A small business in 2006 could publish a website, but getting found and turning visitors into customers took much more work. Buyers were moving to Google, social media and blogs, and they were getting better at blocking calls, junk mail and spam. To market online, an owner had to learn search and online publishing, handle inquiries and connect them to sales, usually with several separate applications. Businesses without developers or technical staff often paid outside help to set up that work and keep it running H1 H3.
HubSpot
HubSpot sold small businesses a complete marketing suite through its own teaching and partner agencies, then gave away its own CRM so customers grew into more of the suite on records HubSpot held.
How HubSpot won
- 1 · 2006–14Serve the small businesses rivals priced outA $250-a-month product for owners without developers while Marketo and Eloqua moved upmarket.Focus Strategy
- 2 · 2006–14Teach inbound marketing and own the termWebsite Grader and the blog diagnosed a buyer's site; inbound brought over 93% of new customers in 2014.Category Design
- 3 · 2011–All-in-one suite, no developer neededBlog, website, search, email and automation in one product replaced separate applications.End-to-End Workflow
- 4 · 2011–14Agencies sell and run it for clientsAgency partners and their referrals were 44% of customers and 34% of revenue in 2014.Channel Partners
- 5 · 2013–19Own the CRM and give it awayA free CRM, announced in 2014, supplied about half of HubSpot's leads by 2019.Freemium Model
- 6 · 2017–25Switching costsCustomers on several hubs rose from 34% to 60%; leaving means rebuilding records and workflows.Switching costs
Versus Marketo: Marketo sold marketing automation that ran on top of Salesforce's CRM and moved upmarket to enterprises. HubSpot sold small businesses a complete suite through its own content and agencies, then gave away its own CRM, so the customer records lived in HubSpot.
Arena: Market Conditions Before HubSpot
How each step happened
Step 1 of 6 · 2006–14
Serve the small businesses rivals priced out
HubSpot chose the customer its rivals were leaving. Halligan and Shah started with software to run law firms, found that the firms cared most about being found on the internet, and turned that one application into marketing software for any business without developers H1. Advisers told them not to sell to small businesses, while Marketo, Eloqua and others moved upmarket to large companies HMK-5. HubSpot started at $250 a month H1.
The choice set the economics for everything after it. Average subscription revenue per customer was $5,395 in 2011 and $8,823 in mid-2014 H2, among the lowest of about 40 public software companies Tomasz Tunguz compared H4, and most HubSpot clients had less than $25M in annual revenue HMK-10. At that price HubSpot sold through inside salespeople on the phone, not field sales, and it needed buyers to come to it H1 H4. That is the next step.
Rivals Marketo's minimum was $2,000 a month; in 2011 it added Spark at $750, which the analyst David Raab read as a reaction to cheaper systems such as HubSpot's HMK-11. Marketo led on the largest websites HMK-10 HMK-17 and averaged about $40,000 a contract by 2016 HMK-7.
Step 2 of 6 · 2006–14
Teach inbound marketing and own the term
HubSpot sold a method along with the software. The founders framed "inbound" against "outbound" marketing: attract buyers through search, social media and blogs instead of interrupting them H1. Their book, Inbound Marketing, sold more than 90,000 copies H3, and Shah says they wanted HubSpot to be the company best known for the term HMK-5. As more businesses learned the term, more of them learned it from HubSpot.
The company then used the method on its own buyers. Website Grader let an owner enter a web address and get a score for how well the site attracted visitors; the report pointed to the blog, and weeks later many readers asked to talk to sales H6 H1. By 2014 HubSpot drew over 40,000 new leads a month, and over 93% of new customers came from inbound sources with no advertising cost H3. This reached small buyers at scale, but it was not free growth: Tunguz calculated a payback of just over two years on acquisition spending in 2013 H4.
Rivals Marketo also published content, but it sold primarily through a direct sales force working from offices in San Mateo, Atlanta, Dublin, Tokyo, Sydney and London HMK-1 HMK-13.
Step 3 of 6 · 2011–
All-in-one suite, no developer needed
This choice runs from HubSpot's early product to its latest customer accounts, because the product still competes on it. The method needed a blog, a website, search tools, email and automation. HubSpot put them in one product, for what Halligan calls "mere mortals" rather than technologists H1. Its 2015 filing describes mid-market businesses underserved by vendors of single applications and short of the resources to run complex systems H3. AmeriFirst Home Mortgage, for example, moved from several separate applications to HubSpot and connected its content and leads to its sales team H3.
