Billions of ad spend a year is spent one click at a time through PPC advertising (PPC = pay-per-click). The majority of this ad spend is managed by professionals at digital marketing agencies.
So why aren't their more software companies like ours focused on serving this market?
My Background in PPC
PPC professionals are trained and continually evolving their skills to navigate the complicated world of buying ads on platforms like Google, Bing and Facebook. I was one of those pros for 7 years. My last agency role was managing a PPC department of 6 analysts. We were spending millions of dollars on behalf of our clients. Part of my job was to research and try to actively find software our team could utilize to scale our efforts. It seemed like to me only 20–30 companies at most were focused on serving PPC professionals exclusively. That was 2013. Three years later and there hasn’t been a noticeable increase.
The Current PPC Software Landscape
Luke Alley gave a presentation at SLCSEM that laid out the Paid PPC Tools Landscape in 2016. (see image above) The data was based on a survey he sent out to 47 top PPC professionals.
Removing the products with wider appeal and not focused on PPC in areas like call tracking, conversion rate optimization, landing page creation and competitive research there are less than 20 products with a focus on PPC. 47 people doesn’t represent the whole market, but you’d be hard pressed to name a lot more companies with PPC software as their core product offering.
Marketing Technology Landscape Through the Years
Drilling into the section of the landscape over the years focusing on software specifically for PPC professionals. There is a diverse mix of tools that qualify in Scott’s mind in this category in 2016. You can see Scott includes the tools from ad networks themselves and other logos from products that PPC professionals wouldn’t really consider a solution to many of their core needs.
PPC Focused MarTech Landscape Through the Years
After vetting every company on these lists and failing to find any software solutions the team could agree; I felt compelled to help myself and my fellow digital marketers by beginning to work on being part of the solution.
Our History in the PPC Software Industry
The First Attempt to Enter the PPC Tools Landscape Resulted in a Miserable Failure
I knew enough code to be dangerous. On nights/weekends over 2012–13 I began to build a prototype of a tool I thought could help my former PPC coworkers and other PPC teams like ours. At that time the idea was to build a project management tool for PPC pros called PPCHQ. Eventually I felt strongly enough in the idea to leave my agency job and pursue building the software full-time with a technical cofounder.
Beta is Released: One Month Later — Zero Active Users
After months of work (most spent fixing my crappy code) to release a beta version in Feb 2014 and soon we got sobering feedback. Out of our entire beta group we had zero active users one month after release. From the last screenshots, you can see down the left hand navigation we started to try to do a lot with the product. It turned out to be too much. Analysts were using parts of the software but not others. The features they weren’t using created friction with the few features of the platform they actually did like.
During Failure There is No Substitute for Loyal Cofounders
Ego hit aside, I felt terrible my now 2 cofounders had put so much work into a product based on my ideas and nobody wanted to use it. I thought for sure this was the end of my run as a startup cofounder. Without them to help me code whatever what might be next I was finished.
During the conversation when we decided to stop coding and throw in the towel on PPCHQ, I was lucky enough that instead of moving on and taking offers to start working on something else, they both said, “take some time and think about which direction we could go next with this data.”
Doubling Down on the One Feature Analysts Actually Liked
We regrouped and started coding from scratch using the lessons we learned with the PPCHQ failure. Digging through usage stats we found one nugget of information that we used to drive our new product. Analysts actually liked having a central place to track PPC budgets. Our beta customers were asking to have a more built out dashboard that tracked budgets and let them easily scroll through clients and see any over or under spending.
A Better Product, Customers, a Growing Team and VC Funding
Double down on budget tracking we started writing code in the spring of 2014 on our new project. Two years later and our PPC management software Shape, formerly SteadyBudget, is solving problems for analysts around budgeting and more. We have attracted a great team, great customers and a seed round of funding in 2015. We haven’t hit the supergraphic yet (working on changing that) but you can find us in the ‘Notable Mentions’ section on Luke’s landscape as SteadyBudget at the top of the post.
What We Have Learned That Could Help You
Surviving the failures and now the new challenges that come with customers and sales goals it’s much clearer to us why the current landscape of tools for PPC pros is as small as it is. Fundamental parts of growing a company can be uniquely challenged when the core product is PPC management software. In my opinion, these challenges protect against a large expansion of the landscape for tools targeting the PPC industry.
20 of the Many Challenges That Your PPC Software Startup Will Face
I grouped what we have seen into the following activities you’ll have to take on:
- the challenges developing software for PPC work
- the challenges to bootstrapping a PPC software company
- the challenges of direct selling software to PPC professionals
- the challenges of inbound marketing to PPC professionals
- the challenges of fundraising for a PPC software company
Engineering Challenges and Risks to Building Software for the PPC Industry
The PPC industry presents development teams with a unique set of challenges.
