When you think about runaway business models – the kinds MBA students study in class as they dream up the next big winner – it’s tempting to reduce their success to a few simple factors.

These companies obviously have an amazing product. They’ve got a great way of telling that product’s story to the world. And they’re really, really good at selling.

But those three things are what got Starbucks its first profitable coffee shop in Seattle, not what allowed that shop to morph into an $80 billion business with 30,000 cafes around the world. That kind of growth? It requires thinking at a different scale.

As the team at the Saas Commerce Platform Paddle has learned, real growth is about entering new markets – and that takes thoughtful attention to pricing, making inroads into new geographic regions, deciding whether to move upmarket (or downmarket), and offering new standalone products instead of bloated features tacked onto old ones.

“The reason why businesses grow is they’re in a great market”

It’s this approach to scaling their business that has enabled Paddle to achieve 2475% revenue growth over the last four years. It’s even garnered them an enviable position among Deloitte’s Fast50, a list of the fastest growing software companies in the UK.

We sat down with Paddle’s Ed Fry for an in-depth look at what it really takes to scale at such a breakneck pace. As the Head of Growth, Ed’s mission is straightforward if far from simple – taking the company’s already skyrocketing growth and accelerating it.

Listen to the full episode above or check out our main takeaways below.

This is Season Two of Scale, Intercom’s podcast series on moving from startup to scale-up. If you enjoy the conversation and don’t want to miss the rest of the series, just hit subscribe on iTunes, stream on Spotify, listen on Stitcher, or grab the RSS feed in your player of choice.

1. Product, marketing, and sales are table stakes for growth

When it comes to growth, it’s tempting to boil the recipe down to just a few ingredients. We see wildly successful companies and attribute their success to a combination of their product, the story they tell about it, and their ability to monetize it.

Take Slack, for example: the media points to its brilliant product as the reason for its impressive growth. Hubspot? A genius inbound marketing strategy. Salesforce? It’s in the name: a company inspired by the needs of salespeople has to be good at selling itself.

In reality, a killer product, a great story, and sales talent are just the bare essentials – the cost of entry into the world of business. To unlock real gangbuster growth, you have to think about expanding your market, not just capturing more of an existing one.

Here’s Ed’s perspective on growth:

“The reality is fast growing companies have all this stuff – they have marketers doing marketing, they have product people. But that’s not why they grow. The reason why they grow is they’re in a great market. Software businesses are just like any other business, like Starbucks, Pret A Manger, McDonald’s. They grow because they are in more markets. They are in more locations, they’re selling at more price points, they’re selling more products. And for software businesses, it’s exactly the same.

“In that process, the whole sales, marketing, products, go-to-market, commercial model is going to change. And, really, growth comes from figuring out that product-market fit, that go-to-market fit within each of those markets.”

2. Invest in the five stars for growing your market

Most businesses talk about the idea of a North Star. Sometimes it’s a guiding philosophy that the company’s leaders rally everyone around. Other times it’s a metric that a specific team orients their work toward achieving.

In Paddle’s case, they optimize for the five stars of growth:

  • Monetization: Optimize the pricing.
  • Product expansion: Design compelling standalone products, not features.
  • International expansion: Enter into global markets.
  • Moving downmarket: Offer self-serve options for individual users.
  • Moving upmarket: Court enterprise customers.

Companies like Slack, HubSpot, and Shopify have all operated on this deeper level, leveraging these five strategies to go public. As Ed points out, it’s right there in their company reports:

“If you go and look at public SaaS companies, you go down to their S-1 and investor filings and Q1 reports, you see how they’ve outlined their growth strategy. And we dig through this and we dig through our own sellers’. And really there are five most common market-moving strategies. This really sets the context for how companies grow.

“Our prescription to software companies, because we grow when they grow, is to think about how you’re going to move strategically through these five stars and how you’re going to grow your TAM [total addressable market] so you can grow your ARR [annual recurring revenue].”

How you prioritize each of the five stars depends on your organizational model and whether it’s product- or sales-led. Though both focus on monetization first, product-led companies tackle internationalization – that is, building a product for a global audience – before moving upmarket. Sales-led companies, on the other hand, flip the script. Whichever path you decide to take, it’s essential to put a comprehensive strategy in place.

3. Optimize for being international from day one

Growing companies often see international expansion as a huge endeavor, requiring years of careful planning. Unsurprisingly, the thought of having to rethink all your customer touchpoints tends to inspire trepidation, not excitement.

