Everybody, welcome to HubSpot's eighth annual Analyst Day at Inbound. It's great to see you all back here in person at the convention center here in Boston, Massachusetts. Those of you joining us over the webcast, hope you guys have all enjoyed your summer so far and are doing well. I'm Chuck MacGlashing, I'm the head of Investor Relations here at HubSpot. Super excited about the content that we've got lined up for you guys today. Before we get started, as always, gotta run through a couple of housekeeping items. With that, our safe harbor statement in all of its glory. You can find all of the non-GAAP reconciliations to the financial information we discuss on our website at ir.hubspot.com. Okay, onto the fun stuff.
In just a minute here, I'll be joined on stage by our co-founder, executive chairperson, Brian Halligan, to chat with him a bit about what he's sort of been up to over the last year in the executive chairperson role. Unfortunately, we're gonna probably have to touch on the bottom of the barrel, Boston Red Sox here in the AL East. But joking aside, we'll kinda pick his brain on HubSpot and sort of what's to come. Once we finish up, Jenna and Ryan, they're in the back with the big orange lollipop signs are gonna shepherd us down to the main stage area, where we'll sit in on the spotlight session with Yamini, Steph, and Dharmesh, which is gonna be great.
Once that finishes up, we'll have about 45 minutes to make your way back up to this room where we'll have lunch served. So feel free to grab a bite, make your way back to your seats, and then we'll kick off the afternoon sessions around 12:30 P.M., maybe just a little bit before. Yamini's CEO overview, Kate's CFO overview, and then we'll have a short little break, bring the exec team up on stage here. We'll do a Q&A session with the entire team for about 40-45 minutes. Finish up at 2:00 P.M. As for the ground rules for Q&A, we're gonna take questions and sort of prioritize the audience live here for the folks that have flown in from all over. Knowing this group, I doubt there'll be much time for additional questions online.
If there is, we'll get to a couple of questions submitted online through the Q&A feature of the video feed. With that, I'd like to welcome up on stage our executive chairperson, co-founder, and my good friend, Brian Halligan. Brian.
Hi, Chuck.
Good to see you.
Good to see you. Red Sox.
I couldn't help myself there.
Yeah.
How you doing?
Doing great. How are you guys doing? Nice to see you all. Thank you for coming.
how's life? How you doing? Like, physically, how you doing?
Great. I can't run, I can't jump, but I can never really do those things in the first place. Other than that, I'm doing great. I feel terrific.
That's good to hear.
Yeah.
Maybe to start out, I often get asked from actually a lot of people in the room here what life is like in the day of Brian Halligan as the Executive Chairperson, you know, sort of moving out of the CEO role and into a less operational sort of day-to-day role, and if that's changed sort of the way that you've thought about HubSpot and sort of, you know, your ambitions for the company into the future.
No. Very ambitious about the future of HubSpot. I think the things you'll like, you're gonna like a lot of what you see today, but one of the things I think you'll like a lot is Kate Bueker's presentation on capturing the market, and the size of the market and the growth of that market is really impressive, and we're still super early days in a giant market. There's a much, much bigger company here than we've got today. We're super ambitious to build a giant company. Stuff I'm working on, I'm still very active. I'm active on product. HubSpot's really become a product company over the last several years.
We were more a sales company first 10 years of HubSpot, but we're very product-focused, customer-focused, and I spend a lot of time on sort of the platform level of HubSpot. Like, the key secret sauce behind HubSpot is these primary colors that underpin it, and there's a set of shared services that power all of our applications on top. The more powerful we make those down below, the more powerful all those applications get. Like, if we improve the reporting shared service underneath, the reporting on top across all the apps gets better. I'm really pushing on those, on that core competitive advantage. The better those things are, the faster our developers move.
I think you'll see in Stephanie Cuthbertson's presentation, she goes right after Yamini on the main stage today, just amazing progress at that platform layer that enables companies to do more and more with HubSpot. In particular, mid-market companies, you know, right-sized companies, not necessarily startups, but scale-ups. A lot of power-up has happened in that platform over the last year. I work a lot on that. I'm sort of the chief zag officer. Every time you see the world zigging one way, I tend to wanna zag and go the opposite way, and we've done that a few times in our history.
Wait, wait. Maybe just stop you there. Like, what do you mean by that?