1. PPC Professionals are Trying to Solve Nuanced Problems
Nuance is any enemy of software. In my view this is the most fundamental challenge facing software and product teams building tech for the PPC industry. Software wants users actions to be generally the same and easily organizable. PPC organizations are anything but the same. We have heard hundreds of customers and prospects describe their workflows, we are still yet to hear two that are exactly alike
2. It’s Very Risky to Try to Build Great PPC Software Without Great Developers
The architecture necessary to pull tons of data, maintain a fast interface and pass the security requirements of the major ad networks takes great code. If no one on your team has already proven they can build software that handles massive amounts of data points and connections with APIs then try to find an advisor who has if possible.
3. Building Optimization Algorithms for Every Use Case is a Hard Problem to Solve
The metrics of success for a PPC professional’s client can vary account by account. Creating universal algorithms that can be applied to every situation is tricky and maybe impossible. The only solution is giving PPC pros a lot of control and custom parameters they can adjust depending on the goals of the client. Each custom dial adds a layer of complexity for the data architecture and new sets of design challenges. Even the most advance machine learning algorithms out there need to be directed on what to optimize for in some way.
4. The Bing API
I promise anyone reading this who has ever built software that uses the BingAds API data, just nodded their head. Setting up a rock solid connection to the Bing API demands extra effort, especially when compared to working with Google and Facebook APIs.
5. There is Inherent Risk to Building on Top of Ad Networks like Google, Bing and Facebook
Small example, if any of the major ad networks changes ad formats and your software enables PPC professionals to write their own ads, you’ll have to adjust. It’s hard to be subject to decisions being made by companies you have no influence over. That’s scary to anyone, especially developers.
6. The Future of Software Will Probably Be ‘API Driven’
To solve problems for large PPC organizations you are going to need an API in many cases. When enterprise customers see data they love in your software they want it to be as easy as possible for their internal developers to use it to build a custom solution. Maintaining a well documented and functioning API takes a lot of effort.Challenges of Inbound Marketing to PPC Professionals
Challenges Bootstrapping a PPC Software Company
Most early stage companies are forced to sustain the early phases of growth and product development from personal savings and ideally revenue from customers. We bootstrapped for years before taking funding in 2015 and learned a lot about the challenges of going down this path.
7. Lining Up an ‘Anchor’ Customer
A common theme among a lot of bootstrapped companies is that they had an anchor customer to get them going. Many times this is a past employer of someone on the founding team. If you are going the bootstrapped route do everything you can to lock down a customer you can count on. They will give you valuable feedback, testimonials and hopefully revenue.
8. Building a Team With PPC Industry Experience is Extra Tough on a Budget
There are lots of opportunities for marketers and developers with a knowledge of PPC. The challenge is finding people in this niche group of professionals who are willing to take a chance on a job with a company offering below market salaries and an uncertain future.
9. Your First Idea Probably Stinks (just like ours did)
Not everyone’s first idea fails as miserably as ours but it’s more the rule than the outlier in software. If you don’t have enough runway to go through the process of surviving your first idea, then learning, iterating and bootstrapping will be stressful.
Challenges of Direct Selling Software to PPC Professionals
So you have built some software you believe in, now you have to sell it. No matter what the functionality of your software is, if you are direct selling to PPC professionals, here are some of the challenges you’ll face:
10. PPC Professionals on a Whole Hate Being ‘Sold’
There is a reason many of us fell in love with PPC advertising. A lot of what we love about it is the advantages it has over direct selling. The searcher is in control and telling us what they want. Getting direct sales emails and messages are seen as an annoying part of the day by many PPC pros in today’s world. This stigma is something you’ll have to work harder to break through than in some industries.
11. Lots of PPC Professionals Just Prefer Excel and There is Nothing You Can Do About It
It’s a harsh truth. I know… your vision is a much better way to solve a problem facing PPC pros right? Of course it is, unless you wouldn’t be building it! But that doesn’t matter to everyone. A percentage of prospects will hold onto their Excel workflow and there just isn’t anything you can do about it.
12. Many PPC Professionals Have Been Burned By Software in the Past
It’s not fair but you’ll pay for other companies’ mistakes. Many times during sales conversations we’ll hear about a previous negative experience someone has had with a PPC software provider. I have been on the agency and the vendor side of a software rollout not going well for a PPC team. It’s complicated and normally a case where both sides could have done better. Regardless, their negative experience effects the initial reaction to any pitch involving new PPC software.