“Making small incremental improvements can make dramatic increases in top line revenue”

But as Ed points out, even small optimizations for global customers can have outsized results, especially in software where the barriers to entry are low. It’s especially helpful if international aspirations are baked into the strategy from the very beginning:

“Most companies, particularly companies isolated, say, in the US market, are missing out on optimizing for half their signups, half their customer flow. And at the scale stage where 100% year-on-year growth actually turns into quite a substantial dollar amount, making small incremental improvements can make dramatic increases in top line revenue. That’s something which we’ve seen repeatedly again and again, particularly for product-led SaaS, product-led software companies where anyone all over the world can sign up. You’re international from day one.

“For scale-ups who aren’t thinking about international beyond ‘Oh, that means we have to set up an office or translate to our entire product,’ it’s like, ‘No, there are way earlier, way simpler optimizations that people can make.’ We see a pretty consistent lift there, sort of 30% globally on revenues. In some markets like Germany, we’ve seen sellers triple their conversion rates just by getting things like payment methods right.”

These kinds of optimizations are only the first step into a vast world. An ongoing commitment to internationalization, one of Paddle’s five stars, can lead to huge results. In a recent study of SaaS companies, Paddle found that 40% of those who expanded internationally reported having new, scalable sources of growth among other benefits.

4. Build your own universe of market opportunities

Last season, Stripe’s Jeanne DeWitt shared how the payment-processing company developed “the universe” –  a giant database of companies they could target through outbound sales. Ed and his team at Paddle have taken this idea and made it their own.

In their case, Paddle are using data to determine which geographies they’ll target next. Analyzing data from their own sellers along with external data, Paddle’s “software universe” enables them to identify which markets are ripe for expansion and assess what factors will lead to success in those regions:

“We started building our own universe and we call it ‘the software universe.’ So this becomes a collection of data sources to understand different things about software companies. Who do they sell to? Is it a free trial? Is it sales-assisted? Where’s their traffic across the world? What tools are they using? And then how can we run machine learning and AI and all kinds of predictions on top of this to understand who we should be talking to?”

So, where did their “software universe” lead them? Directly to Asia and the Middle East. While most companies establish themselves in North America and Europe before expanding into these regions, Paddle’s data took them down a different path.

“Going East is definitely the area of focus in the future. I think very few companies, particularly US companies, understand the East on this. It’s quite a distributed software landscape because salaries in many of these countries aren’t as high. It doesn’t tend to support enterprise software, but product-led companies can do really, really well there.

We have a number of sellers from places like Armenia or India or Malaysia who are performing really, really well. They are GT 100 companies. They out-compete their Western competitors. They’re growing much faster. And this is for us one of the biggest growth areas.”

By looking beyond the horizon of established markets, companies can slingshot into a new frontier of growth. The International Monetary Fund projects global GDP growth to pick up in 2020, largely due to anticipated upturn in emerging market economies such as those in the Middle East.

5. Growth requires collaboration, not kingdoms

It should be clear by now that a truly effective growth strategy spans a number of initiatives. Paddle’s Five Star Framework dispatches with the notion that a company can get by on its product, marketing, or sales alone in a way that will produce massive, meaningful growth.

But with five different strategies all competing for attention, each hand must know what the other is doing – or risk misalignment. It’s a danger that can quickly send your company careening off track. Just as companies scale, so does misalignment.

That’s why it’s crucial everyone in the company thinks about growth from a single, shared point of view – that of the customer. As Ed points out, growth requires collaboration, not kingdoms:

“The challenge across all this market moving stuff is it’s not functional. Like I said earlier, it’s not me and marketing sitting and explaining my view of the world or sales doing that in their silo, or product in their own kingdom. This is truly cross-functional stuff.

“For the companies which fail to do that, it shows. Your products, it seems out of touch. Your messaging is off. It doesn’t quite hit the mark. Again, that aggregation of customer insights, given in modern companies, people come through products, they come through a website, they talk to a rep, it’s all cross-functional as well. It’s flattening the entire organization around the customer.”

Scale Podcast

Amazon advertising revenue increased 45% year-over-year in the third quarter. Click to enlarge.

Amazon advertising revenues hit a new high in the third quarter, reaching $3.6 billion. Overall, the company reported lower-than-expected profits of $2.1 billion on $70 billion in revenue for the third quarter of the year on Thursday.

Amazon doesn’t break out advertising revenue, but advertising makes up the majority of an “Other” revenue category in its earnings reports. The other category grew by 45% year-over-year, but the advertising segment of that category actually grew at a rate higher than 45%, Amazon CFO Brian Olsavsky said on the earnings call.

Why we should care. Amazon’s advertising growth rate underscores the threat it is presenting to Google and Facebook in attracting ad dollars from brands and merchants. The company has been steadily investing in solutions for branding and performance advertising including inventory, ad formats and targeting capabilities.

“[W]hat we’re focused on really at this point is relevancy,” said Olsavsky, “making sure that the ads are relevant to our customers, helpful to our customers, and to do that, we use machine learning, and that’s helping us to drive better, better and better relevancy.”