Yeah.
Give us an example or maybe a few examples of, you know, sort of your favorite zags, like in HubSpot history. You've been at this for 16 years.
Yep.
What are the ones that come to mind? Like, what was not so apparent from the outside looking in?
Yeah.
that you and Dharmesh picked up on?
There's a quote from an entrepreneur that I really like, whose politics I really disagree with. His name is Peter Thiel. His quote goes something to the effect of, "You have to be right about something that everybody thinks you're wrong about, and you have to be right about that when everyone doubts you for a long period of time." I sort of buy that. There have been a few times we've made these counterintuitive bets. The first bet we made was on SMB, and that was, you know, the founding of HubSpot. The thesis basically was the internet disproportionately benefits small businesses relative to large. I remember my investor pitch, the Series A, Series B investor pitch.
I had that New Yorker cartoon, which is the dog on the Internet, and there's a dog typing there on the Internet, and he's looking at the other dog, and he says, "You know, the great thing about the Internet is nobody knows you're a dog." I love that cartoon. That sort of summed up how we felt about the opportunity for marketers on the Internet. We went out there and said, we're an SMB play, and the investor did not like it. Some of you probably still don't like it. But we were able to convince them and get the math to work by keeping our CAC low and scaling our revenue retention. That was the first kind of counterintuitive bet that paid off.
The second one was probably seven years later when we decided we were going to move from being a marketing app company to a CRM suite company. At the time people thought we were crazy. They were like, "Have you heard there's a giant company that's already doing this right in your way? It's the new big blue. Don't touch them. They're unassailable." We used that product, and so we knew it was assailable, and we knew particularly for small, medium-sized businesses, there'd be an opportunity there. We plowed ahead against conventional wisdom and feeling good about that call. The current zag is, you know, we've got a little bit of size at this point. We're still small relative to what we'll be, you know, five years from now.
Everybody tells you, okay, the playbook for building a big CRM system in the modern era is once you get a decent amount of money in the bank, you have decent market cap, start acquiring companies, and you cobble together this monstrosity. Oracle did it. Many companies have done it. We're going the exact opposite way. We think that people really care about the usability of the product, the cost of the product, the implementation of the product. Then if you cobble this monstrosity together and glue it all together, it's a nightmare for the users inside of that organization, and it creates a very disconnected experience for your end customers. We're builders, we're crafters, we're not cobblers.
Those are like the big three zags I think we've taken across history, and we'll see if the third zag pays off. It seems pretty good so far, but the first two paid off really well.
Happen to agree with you. I think it supports your chief zag officer-
Yes.
title.
CZO.
It's volatile out there, right? I mean, markets for investors, for partners, for customers. You know, like we've faced volatility in the past, right? There have been points in time in HubSpot's history where we've faced adversity. I wonder how you think about, you know, how we sustained through turbulent times in the past. As you sort of look ahead, you know, what the secret sauce is for HubSpot sustaining into the future for all of these constituents.
To me, it's always been turbulent times. In fact, I think of HubSpot as like a sine wave that goes up and to the right. Like, we have great times, we have tough times. The interesting thing about these turbulent times is historically, the turbulent times are self-inflicted. Like, we make a mistake somewhere in the business, and we cause a bunch of problems for ourselves. These are sort of things happening from the outside impacting. Lean into it. Never waste a good crisis. We've been kind of beating that never waste a good crisis drum for a long, long time. Every time a crisis hits, we tend to learn from it. We tend to kind of benefit from it over the long haul and build competitive advantage.
Yeah. I think the good news is, you know, from a leadership perspective, you know, one of the things I admire most about Yamini is how she acts under pressure, right?
Yeah.
Through a crisis, right? She was the CEO, maybe not by choice out of the gate.
Yep.
-through the pandemic. Maybe you could just talk a little bit about Yamini-
Sure.
You know, her move into the CEO role and how you sort of watched that and mentored her through.
Yeah. I'll give you a little inside baseball on Yamini. She started in January of 2020, so within two months, you know, bam, COVID happens, and she's right in the middle of it. I had this long, like, 6-month onboarding process for her, where she slowly gets to know the business, everybody in it. She was thrown right in the fire two months in. She sort of grabbed the wheel on our COVID response. I remember two decisions she made that are a great example of never wasting a crisis. One was, she said, "Let's drop that price of our starter edition to $50." That turned out to be a brilliant decision.
