product roadmap. Our customers don’t need to stay guessing. Or they don’t need to ask us and we reply. We just put it out there. Many people think we’re insane because we’re telling all our competitors what we’re going to do, but I think that’s great. If anything, that means that maybe they’ll end up following us and that’s a good position to be in. Similarly, the way we communicate these changes and the roadmap changes. Many of you have probably seen Nick’s face quite a lot, right? It’s part of, again, communicating openly, transparently. To summarize, we eliminated any barriers with its simple and easy to use interface and transparent communication. Eliminating friction allowed that line to move nice and smoothly.
Efficiency, this is where it starts to get interesting. A little bit more tactical. As I mentioned before, we were very aware of what our strengths were and our weaknesses are. We know the B2C environment really well, but when it comes to doing the typical sales and enterprise stuff, we had no idea how that worked. We had never done content really well before. Although we love to consume content, but we had never done it. Initially we’re like, “Should we do content?” “Probably not. Because I tried to write a blog post and it took me a month, so this is not going to work.” And, “Johann, you want to write a blog post?” “No, I don’t think I want to do that.” It was very clear. What I’m trying to say is don’t try and do a channel which you’re not inherently, organically, naturally good at. Do what you’re good at.
In our case, we had built a software business to tens of millions of dollars, and we had done that on the back of page. We leveraged that knowledge. Early on, we knew how to do Facebook advertising quite well, because actually used to do parties quite a few years ago, so we had done Facebook. I knew it really well. Ironically, this was the very beginning of Facebook advertising. We leveraged our knowledge of messaging, of how to make ads much more news oriented and content oriented and less spammy. It is paid, but it’s not your typical ads. In our case, we leveraged heavily our positioning and the novelty of Hotjar by talking about new and awesome tool, value which is going to change, highlighting the change happening. This was extremely effective for us in this land grab that we were doing. We managed to spread very quickly. This is what we focused on especially in the first initial nine months.
We also did email and community. By email, we weren’t spamming anyone. But what we would do is, since it was very crystal clear who we were building the product for, we could go to communities such as, for example, Webdesigner Depot. We’re focused on web designers and we’d speak to them, “Listen, do you have an email list?” “Yes.” “Can we sponsor?” “Yes.” We’d take the messages that we had tested on Facebook and knew really resonated well, and then use the money made. The tip there is, if you’re going to do that, don’t test on email because that’s not the best place to do it. Test it where you can do it very, very agile and quickly, and then replicate that on email. Then communities, I mean, stuff like Early Bird, Product Hunt. Product Hunt back then, that was just the real beginning of it. We were lucky in that way.
Later on, as you can see, as we wanted to sustain growth, we then … Even though we know Google Search quite well, it took us quite long to actually start it because we didn’t feel there was a need for it. We’re not doing growth just for the sake of growth, but we then moved as the brand started to slowly develop. We started to move into Google Search to do brand more. As competitors started to pop up doing ads about Hotjar alternatives, we joined the fray. As we started to rank better for keywords like heat maps and whatnot, again, we started to bid on those keywords. If anyone wants to ask more questions about that, we have actually Natalia from our marketing team here, can answer questions, and John as well. A lot has happened there that’s helped us develop.
Now, content, which is the final piece. We also have the guys from the content team here, Louie and [Fior 00:21:18]. That’s our last stage of adding a new channel. This is us thinking, again, the hundred million now. It’s a little bit late, yes, but it’s again being focused and leveraging our strengths. Very early on, we were always monitoring our efficiency, because we’re talking about efficiency. Because we know paid so well, we’re constantly looking at what is our LTV to CAC ratio, and our months to recover CAC. Constantly we’re looking at, we want to make sure we stay over the three ratio, but we know we have leeway in terms of recovery.
That’s where we’re now starting to think about should we develop more connection with the tool and maybe less urgency for them to convert, so that we can potentially actually get better results by doing that. Again, really important that if you’re going to do paid, you have to be looking at the numbers. You have to be monitoring them. Similarly, we also look at the engine engine, which is of a freemium point of view. How many people are going from free to actually paying? We again monitor this over time.
So, focused on a channel we knew well, measured efficiency of paid from day one, and analyze the freemium conversion really on early on, to make sure that we’re always aware of where we can fine tune where our weaknesses are. More than anything, to see as we change channels and as we make changes and as we scale, is that engine changing? Is that line moving or not and what should we be aware of.
Traction. We’re lucky in a way. It wasn’t by design that our vision and our methodology is about … Don’t get lost in having all the data. You don’t need to have the data about everything constantly, every page, every user. At Hotjar, methodology is more about qualitative. If you want to improve the experience, dive into the experience. It’s how the product is built. Snapshot of a page, snapshot of how people are using an experience. We’re lucky that on the back of that, we have feedback. Because we believe that the big powerful stuff happens when, for example, you do a heat map of a pricing page and then ask is our pricing clear.
We actually had one of the biggest aha moments ever when we saw that people were speaking about something, but then interacting with something else. We’re like, “Hold on. That doesn’t make sense.” And then we dug into that and we realized everyone thought sampling was snapshot and snapshot was sampling. It was a whole hullabaloo. But we wouldn’t have discovered that had we not done the two things at the same time. Where does traction come in? Traction comes in because we’re lucky that our methodology does leverage feedback, because it means we do have these widgets, which appear on sites. Which have actually helped us a lot with traction, because we have this not using Hotjar yet.
There was a little bit of optimizing, where we ran tests on that wording. Just changing the wording actually had an impact of 3X in terms of traffic. Sometimes when you identify a big traction point where you’re spreading, it is definitely worth doing some testing. Similarly, in our recently released incoming feedback, similarly we have the same thing, not using Hotjar yet. I mentioned this in thinking … I want you to think in your business, what are these traction points? Where can you be visible to the public, which makes it easier for the word to spread? Find these traction points in your business.