On Fire TV, video and OTT advertising options. “You know one of our areas of focus is expanding our video and OTT offerings for brands,” said Dave Fildes, director of investor relations.

While performance advertising comprises the bulk of budgets going to Amazon, brand awareness campaigns accounted for 42% of spend on Amazon’s DSP in the third quarter, up from just 26% in the first quarter of the year, performance agency Tinuiti reported this week. Spend on Amazon DSP increased 30% in the third quarter, among Tinuti clients, up from 27% in Q2.

“It’s still early in this space, but we’ve done a few things with IMDb TV, Live Sports, things like adding more inventory through Fire TV apps, and as I said IMDb TV, adding more OTT video supply through Amazon Publisher Services or APS integrations and streamlining access for third party apps and really just making it easier for advertisers to manage their campaigns and provide better results.”

Free one-day shipping costs add up. Amazon has been investing heavily in one-day shipping — more than two billion dollars so far — and is expected to spend $1.5 billion on it in the fourth quarter alone. This type of investment puts a dent in profitability and makes investors skittish, but long-term investments like this make up a well-worn page in the Amazon playbook. Amazon customers have already ordered “billions of items with free one-day delivery this year,” Jeff Bezos, Amazon founder and CEO in a statement.

“Customers love the transition of Prime from two days to one day — they’ve already ordered billions of items with free one-day delivery this year. It’s a big investment, and it’s the right long-term decision for customers.” Bezos also said that the proximity of the distribution centers to customers for one-day means carbon emissions are lower than for air or long-haul delivery routes.

On the shorter holiday season. The company said it does not expect much negative impact from this year’s shorter holiday season — six days shorter than last year, which was the longest possible at 32 days between Thanksgiving and Christmas.

“What we found in the past is that there is generally a holiday budget that is spent somewhere between November 15 and December 25, and well certainly Black Friday and Cyber Monday are important dates in that holiday period,” said Olsavsky.

The company is optimistic it will have its best holiday season ever with the combination of factors such as faster shipping options and its new lineup of Alexa-enabled devices.

About The Author

Ginny Marvin is Third Door Media’s Editor-in-Chief, managing day-to-day editorial operations across all of our publications. Ginny writes about paid online marketing topics including paid search, paid social, display and retargeting for Search Engine Land, Marketing Land and MarTech Today. With more than 15 years of marketing experience, she has held both in-house and agency management positions. She can be found on Twitter as @ginnymarvin.


Snap, Snapchat’s parent company, had its third straight quarter of revenue growth during the third quarter of 2019, up 50% year-over-year at $446 million. Daily active users (DAUs) were up 13% year-over-year, reaching 210 million. Snap trimmed its loss by 30% in the quarter, from a loss of $323 million to a loss of $227 million.

Snapchat DAUs up on iOS and Android. It appears Snapchat has turned a corner in terms of growth among its Android users — a challenge it has been trying to overcome after a redesign in 2017 negatively impacted the Android version of the app.

During the second quarter of this year, the company reported higher retention rates for first-time Android users and an uptick in the number of Android users sending Snaps. Per this most recent earnings report, Snapchat said DAUs were up 4% sequentially and 13% year-over-year on both its iOS and Android platforms, with a global user base reaching of 210 million during the third quarter of 2019 (24 million more than the third quarter of 2018).

Snapchat reports its DAUs open the app, on average, 30 times a day, and that time spent watching Discover content increased 40% year-over-year.

Snap’s ad revenue keeps climbing. Snap’s commitment to the long-game, rebuilding its app in 2017 and focusing its efforts on building out its self-serve ad offerings appears to be paying off. The company is continuing to see steady growth, reporting an increase in revenue for three straight quarters. This is a good sign for the company — but what may be an even better sign is the CEO’s acknowledgement that the platform is “extremely” under monetized.

This quarter, the company launched Dynamic Ads, extended the allowable length of video ads from 10-seconds to three minutes, added new interactive features to its Commercial ad product and introduced a Goal-Based bidding model for advertisers.

“Our success is the result of planning, discipline, and deliberate decision-making across many teams at Snap who are obsessively focused on ensuring our ad products are innovative and performant, our self-service marketplace is delivering ROI at scale, and that our team is operationally set up for success,” said Snap’s Chief Business Officer Jeremi Gorman.

Snap’s AR initiatives. Snap is positioning itself to be the AR leader among social platforms — potentially a big selling point for brands looking to bring AR into their advertising strategy. The company reports that each of its DAUs are interacting with AR features nearly 30 times every day, on average.

“In short term, meaning the next one to three years, we are focused on scaling our content and augmented reality platforms, making Snapchat content and augmented reality easier to create, easier to monetize and more personalized,” said CEO Evan Spiegel.