Buyers still cite the same reasons. Rentokil Initial chose HubSpot because it was intuitive and meant they "wouldn't need a full-time developer" to run marketing automation H11. Marq replaced a stack of Salesforce, Marketo and other tools that took eight people to administer, and estimates it cut technology costs by 50%, including $77,000 a year in license fees H8.
Rivals Marketo was an automation layer synced to a separate CRM. Stan Johnson Company made "workaround after workaround" in Marketo and struggled to sync it with Salesforce H9; at Marq, "Marketo was never fully integrated with Salesforce" H8.
Step 4 of 6 · 2011–14
Agencies sell and run it for clients
A small team could understand inbound marketing and still lack the time to write content and run campaigns. Marketing agencies had that time and a reason to sell the software. More than 2,200 agencies partnered with HubSpot by 2014, offering inbound services that moved clients onto long-term retainers H3. New Breed Marketing used the platform to shift from short projects to retainer clients H3. The software gave agencies recurring work, and the agencies made the subscription produce results.
The channel carried real weight: partners and the customers they referred were about 44% of customers and 34% of revenue in 2014 H3. Partners also handled harder work as customers grew. OBO replaced Marketo at Stan Johnson Company and connected HubSpot to its customized Salesforce system H9, and Aptitude 8 moved Marq onto HubSpot within a 90-day deadline H8. HubSpot could win the marketing work without replacing every other system first.
Rivals Marketo sold direct first, with distributors, agencies and resellers as a supplement; the partner program it named was LaunchPoint, a set of add-on applications HMK-1.
Step 5 of 6 · 2013–19
Own the CRM and give it away
Marketing software works alongside a customer relationship management (CRM) system, the database of contacts and deals that salespeople use. Shah's view was that whoever owned the CRM would win over time, and Halligan made the move into CRM a one-way door despite pushback HMK-5. HubSpot announced its CRM in September 2014, free to anyone H5. Halligan says it needed "a lighter product" and a lighter way of selling to enter Salesforce's market: "Let's make it free. Let's make it free forever" H6.
Free use lowered the first commitment. HubSpot ran the CRM as a separate business inside the company and measured how often users returned and how many colleagues they invited H1. By 2019 about half of HubSpot's leads came through freemium H1. Small accounts increasingly bought without a sales call, while larger ones got coaches and negotiation H6. Adam Fisher of Bessemer cites the free offer as the way HubSpot kept serving the low end as it moved up to larger customers H7. The contacts and deals now lived in HubSpot, not in a rival's system.
Rivals Marketo ran on Salesforce's APIs with no long-term contract HMK-1 HMK-13. Most of its customers used Salesforce, which bought the rival Pardot in 2013 HMK-6 HMK-1, and in 2017 Marketo's CEO, Steve Lucas, rejected the idea of CRM itself HMK-14.
Step 6 of 6 · 2017–25
Switching costs
With the CRM underneath, customers bought more of the suite. HubSpot sells its products as "hubs" for marketing, sales, service and operations. Customers using more than one hub rose from 34% in 2017 to 60% in 2021 HMK-8, and net revenue retention (this year's revenue from last year's customers, including upgrades, as a share of what they paid last year) climbed from 88.6% at the 2014 IPO to 115% in 2021 HMK-9. Rentokil Initial started with one team in South Africa, upgraded to include its Rentokil division, and spread to Europe, the Americas and Australia H11.
Records and workflows built up in the CRM make leaving a rebuilding project. When Recharge moved to Salesforce, years of fields, notes and processes did not map cleanly, and nearly every workflow had to be rebuilt H10. The barrier has limits: Recharge left anyway, net revenue retention fell back to 102% by early 2025, and customer dollar retention sits in the high 80s HMK-9. One Hypha client left for Salesforce and came back for ease of use H13. The switching cost exists because of the free CRM in step 5: the records are in HubSpot.
Rivals Vista took Marketo private for $1.79B in 2016 with more than 4,600 customers HMK-2, and Adobe bought it in 2018 with nearly 5,000 HMK-3; HubSpot ended 2019 with 73,483 HMK-15. In a 2023 survey of business marketers, 36% used HubSpot and 25% Marketo HMK-16.