Sure.
that has stood the test of time, and the number of customers coming in has grown a lot, and then our ability to upgrade them has really grown a lot. The second one she did that maybe isn't as obvious is, you know, you remember when COVID first started, like, things were really tanking, and we didn't know, is it gonna be like, stay down? Is it gonna be a swoosh? Is it gonna be a W? Our partners were freaking out. The partner sphere of HubSpot is ginormous. It's much bigger than HubSpot itself. They were totally freaking out, and they're all getting ready to lay people off.
She did something super smart where she said, "Why don't we advance you your commissions for," I forget how long, six months or a year, "and that'll give you a little bit of runway so you can keep your staff. You don't have to lay them off." That turned out to be brilliant because it did turn out to be a V. I don't know even what to call it, but it was kind of a V at the beginning, and they were all quite stable through it, and I think we built a lot of loyalty. That was sort of the first crisis that she was super calm through it and super professional.
She's a pro, but it's been kind of one thing after another, like all the social tumult that happened in the United States across 2020, that normally wouldn't impact the company or the CEO or the management of the companies, but now really did impact the way you think about the way we run the company. Employees really changed the way they think about it, and companies really changed the way they thought about it. She was a great thought partner in all that.
Yeah, I mean, one of the ones I'd add to your list of the two-
Yeah.
is the decision that she and Kate made on, you know, giving discounts to customers in highly impacted industries, right?
That was smart.
Like, there was a big fear.
Super smart.
At that point in time around our gross retention and if customers were gonna be able to make it through. I think just, like, the quick decision-making.
That was great.
Taking the hit up front to support our customers on the, you know, through that, earned us a lot of goodwill.
I agree.
Kept them around so that we could sort of grow out of it with them.
Yeah. The other thing she's handled well is, like, I had a bad snowmobile accident in February of 2021, and, you know, I was out of commission. I almost died. Fortunately, the board had just had a board meeting, and we had the what if Brian gets run over by a bus?
Oh.
The decision was consensus Yamini takes over. We had the break glass ready, and she was the obvious choice. She managed the company beautifully while I was out on medical leave. As medical leave was closing up, I said to her, "You know, I think you're doing a great job. I don't wanna come back as CEO. Would you do it?" She wasn't that anxious to do it. After some cajoling, she agreed to do it, and she's done just a fabulous job on the company. Like, crisis after crisis. Nowadays, like, I wouldn't call it an economic crisis, but you look at the multiples of SaaS companies, it's, wow, another macro impact to what's going on. I think she's just been fantastic through all of it.
I have a lot of faith in her leadership. I think we picked a winner.
Me too. Speaking of crises, I think what investors are gonna hear about in the spotlight in just a bit here is this crisis of disconnection theme, right? They're gonna hear it throughout the spotlight. Without maybe stealing too much of the thunder from down there and get yourself in trouble with Yamini, Steph, and Dharmesh, I wonder if you could maybe just kinda touch on the theme a bit, you know, what you sort of understand about it, how, you know, how important it's gonna be to HubSpot's growth, but maybe even more important, our customers' growth into the future.
Yeah. The basic idea behind it is companies sort of have three choices. They can buy a whole bunch of point solutions and try to glue them together. They can go to a, one of the more traditional platform players who's bought a whole bunch of point solutions and glued them together, or they can buy HubSpot. I think when you buy one of these monstrosities of point solutions glued together, or you buy all these point solutions, it turns out it's really expensive to buy all that stuff and really expensive and hard to implement all that stuff. It's exceptionally hard to create a cohesive, smooth-running flywheel for your business, and it's hard to change or go to market. It's big and complicated.
The third choice is really HubSpot, and it's sort of an Apple-like approach to building a product, you know, from the ground up. I think there's a crisis of disconnection inside your company, inside your front office applications. It's a true mess for almost every company. The data's a mess for almost every company. The reporting's a mess. That creates a crisis disconnection between you and your customers, as customers seem to be getting farther and farther away. Sort of macro things are pushing them even farther. All this privacy stuff is sort of pushing them farther. There's a lot of distrust out there, and there's this kind of crisis of distrust out there. There's a crisis of disconnection, and Yamini is really passionate about this idea of how do we connect our suite together?