Why we should care. Snap’s DAU numbers may not compare to a Facebook or Instagram, but the app is growing and is a prime channel for marketers wanting to connect with younger audiences. (For a number of months now, Snap has reported it reaches 90% of 13 to 24-year-olds in the U.S. and 75% of 13 to 34-year-olds.)

And, the company’s investment in its ad platform is delivering big results — Snap reports total ad impressions on the app were up 121% year-over-year during the third quarter of 2019. A Snap-commissioned study on CPG advertisers by NCSolutions found that Snap Ads were earning an average ROAS of $2.92 compared to a mobile ad industry standard of $2.50.

“Our advertisers are able to achieve higher ROI when they combine Snap Ads with our Augmented Reality and Creative Tools products, and this is helping to drive strong adoption of our Self Serve Reach and Frequency Lens products, which grew more than 30% sequentially in Q3,” said Snap CFO Derek Andersen.

About The Author

Amy Gesenhues is a senior editor for Third Door Media, covering the latest news and updates for Marketing Land, Search Engine Land and MarTech Today. From 2009 to 2012, she was an award-winning syndicated columnist for a number of daily newspapers from New York to Texas. With more than ten years of marketing management experience, she has contributed to a variety of traditional and online publications, including MarketingProfs, SoftwareCEO, and Sales and Marketing Management Magazine. Read more of Amy’s articles.

second earnings report since going public in April, generating $261 million in revenue during the second quarter of this year — up 62% year-over-year, and nearly $60 million more than it earned during the first quarter of 2019. Of the $261 million it earned, $238 million came from the U.S.

The site’s monthly active users (MAUs) were also up, seeing a 30% increase year-over-year.

Despite the revenue gains, Pinterest reported a net loss of $1.16 billion for the quarter, which it says was impacted by, “RSU [restricted stock unit] expense recorded in connection with our initial public offering.” The company expects to surpass $1 billion in revenue, according to its full-year outlook for 2019, reaching between $1.095 billion and $1.115 billion.

Pinterest’s international reach. Pinterest’s global MAUs reached 300 million during the second quarter of the year, nine million more than it reported during the first quarter of the year. The bulk of Pinterest’s MAUs are international users: 215 million global MAUs compared to 85 million in the U.S.

Pinterest introduced mobile ad tools that let advertisers create and manage campaigns from their phone, and launched new video capabilities for brands, including an updated video uploader, scheduling capabilities and a dedicated video tab within business profiles.

Pinterest is also focusing its efforts on e-commerce initiatives. Shortly before going public, the company recruited the head of Walmart’s e-commerce tech team, Jeremy King, to lead engineering. It has since launched the “Complete the Look” visual search tool — a feature that recommends relevant products based on the context of a scene.

Why we should care. As a discovery platform, Pinterest provides a wide range of opportunities to showcase products. Now that it is fine-tuning its e-commerce capabilities, the image-heavy social network is aiming to attract more retail brands and pull more ad dollars.

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video ads accounted for more than half of its quarterly revenue.

Ad engagement growth versus cost per engagement. Twitter’s total ad engagements for the quarter were up 20% year-over-year, but cost per engagement (CPE) remained flat.

Tracking the two data points over the past ten quarters shows that ad engagement growth rates have declined, while the “drops” in CPE are shrinking. Last quarter, Twitter reported CPEs fell 4% year-over-year and were flat this quarter compared to the previous year. This time last year, Twitter reported a 32% drop in CPE.

mDAUs reached 139 million during the second quarter of 2019 — an increase of five million from the first quarter of this year, and 17 million more than the second quarter of 2018.

In the U.S., mDAUs reached 29 million during the second quarter, which means U.S. users make up just over a fifth of Twitter’s total user base. This number grew by only a million since the first quarter of the year — and 3 million year over year.

Last quarter, Twitter announced it would no longer report monthly active users (MAUs) stats, sharing only on the new monetized daily active user (mDAU) metric itintroduced in February. The move was in part to compensate for the slide in MAU numbers, which Twitter said resulted from its efforts to improve the health of the platform. Twitter defines its mDAUs as authenticated users it is able to show ads to who have accessed Twitter via the app or desktop application.

Why we should care. Twitter has put much of its focus during the past year cleaning up the platform and ridding timelines of malicious activity and spam in an effort to provide a safer environment for brands and advertisers. Many argue those efforts have gone far enough, but it appears to be making an impact on the adveritsing front.

CEO Jack Dorsey said the health of the platform remains the top priority for the company. “Our focus was on ensuring that our rules, and how we enforce them, are easy to understand. We also continued our work to proactively identify and address malicious behavior, resulting in an 18% drop in reports of spammy or suspicious behavior,” said Dorsey.

About The Author