Then obviously we didn’t stop there. We also took it to the next level and thought, “How do we replicate what we had in the beta period, where we had people spreading the news.” We created our own in-house built referral program where people basically refer friends and then they can win gear, and it’s every month we’re resetting the number. It’s a leader board on a monthly level. Again, it’s not a game changer, but it’s all these inches which add up to get you to that final milestone.
Finally, traction also comes from, again, the product. We keep on talking about the product. The fact that we put so much love into the product and made it simple and easy to use, translated into the fact that our users love it and actually show it to others. This didn’t come from nowhere. From day one, the product has evolved and changed a lot. We use our product on our product. We use our product on our product. We’re constantly looking at recordings. We look at our drop-off points. We do surveys. We do polls to understand how can we improve the experience. We also track NPS. NPS critical. Many people have spoken about it. Again, we use Hotjar to track our own NPS scores. It’s really important because at the end of the day, NPS is an indication not just of loyalty, but also of traction.
I remember I had a customer at Hotjar. He said, “We’re just not growing enough. We’re not growing enough. Can you help us?” I was like, “Yeah, sure. I’d love to help. Let’s take a call.” I took a call, explained to them the notion of NPS. They set it up. A week later, they sent me an email and said, “David, we’re looking at the results. It says zero. What does that mean?” I was like, “That means you’re not growing because you’re not giving your customers a reason to talk about you.” Like, you’re not worth promoting. That’s where you need to dig into what are the people saying is their response of why they don’t promote you, and solving those problems is how you’re going to start growing organically.
That’s what happens. When you invest into this and when you care about improving the product, you get traction in this way, which is people excitedly showing the product at events, sharing it and whatnot. This is not something that you can grow with hack. It’s not something that you can optimize or engineer. It happens out of the love you put into the product. We leveraged our referral opportunities, incentivize word of mouth. We created a product our users love or are loving more and more because we’re definitely not at the final results we’re looking for. It’s an ongoing process.
Finally, experience. Many of us, when we think about experience, we think about UX. We think about pixels. We think about user journeys. But experience is more than that. For us, we invested very early on into how do we actually speak and communicate with our users. They’re going to have questions. They’re going to have feedback. They’re going to be pissed off. How do we handle that? Because for us, that is probably the most important layer of experience on top of the pixels. In the beginning, the founders were doing this. When we brought people in boards to do it, we were really, really crazy about hiring the right people from both a cultural point of view, but also developed specifically an ethos around how we do it, how we communicate, what to say, what not to say. We really put the energy into it. Not only that, in our one page strategic document in the company, we speak about experience and how are we going to improve it and how are we investing into it.
It’s also reflected in the way we structure the company. We have one pillar specifically dedicated to customer experience. In there, we have a team. It’s not called support. Support makes it sounds like a body count place, where you throw people to solve a problem. For us, they’re heroes. They are people who speak to our users, they answer the questions, but more importantly, the layer is they loop back to product. They productize issues into solutions, so we eliminate the need of the conversation in the first place.
Then we put our money where our mouth is. We also allocate budgets as a percentage of our revenue towards our groups, towards these departments. Customer experience actually has a percentage of revenue that they can invest. Again, it’s this idea that we have in the way we run the business of rather than managing, we lead. We say, “Here’s where we’re going,” but we let the teams self-organize and invest in their way.
More importantly than anything, I think the fact that we treat our team in the same way that we want them to treat our customers is so important. It’s just a simple concept, but just starting from trust. Everyone who joins a team gets a Hotjar credit card so that they can manage their own budgets. We’re remote, so they can manage their own working space budgets, their home office budget. It’s just a question of trust, of empowering them to do the job.
And then obviously again, tracking. We’re always going back to numbers. We look at close conversations and replies. How is our C-SAT doing as we scale up? Are we in any way starting to diminish the quality of the experience that we’re providing? You always have to be measuring. Investing in experience to us is an opportunity, not a cost. This is quite a big change in mindset. Many companies see it as a cost, but it is such a huge opportunity. In our NPS surveys, when we get people giving us 9 and 10, time and time again they’re saying, “Your support is awesome. Your people go out of their way.” Especially in the market, which is very competitive, having that can be a huge ingredient for growth and success and wow moments. We developed an ethos for interacting with our user. We treat our team how we want them to treat our customers.
I leave you with one final thought, which for me has been quite interesting, coming from a conversion rate optimization experts background, growth hacking and all this stuff, which is over these last two and a half years. This is the big takeaway for me, which is, I really want you to think more about the strategic big things that actually move the needle, and it’s more around the market, and the positioning and all the things that we talked about as opposed to optimizing. It’s this same concept of us being fishermen. We have automatically this area that is our own and to grow, the opportunity is much bigger if you think big and think about markets versus just optimizing to increase that small circle.
One final thing. We’ve developed an amazing … 20 minutes is impossible to share all this stuff I’d love to share with you. We’ve developed an awesome guide at the back of an event we organized in Malta, which was really awesome. It’s not just us. We’ve actually brought together a lot of thought leaders. Highly recommend you check that out. Also, next Tuesday, we’re doing a live session. I hate the word webinar, but we’re doing a live session on the back of this. We’re going to do a Q&A and everything. If you know anyone who could benefit from this, we’d appreciate you sharing that. Thank you from me and the Hotjar team.
Unfortunately, I don’t have time to take questions. The reason was, to be quite honest, I thought it was 25 minutes presenting and then 10 minutes questions, not included within the 25 minutes. Feel free to hit me on Twitter, David Darmanin. I’ll answer all your questions. It’s time to introduce the next speaker, Greg, from Growbots.