How do we connect our platform together? How do we enable our customers to connect themselves together and connect with their customers better? That's the basic thesis. One of the things I really like about HubSpot is we're unique. We're a very unique offering relative to our competition, and I think we're unique in ways that really matter and are important to customers today.
Yeah. That makes a lot of sense. I think a big part of the story and the journey has been this move from app to suite to platform, right? That, you know, just sort of help us execute on that. I wonder, you know, to use a baseball analogy without touching the third rail with the Red Sox at the moment, what inning do you think we're in, on that sort of journey from suite to platform?
It's probably the top of the first inning, one out, man on second.
Red Sox down, like, 5 runs at that point or what?
Yeah. A lot more work to do. I mean, we really wanna help the whole front office and mid-office. We wanna help all our customers build an amazing end-to-end customer experience, really managing their entire front office, increasingly doing more things in that mid-office, and you'll hear more about that. Connecting nicely with that back office. Just a lot more wood to chop. You know this, but once a year, we have an offsite in Maine, and we had one this June. We have it every June. It is a very lively meeting, and there are. This is the meeting people show up with all their ideas. There are no shortages of high ROI projects that we can fund across the platform. I still think it's very early. It's also very early in the market. It's a large market.
The market is growing quite fast, and we have single-digit % of that market, and we have a terrific product. Lots and lots of opportunity. I still think it's early.
Okay. What do you miss about the CEO gig?
Nothing. Absolutely nothing. I will say one thing I sort of miss is the earnings day. I remember the first couple of earnings calls. I was super nervous for the first couple of earnings calls.
You and I both.
Yeah. We kind of got in the flow, and on the day of earnings, I have no idea what other companies do, but what we do is we get together at, like, two, and Chuck basically batters us with questions that he thinks you'll all ask, right? We give our response, and he beats us up. We kind of role-play the whole thing. When he's done beating us up, we all get out to Dunkin' Donuts because we're in Boston. It's a mall across the street, really fancy. We got our Dunkin' Donuts, and we come back, and then we play a little game for everyone in the room. I just want to make sure you know who's in the room.
Chuck's in the room, I'm in the room, Kate, our CFO, is in the room, our legal counsel, and then Matt is in the room. Matt's our IT guy. Matt, can you stand up? Where are you, Matt?
Oh, there he is.
There he is.
Yeah.
We play this game, and we all know that all the information that's gonna be portrayed, and we know the answers to the questions, and
We think we do.
At least we think we do. We know at least half. I get on the whiteboard, and I say, "Okay, what's the stock price going to be at the close of business tomorrow? So in other words, how are you all gonna react to it? We all put our numbers up there, and Matt puts the number up there. I would say 75% of the time, Matt's close to the pin. We never know what's gonna happen. It turns out Matt knows. The professionals that really have our arms around it. I miss that. I miss some of you, like Samad. I saw Samad and, you know, Mark Murphy, some of the people who've covered us for a long time. It's been great to get to know all of you, and I would just give you all credit.
The HubSpot story is not like a super obvious story. Like, we do zag when everyone else is zigging. You've hung in there, understood the story, and a lot of you are covering us, and I appreciate all of you. It's been great to get to know all of you. I actually do miss the investor relations part of the job a lot.
That's nice of you to say. Miss you. Let's think about a minute left here. What would you leave people with? You've got, you know, a lot of our top investors here, a bunch of people listening online, all of our analysts. What would you leave them with?
I've got this kind of personal mantra that I want to build a company that my grandkids will be proud of. Like, my dad worked for BBN, and I always brag about that because he invented the internet and all that. I want my grandkids to brag that, you know, my granddad founded HubSpot, and that HubSpot is an amazing company that delights its customers, that delights its partners, that delights its employees, and ultimately, that delights investors over many, many decades. We are working very hard on that. Everyone is working super hard. There's been a really nice leadership transition. The new leadership's doing a fantastic job. You can be assured we are focused on the long term. We are making big bets.
We are investing aggressively, and we're trying to build an amazing company that all our grandkids will be proud of.
