Brainstorms Issue #10

Brainstorms Issue #10

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Alright, let's dig into this week's Brainstorm! 

Finding SaaS Deals Takes Too Much Time

“I buy a lot of different SaaS (software-as-a-service) tools for various things. Sometimes it’s for personal use, sometimes it’s business-related. I often find an affiliate code, or some other deal I didn’t know about after I purchase the software. I always forget to hunt for deals before I make a purchase, and it costs me a lot of money.”

- SaaS Consumer

The Opportunity

Someone should create Honey for SaaS tools and digital products.

Honey is a chrome extension that searches for coupons and discount codes for physical products automatically right before you check out. Currently, Honey doesn’t work with any digital products.

To give you an idea of how successful this Honey is, it was purchased roughly one year ago by PayPal for $4B and they are doing over $100M in revenue each year.

The idea is to create a chrome extension that works in the background hunting for affiliate codes and other discounts at the checkout for software and digital products. I like this idea because the value proposition is so clear - save money on products you were already going to buy.

Note: I believe this business can print money, but more on that in the ‘Economics’ section down below.

Market Background & Opportunity Size

SaaS (software-as-a-service) tools and digital products have exploded in the last 10-15 years. Whether you know it or not, you, or your company, are paying for multiple SaaS tools and digital products.

In 2019, the average company spent $514,500 on SaaS tools, which is a 50% increase from 2018. Most companies invest in anywhere between 100-300 tools, depending on the size of the organization.A few interesting facts:

• Companies are spending more on SaaS tools than they are on laptops

• The average employee uses 8 SaaS tools to do their job

• Every 2 years, companies switch roughly 50% of their SaaS tools to different providers

These tools and products aren’t limited to business use cases. On average, Americans are spending somewhere between $60-120/month on digital subscriptions (or about $720-1440 each year).

Note: If you want to dig more into these numbers, most of the stats came from here.

Pain Points

While there are many pain points related to SaaS tools and digital products, we’re going to focus on the problem detailed above. There are pain points for both users and SaaS companies.

Users 

• Finding deals on digital products is time-consuming and you often forget to do it. This results in you spending more money on the same tool or product. Currently, there are no good solutions to help automate finding and applying coupons to SaaS tools and digital products.

SaaS Companies 

• Acquiring new users is a huge challenge for most SaaS companies. Offering them access to a targeted customer base in exchange for discounts is a great value proposition.

  Current Solutions

Appsumo

• Appsumo is by far one of the most popular sites to get deals on software. They partner with software companies that want to offer heavily discounted prices in exchange for access to their estimated 800,000 users. They do roughly $30M in revenue/year. That said, they don’t use any software to help you find deals on products you’re looking to buy, you have to search their database.

F6S

• F6S is a site that helps founders succeed. While they do many things, one of their features is a deals platform where founders can get access to discounts on software. All the deals are business tools and you have to search their database to get the deal.

Dealify

• Dealify is a Chrome Extension that notifies you whenever a new lifetime deal becomes available. However, they currently don’t help you find deals on the software you’re already looking at buying

Note: The two biggest players, Honey and Rakuten don’t currently offer discounts on most software. But, nothing is stopping them from moving into this space and becoming competitors.

Additionally, I found a guy who’s working on this problem currently, Shaun MacLellan. He’s a super nice guy, reach out to him if you’re interested in this opportunity.

How Do The Economics Work?

How Honey Makes Money?

This idea becomes one that I think can print money when you look at the business model used.

The gist of it is this: every time you make a purchase using Honey, they get a commission paid by the retailer. This is similar to how bloggers, YouTubers, or newsletters use affiliate links to get commissions when they refer customers to a product/website.

One nuance here is that many believe (although it’s not confirmed) that Honey actually steals commissions from other affiliates. By offering codes right at the point of purchase, it is likely Honey receives all the commission on the purchase. You can read more about this here.

Does This Work For Software?

The commission offered by SaaS companies is 2-3x the commission offered on physical goods. If you’re able to emulate Honey’s business model, this could easily be a business that prints money.

How to Execute

• Populate Your Extension With Deals: After doing some research, there are dozens of platforms that offer deals that you could use to populate your extension. Additionally, here’s a link to ~150 software affiliate programs you could sign up for to immediately start making money.

• Find Your Early Adopters: This extension isn’t for everyone. I’d start by going after the individuals who already use Appsumo or other solutions. This will likely be indie makers, startup founders, or digital marketers. There are dozens of online communities where these people hangout that you could use to capture your first 1,000 users.

• Build a Smoke Test: This idea is perfect for running a smoke test - it’s got a simple value proposition and the product is easy to understand. I’d drive traffic to a well-designed landing page and capture emails before building out the tech. This will help you test both channel and market risk.

• Build Partnerships: Once you’ve got some initial traction, I’d focus on building partnerships with SaaS tools and digital products. The best way to make your extension sticky is by always having the best deals for your user. Appsumo has done this well, so steal a page out of their playbook.

Challenges

• Low Purchase Frequency: Unlike physical goods, SaaS tools and digital products are bought at a much lower frequency. This is bad for two reasons: 1) If your business model is getting commissions on each purchase, you make less money, 2) It may be harder to convince people to download the extension if they feel like they’ll use it often enough.

• Incumbent Threat: As mentioned above, Honey and Rakuten don’t currently offer discounts on SaaS tools and other digital products. That said, there is a real threat of them adding these products to their offerings. If they did that, competing with them would be challenging.

• Creating + Managing Partnerships: Most physical goods are purchased through online retailers like Walmart, Amazon, Fashion Nova, ect… These retailers already have affiliate programs set up, which makes things easy. While some SaaS companies have affiliate programs, there are a lot that don’t. To dominate the space, you’ll need to do some leg work to convince these companies to work with you.

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Thanks for reading - now get out there and build it! 

Catch ya next week, 

Keevin ✌