Key dates
- 2006Law-firm pitches turn into marketing software for any business H1
- 2011$28.6M revenue Full year H2
- 2011-10Marketo launches Spark at $750 a month, against its $2,000 minimum HMK-11
- 2013$77.6M revenue Full year H3
- 2013-06Salesforce agrees to buy ExactTarget and its Pardot unit HMK-6
- 2014$115.9M revenue Full year; over 93% of new customers from inbound H3
- 2014Agencies and their referrals: 44% of customers, 34% of revenue H3
- 2014IPO; listed on the NYSE as HUBS H3
- 2014-0611,624 customers June 30; average subscription revenue per customer $8,823 H2
- 2014-09Free CRM announced at INBOUND H5
- 2016-05Vista takes Marketo private for $1.79B HMK-2
- 2017-09Marketo remodels its field sales around enterprises HMK-14
- 2018-09Adobe agrees to buy Marketo for $4.75B HMK-3
- 2019$674.9M revenue Full year, +32% year over year; 73,483 customers HMK-15
- 2019Freemium supplies about half of leads H1
- 2021115% net revenue retention Full year peak; 60% of customers on more than one hub HMK-9 HMK-8
- 2023-08Survey: 36% of business marketers use HubSpot, 25% Marketo HMK-16
- 2025-03102% net revenue retention First quarter; customer dollar retention in the high 80s HMK-9
Sources
Oldest first.
- HMK-11 Marketo Spark Targets Small Business Marketing Automation. Contemporaneous analyst review
- HMK-12 Marketo Debuts Marketing Software For Small Businesses, Spark. Trade press
- HMK-6 Thoughts on Salesforce.com Acquiring ExactTarget/Pardot. First-person founder blog
- HMK-1 Marketo, Inc. Form 10-K, fiscal 2013. Annual filing
- HMK-10 Hubspot, Marketo, Eloqua: New data shows marketing automation market share in unprecedented detail. Trade press with Datanyze data
- H2 HubSpot Form S-1. Primary source
- H4 Benchmarking Hubspot's S-1: How 7 Key SaaS Metrics Stack Up. Outside analysis
- H5 HubSpot launches free CRM and Sidekick at INBOUND14. Primary source
- HMK-17 Hubspot, Marketo, Pardot, Act-On, and Eloqua lead latest marketing automation market share numbers. Trade press with Datanyze data
- HMK-13 Marketo, Inc. Form 10-K, fiscal 2014. Annual filing
- H3 HubSpot Form S-1/A. Primary source
- HMK-7 Want to compete with Salesforce? Buy Marketo. Outside analysis
- HMK-2 Vista Equity Partners buys marketing automation giant Marketo for $1.8B in cash. Trade press
- HMK-14 Marketo CEO Steve Lucas: The Engagement Economy Will Replace the Outdated CRM Model. Executive interview
- HMK-3 Adobe to Acquire Marketo. Company press release
- H1 Brian Halligan with Wufoo cofounder Kevin Hale. Primary source
- H6 The Funnel is Dead. Long Live the Flywheel.. Primary source
- HMK-15 HubSpot Reports Q4 and Full Year 2019 Results. Company results release
- H7 Moving upmarket and the ascent of SMB SaaS. Outside analysis
- HMK-8 HubSpot Q4 and full year 2021 earnings call. Earnings call transcript
- HMK-16 Hubspot Overtakes Marketo as Marketing Automation Leader: Demand Spring Report. Trade summary of practitioner survey
- H13 Migrating from Salesforce to HubSpot using a workaround. Primary source
- R15 Social media management tool evaluation and contract request. Buyer procurement evaluation
- HMK-9 The complete history of HubSpot's net revenue retention. Outside analysis of filings
- H12 HubSpot reports Q4 and full year 2025 results. Primary source
- H10 Recharge cuts seller administration and strengthens MEDDIC adoption. Primary source
- H11 Rentokil Initial marketing adoption and expansion. Primary source
- H8 Marq migrates from Salesforce, Marketo and other tools. Primary source
- H9 OBO helps Stan Johnson Company implement a HubSpot-Salesforce integration. Primary source
- R17 Capture connects CX and engineering with Zendesk. Vendor-hosted named customer evaluation
- HMK-5 Crucible Moments: HubSpot, An Underdog Helps Invent Modern Marketing and Then Takes on Goliath. Founder and investor podcast