Welcome, everyone. We have over 60,000 people attending INBOUND from all over the world. Whether you're joining me here in Boston or you're joining me from your couch, welcome. I'm just so excited that I get to speak with all of you today. Let me start by asking you, how are you? How has life been since last INBOUND? Easy? Breezy? I know, I know, I'm kidding. "How are you" has become such a loaded question, hasn't it? You know, we've seen each other's kids and pets and colorful living rooms all on Zoom. When the lines between life and work have blurred so much in the past couple of years, it just feels weird not to have a real conversation. That's why when someone asks me the question, "how are you?", I honestly don't know where to start.
'Cause my year, I'll tell you, has felt like a rollercoaster ride. On one hand, I've had some amazing highs. I stepped into this dream job as CEO of HubSpot. I have a dream team here. I have a supportive husband, two lovely teenagers. No, lovely teenagers is not an oxymoron. I also lost my dad. He was my rock, and that was two weeks after I stepped into my new role, and that was tough. I've had to step up as a daughter, as a mother, as a CEO, all at once. At the same time, work has been anything but easy and breezy. The world is changing, and every week it feels like a new twist and a new turn. I know I'm not alone. The past year has felt like a rollercoaster ride for many of us here, right?
'Cause when I talk to you, I get to hear about your highs and your lows, too. At the height of the pandemic, you had to pivot hard and fast. You did some amazingly clever things to survive, and some of you even thrived during the pandemic. Now this year, that momentum seems to be stalling a little bit. It's harder to reach our customers, and the flywheel that was spinning seems a bit frozen. It's hard to figure out exactly what's in the way. That is one of the things as CEO that keeps me up at night. 'Cause helping you all grow, that's our focus here at HubSpot. That's our bread and butter and our jam. Over the last six months, I spent a lot of time going on a listening tour. That's part of my job I love the most.
I spent a lot of time talking to many of you to get to the bottom of what's holding back growth and what we can do about it. Across all of those conversations, there have been three overarching themes that are emerging, what I call as disconnects, that are creating a gap to your growth, but more importantly, ways we can connect and what we can do about it. That's exactly what I want to talk with all of you today. Let's actually dive in. I wanna start with the first disconnect, and that is that companies are struggling with disconnected systems. You know, we actually sent out a survey to businesses to figure out what were the biggest pain points that you had.
I was expecting to hear things like slowing growth and decreasing demand. What was really surprising was the number one pain point for businesses today turns out to be disconnected systems and data. Wow. That actually makes a lot of sense because during the pandemic, many of you had to pivot and turn into fully digital overnight. There was just this frenzy of buying point solutions to be able to solve point problems. You wanna process payments? Yep, you got an app for that. You want to resolve customer tickets? Yep, there's another app for that. You wanna make your reps productive? Well, there are 100 apps for that. No wonder the average SaaS company today has 242 SaaS tools. 242. Now, the thing is, having this many tools, that's not the problem. The real problem is that they're disconnected.
As a result, your data is disconnected, your teams are struggling, and your customer experience, that's suffering. That's exactly what we are hearing from our customers today. Let's listen.
The inefficiency slowing us down is using too many tools. When you're spread out, it's ineffective.
Because we've grown so quickly and we've had to evolve our use of different applications rapidly, I have to spend a lot of time cleaning data, and it's complex. Unfortunately, it falls on me. It's not something that's easy to delegate, and it often comes at the cost of me getting to spend time with customers.
I find that some of the efficiencies that slow us down are really synthesizing all of the kind of data points and systems that we've got and taking that information that enables us to go and execute on kind of delivering a good customer experience.
Ineffective, stuck, inefficient. These are some of the most common words that I hear during customer conversations. We're all spending a lot of time cleaning and connecting data and not enough time connecting with customers. That's a problem, right? That brings us to this point, which is disconnected point solutions are not the solution. We now have a tool for every task and every feature and every department, but we're not connecting the dots, and that is our biggest challenge. Now, when we have challenges like this, what do we typically do? Well, we rely on each other for support. Think about this. You're a new parent, you join a parent's group for support. You take a very tough class, you join a study group for support. If you're a sales rep, you got your quota, you wanna crush it, you join a sales group for support.
Throughout this pandemic, it's become really hard to connect as humans. Almost every survey tells us this. In fact, 45% of workers say that they have fewer interactions at work, and 57% of people are engaged in your social activities today. We can all feel this because we're no longer tapping each other on our shoulders anymore. This brings me to the second disconnect. People are feeling disconnected from each other. No wonder Peloton was so popular during the pandemic. For me, Peloton was the community that just grounded me. Anybody out here is a Ross Rayburn yoga fan on Peloton? Yeah. You know what I mean. I just love his yoga sessions and the community of regulars that he built. Just so much joy. Isn't that why we're all here today for this community?
