The most important business idea you’ve never heard of
One of the best kept secrets in tech is a business model most people have never heard of: self-serve (or product-driven) sales. The idea at the heart of self-serve is that customers help themselves to the products they want to purchase, rather than going through a salesperson. Self-serve is responsible for the success of companies like Google, Facebook, LinkedIn and Atlassian. Earlier this summer, Snap became the latest to get in the game when it launched a self-serve ad manager. Self-serve is the holy grail of efficient business models.
But if product-driven sales is so great, why doesn’t every company pursue it? Because it requires two key ingredients that are hard to find in combination. 1) An intuitive product capable of self-service, and 2) Enormous inbound demand.
First, you need a product that’s easy enough for anyone to use and buy on their own. I joined Google in 2002, shortly after they started the self-serve revolution with the launch of AdWords. AdWords bypassed the salespeople and made it easy for customers to purchase ads themselves with just a few clicks. All you needed was a credit card to take advantage of the most efficient system in digital advertising — whether you had $20 or $20,000.
Similarly with Facebook, businesses only need 15 minutes to create ads that will potentially reach billions of users and take advantage of the social network’s sophisticated targeting. (For instance, jewelers can ensure that only people who are engaged to be married see their ads.)
A more contemporary example is Atlassian. Thanks to best-of-breed tools and an inherently viral core product, Atlassian is now an iconic SaaS company. They’ve even posted about the benefits of self-service: efficiency, money saving, and customers love the experience.
But no matter how simple a product may be, it can only become a self-serve success if the company has something else: an enormous base of dedicated users.
Tens of millions of people were using Google for search every day when AdWords launched. So even without the help of salespeople, Google could reach millions of potential customers instantly. Mark Zuckerberg famously decided to hold off on introducing ads until Facebook became ubiquitous.
Consider the example of Dropbox, which is quickly becoming a self-serve juggernaut in its own right. (I’ll admit I’m biased: my company, Sequoia, was an early investor in Dropbox and I sit on their board.) While Dropbox competes in a different industry and on a different scale than the companies I mentioned, it’s able to take advantage of a self-serve model because it offers an intuitive product to a large existing user base.
With Dropbox, it only takes a few clicks to start sharing your files or collaborating with colleagues. Today, half a billion people have a Dropbox account and can test for themselves how well it works. As CEO Drew Houston says, that means the company effectively has 500 million salespeople. The more users start relying on Dropbox (at home or at the office), the more likely they are to adopt its paid products — and encourage their friends and colleagues to do the same. Today the vast majority of Dropbox’s revenue comes from self-serve sales.
Self-serve tech companies do have sales teams — but they’re relatively small, targeted forces. So when people ask whether Atlassian has a large enough sales force or Dropbox can compete with traditional enterprise companies, they’re missing the point. The golden opportunity for companies with a self-serve model is to increase the percentage of their business that’s sold online, not decrease it.
Finally, it’s important not to confuse a company’s self-serve business model with its mission. Neither Facebook nor Google’s mission mentions “ads,” and similarly Dropbox’s mission omits “software subscriptions.” Self-serve is what pays the bills and gives these companies the freedom to invest in the innovation and big bets that can advance their value proposition. (Facebook, for example, is betting that acquisitions like WhatsApp and Instagram will ultimately help them connect every person on earth, while Dropbox is betting that new collaboration products like Paper will allow them to improve the way teams work together). For any company, long-term success depends first and foremost on offering leading products and services. That said, if history is any guide, self-serve is the prototype sales model to strive for.