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Should Your Startup Have Its Own App Store? Insights From HubSpot

Posted by Yoav Shapira on July 14, 2011 in app marketplace 12 Comments

The following is a guest post by Yoav Shapira one of the early team at HubSpot and VP Platform.  

Earlier this week, HubSpot unveiled its "App Marketplace," an area for customers and prospects to install "apps" much like Apple’s App Store or Salesforce.com’s AppExchange.

Why would we do this?  Doesn’t the world have enough App Stores already?  Does an app store really make sense in the world of business to business?   This article describes our early considerations on this topic, what we did, and why we did it.  We’re probably wrong on some of these things, and we’d love to hear your feedback in the comments.

We hope some of these thoughts help you structure your own analysis for your own business.

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What’s the story behind the HubSpot App Marketplace?

Our App Marketplace started out as an area to test new features and portions of the product which were not ready for regular customer use.  We called it “Labs”.  We modeled the implementation on what Google has done (specifically, Gmail).  In Gmail, you can go to the “Labs” area in settings and enable a large number of additional features.  We implemented this “Labs In The Product” at HubSpot for the same reasons that Google did.  It’s a great way to get new features out to a self-selected list of users, measure results and iterate quickly. 

Customers were very positive about this approach.  It was clear which parts of the system were still new and in “beta”.  As our functionality evolved, we recognized that these cool new “Labs” features didn’t have to just come from us.  Third party developers could also build nifty new capabilities that would help HubSpot users.  Also, as it turns out, people are quite used to the notion of an “app store” (thanks Apple!), so we shifted our efforts into what is now the HubSpot App Marketplace.

Why not have another Beta approach, like sending some portion of our traffic or customers to Beta versions of the software?  

We like this approach.  We’ve been doing it for years, and we continue to do so.

What the App Marketplace brings to the table, besides the familiar metaphor for customers, is that it puts the customer in control.  They decide if and when to install an app, and can remove it at their leisure.  So it’s not quite a controlled A/B test, but it’s much more optimized for the customers themselves.  We like that.  We also like that instead of us choosing some random sample to test out a new feature, we can get data on which of our customers are interested in which kinds of capabilities.

But don’t you need many developers building stuff for a successful app store?

As it turns out, no, you don’t ;)  Especially while we were thinking of the app marketplace as a “Beta” channel, we planned to simply have our in-house developers create some apps.  In fact, this is how the first couple of marketplace apps evolved.

Our app marketplace model is a mixture of both quantity and quality.  It’s not extreme on either end.  We don’t want to be like Apple, controlling the entire experience very tightly, because that is painful for developers.  We also don’t plan to have millions of applications in there, as a B2B company, because our market is not quite big enough yet.  More on that shortly.

What we found is that of our existing hundreds of partners and VARs (Value-Added Resellers), at least a couple dozen companies have developers and are happy to work with us.  In fact, they see this as a channel to productize their custom integration work into something more profitable.  For these organizations, the marketplace provides an opportunity to build an ongoing revenue stream.

We’ve been working closely, and happily, with these early partners.  We’ve incorporated their feedback, and in turn, the ecosystem gets better for everyone involved.

We’d love to get more developers, and we have some ideas In this area, but we’re not shooting for millions.  We’ve been pleasantly surprised at the amount of interest in our marketplace from developers, and we’re working with them closely.  All the documentation and code samples are free / open-source, as is the discussion group, where everyone is welcome.

 Alright, but surely these developers want millions of customers?

Thankfully, that’s not the case.  Each of our partners does their own economic calculation, but it turns out for many of them, selling hundreds or thousands of customers, at up to a few thousand dollars per customer, is a very nice business.

It turns out the SaaS subscription model works nicely here as well.  We’re not selling $0.99 apps, nor $0.99 add-ons.  Apps like some CRM integration packages could easily cost tens of thousands of dollars, but end up costing a small portion of that amount in our marketplace, because the developer gets dozens of customers instead of one.

Isn’t this distracting from your core product work?

Yes, you should primarily focus on your product, and we do as well.  The app marketplace is supported by less than 5% of our development team, so it’s not a big distraction.  And it provides a channel that makes most of the rest of the team more efficient, at least when it comes to testing out Beta-type features or product ideas.

 

I get that.  But doesn’t the world have enough app stores?

There are three reasons we did this, all driven by customer feedback.

First, it turns out that marketing involves many different activities.  The number of tasks our customers have to do is very large, and we want to help them with the entire marketing process.  This would take us a very long time to build ourselves and like all companies, we too have limited resources.  The marketplace provides another way to help more of our customers, faster, whether we do the work or someone else does.

Second, customers are becoming more sophisticated over time, and they want to pick and choose among different modules or pieces of functionality.  It’s not a simple “one size fits all” when it comes to small business marketing.  We try to listen to our customers, so we’re giving them a choice.  But rather than have a very complex pricing matrix, we just used a metaphor they know and like, thanks to Apple et al.

Third, our customers are aware of other external applications that are available .  But they have told us they trust HubSpot more than a random web site they don’t know.  They already pay us, they already know us, and even though we don’t write or support most of the apps in our marketplace, they still prefer this to a random 3rd party.

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Those were some of our considerations.  Stay tuned for another blog post coming soon, covering where we belong on the Apple / Google app store spectrum, how shipping a minimally-viable product totally worked (we haven’t built billing yet), and more…

Meanwhile, would to hear your thoughts on the pros and cons of trying to build a store/marketplace for your product.  Do you think we moved too early at HubSpot?  Should we simply have kept our platform development to exposing APIs and having "external" integrations -- instead of allowing applications to co-exist within our system?  All thoughts and comments appreciated.  We're learning as we go.