Because we just love that opportunity to learn together, share ideas together, get inspired together. That brings us to this point, which is people crave community in good times and not so good times. It's become really clear talking to many of you that systems are disconnected, people are feeling disconnected. Folks, there is a giant chasm that's developing, an even bigger disconnect. I hear this loud and clear in almost every one of my conversations with customers. That brings me to the third disconnect. Companies are disconnected from their customers. Wow. It's really hard to connect with customers today and build meaningful relationships with them, yeah? You're all writing blogs at, like, a frenzied pace, but you cannot cut through the noise. You're all sending out emails like they're going out of style, but you just cannot get to that prospect. Why is that?
What has changed? We got really curious about these questions, and the answer is something that all of us here can easily relate to. Digital fatigue and distrust are now at an all-time high, leading directly to a disconnected customer. There's just no question about this. We are now in a digital overload mode. Think about this. We used to love scrolling our social feeds. Now the only thing they feed is advertisers. We used to love opening those emails from our favorite brands. Now they all go straight to spam. Every piece of data shows this. You, me, we are digitally drained. 65% of Google searches ended up without a click. Sales email response rates have plummeted down by 40% compared to pre-pandemic rates. The average blog has shrunk by 1.6% compared to 2021.
All of the channels that companies relied on to connect with their customers are no longer working right now. In addition to all of this, customer preferences are completely changing because we live in a privacy-first world. 'Cause privacy is queen. We're all very protective of our data. Why wouldn't we be? It's our data. No one's really interested in downloading more white papers and resources anymore because giving away your email does not feel free, does it? That's why the cookie consent tracking that businesses just relied on is really getting cut off in this privacy-first world. I mean, have you seen Apple's latest ad campaign? That literally stopped me in my tracks. When one of the most valuable companies on the planet comes this strongly for a value, we should all pay attention. Our customers are. Let's listen to them.
We are definitely starting to see the impact of digital fatigue. Now people are just they're tired, and they're just really, I'm finding protecting their time.
That was a lot of what we were finding when we had to kind of make that shift from being mostly in-person to now we are completely and fully virtual, still wanting to have the same nurture, the same touch, and make sure that we're still able to anticipate those needs in the same way.
The way I used to talk to leads two years ago, three years ago, changed drastically for us. We are more disconnected from the customers than we would like to.
We're constantly evaluating traditional ways and the new ways to reach people where they are and when they need to hear our message.
That's exactly right. The world is changing, and old go-to-market strategies will not work in this new world. It's become really clear to us that systems are disconnected, people are feeling disconnected from each other, and companies are disconnected from their customers. All of this means we're now in a crisis of disconnection. We're in a crisis. We're grasping for growth, revenue feels unattainable, and people just feel like they're underwater. This is the point where we need to evolve. There's no question about it. Standing still here is not an option. This is the point we rise to the challenge, and we connect. We have to connect with our customers. We have to connect with each other here, and we need to find a way to connect back to growth. Companies will not win by focusing on customer management. They'll only win by focusing on customer connection.
What that actually means, you need more than data. You need context. You need more than content. You need connection. You need more than contacts. You need this community. What you need is a connected customer growth strategy. We created a 20-point multilayered strategy that'll take you two years and $2 million to implement. Nah, I'm just kidding. We wouldn't do that to you, but we are here to help. HubSpot cares, and we want to help you evolve your strategy so you can drive that connection. I wanna start by offering some practical advice for every stage of your customer journey around the flywheel. Now, my good friend Brian Halligan introduced this concept of the flywheel in 2018 here on stage at INBOUND. Make some noise if you heard of the flywheel. Yeah.
It was just an innovative framework to be able to attract, engage, and delight customers. Now it's time for us to grease the flywheel and evolve those strategies so we can drive that customer connection. Let's do that. Starting with the attract phase. Here I wanna start by talking about your advertising strategy. My first piece of practical advice is be first to the party with first-party data. You have so much more valuable context in your first-party data compared to your third-party data. Use it. It works. In fact, companies who sync their first-party data with Google get a 20% improvement in conversion rate compared to companies who don't. Join that party. Your customers will love the relevance of your ads, and your CEO will love the results. Trust me, she will. Yeah.