13. Many Agencies are Owned By Larger Holding Companies
Large holding corporations like WPP own many digital marketing agencies. It’s not always easy to know when beginning the sales process whether or not the agency you are targeting is part of a larger conglomerate. If the prospect is on a list like this, then the people at that company you are selling to may not be able to adopt your software because you are not an approved vendor. In other cases, your main contact just doesn’t have final decision making power over their budget adding layers to the sales process.
14. PPC Advertising is Still a Young Industry so Finding Sales People With Experience Selling to Digital Marketers is Hard
Depending on who you talk to PPC is only about 20 years old as an industry. This greatly shrinks the talent pool of individuals with direct experience selling in the market. Any new sales hire without a background selling to large PPC organizations will take time to ramp up and understand the depths of the challenges facing PPC professionals.
Challenges of Inbound Marketing to PPC Professionals
Direct selling is hard but inbound and content marketing to PPC professionals isn’t easy either.
15. Creating Unique PPC Related Content is Hard
There are lots of great writers, blogs and publications covering the PPC world. It’s hard to stand out. Have an opinion on what the new changes to Adwords mean for the future of PPC? So do a lot of other really smart people in the industry.
16. Building an Audience Takes Years in the PPC World
There isn’t a PPC thought leader that hasn’t been generating great free content for years. The PPC world is decentralized in a way that makes it almost impossible to become a known entity overnight. Not every PPC professional is on Twitter and everyone checks different blogs. There is no central place where all PPC people spend time. Look through the history of anyone with a following in PPC and you’ll likely find years of great content. Creating great content is hard. The process takes a lot of time, energy, strategy and luck for it to have an impact. (Matt Umbro has written in detail about this topic)
Challenges Raising Venture Capital Funding for a PPC Software Company
I believe the answer to the challenges of selling, marketing and building PPC software is having amazing people on your team. Great people (especially developers) can be very expensive. If you don’t have hundreds of thousands of dollars sitting around to hire a great team or co-founders willing to share the burden of starting a company, then you’ll have to raise venture capital. We went through the funding process in 2015. Over the course of 6 months I met with a lot of VC’s and angel investors. Unfortunately, raising money for a software company selling to the PPC industry comes with some stigma.
17. Many VCs Think the Market is Too Small
Tom Perkins, a well know venture capitalist has said, “I can’t tell you how to write a business plan but I can tell you how I read them. I go to the back first, if the numbers are big, I go to the front.” The only public company I believe that is 100% focused on selling software to the PPC industry is, Marin Software. Marin has a market cap hovering around $100 million at the time of this writing. This is a red flag for many VCs. If the largest companies in your space are ‘only’ valued at $100 million it means you have to be extra special for their investment to pay out huge returns. Most VCs are looking for unicorns ($1B+ valuation) and unicorns only.
18. Many VCs Think Marketing Agencies are Too Tough to Sell To
Marketing agencies have a bad rap as a target market in the VC world I have been exposed to. The most common reason I have been given by VCs with this opinion is that they are complex organizations and ownership structures with many layers of decision makers. (see #13 above)
19. Many VCs Think ‘Won’t Google Just Do That for Free Soon’
Google has introduced products that have killed entire industries of software. Many VCs view your company as a very risky investment if they perceive you could be wiped off the map by a free Google product, whether the reality of that situation is true or not.
20. Many VCs Think Machine Learning Should Be Your Focus
A mention of ‘machine learning’ can sometimes even get the most skeptical VC to perk up in a meeting. It’s understandable. PPC data is very powerful and providing recommendations through machine learning that improves ROI makes for a lot easier selling process. However, developing a machine learning feature set delivering great suggestions is a tough engineering challenge and tough to get proof of concept. With many VCs if you don’t have a clear plan to apply machine learning to your data set they aren’t going to invest.
The Future of the PPC Martech Landscape
I don’t foresee a huge expansion in the landscape however because of the unusually high barrier to entry these challenges present. But remember no two startup experiences are alike. Maybe you can avoid some of these challenges based on your unique situation or talents. The most important trait of many companies starting out is they are brutally honest about what lies ahead. So far in my experience I haven’t run into any founders that have looked back on their startup journey and described it as ‘easy’. I hope this post can help others with software ideas for PPC marketers to be better prepared for what lies ahead.
Happy to talk with anyone thinking about building tech for PPC pros and see help if I can, just reach out at firstname.lastname@example.org.