There was an interesting trading update from dotDigital, the provider of SaaS solutioImage may be NSFW.
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ns and managed services to digital marketing professionals this morning. For the six months to December 31 2012, it managed a 22% lift in revenue (to £6.7m) driven by ahead-of-plan growth in the high margin email marketing area (up 38%). It follows a strong full year – see here. While the growth number is appealing, the number and quality of new customers (e.g. BBC Worldwide, BP International, ITV, Odeon Cinema’s plus several others) also marks this company out as one to watch. It is also in our sights because of its developing SaaS focus, and it is adding to its portfolio in this segment. The last six months have seen on-going pilot testing of its online survey product. The emphasis is on experimenting with marketing methods for client acquisitions with the aim of establishing reliable cost of acquisition and estimated lifetime value – this is a pertinent point given SaaS providers' problems in delivering profits.
Performance of the services segment (search marketing business) was disappointing however. Although revenue was up 15% it was not able to translate this to bottom line growth due to higher cost of delivery. However, the emphasis on the bottom line is refreshing. It highlights the challenge of transitioning to SaaS – and the wider issue of bringing a sustainable commercially viable SaaS business model to market. dotDigital is doing its best to feel it way towards one by the looks of it. The company is cash generative – ending the period with £4.6m – which is reassuring too. We think it is a company to keep on the radar.