Now, the next thing you need to do is to be able to cut through the noise, and this is where you diversify your distribution of content. If you're already just looking at organic and social, you have to get creative. Are you on TikTok? YouTube? Get going there. If you're not leveraging creators and influencers to be able to expand your reach, now is the time. At HubSpot, we launched our podcast network, but more importantly, we tapped onto talented creators and saw massive distribution. 9 million downloads per month. That's power. Okay, now you've done that. You've gotten creative, and you've been able to reach your audience. The next step is for you to engage. Here, my advice is earn that open rate. We've all gotten prospecting emails that go something like this: "Hey, Yamini.
I see you're in business." "Can I get 30 minutes of your time to talk about business things? How about next Thursday? Are you free?" You know, the former salesperson in me dies every time I get an email like that. Your reps need to offer something really valuable, a unique piece of data, access to an expert, access to an excellent resource, a peer resource, a compelling video. Make it compelling because just praying and sending out emails is just going to get you a one-way ticket into that spam folder. That's not good. All right, now your prospect is engaged, your customer is engaged. What are you going to do to drive that connection? This is where you need to bring context to the conversation.
It just sounds so simple, but it's such a breath of fresh air when your reps actually have the context of the customer to have a real, meaningful conversation. What product are you using? What was the last content you dealt with? What was your last support ticket? How did it get resolved? Empower your reps with that context and data, so it's not a cold start of a conversation every time. Now, you've had great conversations, and your customer is ready to buy some more. It's time to delight. You can absolutely delight them by making buying a breeze. Think about Amazon. They've set the gold standard in terms of the online shopping experience. They made it so easy to buy from them. That's exactly what B2B buyers expect and deserve today. Now, compare that to current processes, invoices, duct tape, paper cuts, paper checks. It's not fun.
It's bogging down your growth and burdening your customers. Make it easy to buy from you by offering a variety of payment options. Okay, now your customer has bought. That's great. It's time to get real. Give customers channel choice. Email is not dead, but there are other channels like SMS and text that are much more alive. Meet your customers there. Take DoorDash, for example. They certainly have in-app notifications, but they text me. What we need to do, drive that connection, you need to meet your customers where they are. Now, these are just a handful of strategies for you to get started. When you all go back to your teams on Monday, get creative. Breathe some fresh air into your flywheel and send us what you've learned. If there's just, like, one takeaway from this entire presentation, it is this. Optimize for customer connection.
At HubSpot, we know we wanna help you grow. We wanna help you bring your data together. We wanna help you bring your customers together, and we wanna bring you all together. That's why we're combining three powerful combinations of our solution with connected applications, connected platform, and connected community. The combination is our connected customer platform. Let's talk about connected applications. If you have our anchor hubs, you can certainly create automations as a marketer, you can close deals as a sales rep, and you can resolve tickets as a service agent. More importantly, you can see where your customer is throughout their journey with you. That's important. We just did not build any of these anchor hubs in silos because we truly believe that marketing, sales, and service should not be in silos. We know that you need data and flexibility.
That's why we're building a connected platform. Even when you have connected applications, customer-facing applications, you'll still need data from other systems, like your accounting systems, project management systems, your analytical systems. That's why we have over 1,100 application integrations to be able to bring the data and connect the dots. That's why we're building commerce right into our platform, so you can sell to your customers with one click and bring the context right in to your next conversation with your customer. We know that you need more than software to be able to survive and thrive. That's why we're building this connected community. We've always brought educational resources to this community. In fact, we have over 454,000 growth professionals that have gotten certified through HubSpot Academy.
Now, in addition to that, we're bringing experts and assets right into our marketplace, and we're bringing this entire community together through our network, something Dharmesh will talk about in his spotlight. As you can see, we just left this old notion of best in class behind for this new notion of best in connection. We wanna bring the data, the channels, and the people so we can empower all of you to connect and grow better. Phew. That's a lot, huh? Now let me ask you this: how are you doing?
Great.
Yeah. I hope you're feeling a little bit lighter, a little bit clearer on what you can do to drive that connection with your customers, with data, and with each other. More than anything else, I really hope that you're ready to navigate this roller coaster together as a community. You know, my kids used to force me to go on these roller coaster rides with them all the time. I was so nervous, couldn't wait for it to be over. I'd close my eyes and grip the seats. Yeah, I was that kind of a mom. I realized after a couple of these rides and little bit of hand-holding and coaxing, that roller coaster rides can be very energizing. Now, I have my hands almost up in the air, you know? Yeah.
If you were to ask me now how am I doing, after talking with many of you over the last six months, I'm feeling creative, energized. I know we're on this ride together, and we have the right strategies, and we have this community to be able to connect. Let's get rolling. You all inspire us tremendously. We hope to inspire you during the rest of this keynote, as well as the next three days of content here at INBOUND as we step into this age of a connected customer with each other. With that, I'm gonna hand it off to Stephanie Cuthbertson, who's our Chief Product Officer, to share with you how we're bringing this vision to life within our product. Thank you so much, and be well.
Hey, everybody. It is great to be here at INBOUND 2022, and all the growth that you're powering with HubSpot is incredible. In the past three years, we have seen you in over 120 countries drive over 58 billion visitors to your website. You have created over 2.4 billion leads and over 1 billion deals. For a sense of scale, if those were Legos and you stacked them up, they would reach to the moon. It's awesome to see you powering so much growth and success with HubSpot. What Yamini said is also true. We are at a point of inflection. It's a point of sea change where what was working just isn't anymore. The economy is down, revenue is down, ways to get found like organic search traffic and ads effectiveness are down.
Businesses are buying more tools than ever before, but those old-style CRMs just don't feel like enough. Sometimes it feels like navigating in the old days before Google Maps. Do you remember this? You're lost, you're late, you're looking down different roads, and it's just really hard to find your way. Now, you all know in the modern world you just follow the dot, and it's so easy to get where you're going. While on the back end, these incredible algorithms power you through, power through all the data to help you find your way and optimize your path. Here at HubSpot, we've been thinking about the same thing. How do we create the same kind of bright lines so that you can grow well? Today, I wanna walk you through two big themes. The first is something we call connected platforms and applications.
It's connecting your teams together and to your customer at the core in a unified system across marketing, sales, service, and content. A data platform with strongly interconnected, beautiful, easy to use app experiences. Now, we're on a multi-year mission, and the team has done some incredible work. We have a ton to share today, which I'll cover in just a moment. Our second theme is something we call connected community. Here, our Co-Founder and CTO, Dharmesh, is gonna give you a peek into the future. Now let's dive straight in. I wanna spotlight just five of our new connected experiences. First, let's face it, campaigns are not converting the way they used to. With privacy changes, marketing fatigue, ads, and search effectiveness declining, it has all gotten exponentially harder, and we know these trends. That's why we've launched the next generation of marketing campaigns.
It's like a command center for your whole team. When your CEO says, "What part of these campaigns work?" If you're trying to dig that out of a ton of tools, that can be a nightmare. Now we connect all your campaign data automatically, so you can tie spend to growth and connect your teams together. I'm gonna start here and take you on a spin, and most of this talk is gonna be demos from end to end. Let's see how it goes. First, marketing campaigns. Here you can see the team connecting all your activities together, consolidating all your single channel tactics into a fully orchestrated omni-channel strategy. You can compile every asset, every channel for one view. You really can. It's great. This demo is gonna roll in just a moment.
As soon as you can connect those campaigns, then they're gonna be great because you're gonna see a bunch of leads that are gonna come together with reports. Let's give the team just a minute to pull these together. Maybe we can give a round of applause for the team that's backstage, and they'll put our demos together. I'm telling you guys, this entire talk is demos end to end, which is a lot of fun, but also a little exciting when you're on stage. All right, let's go back and try it one more time. All right. Here we're gonna have the team bring all the activities together for a fully orchestrated omni-channel strategy. Okay, that was great. Now, what's awesome is you can compile all of your assets, and together you can see them all together for one view.
You can collaborate as one team with a unified calendar and task list. Most importantly, you're gonna get reporting that would blow any CEO's socks off, including mine. Here's the campaign. It's a deep view, and you don't have to dive into a dozen tools. You can set a goal, say 25,000 new leads. What you see here is a view of exactly what happened across every channel. We have over 1 million website views, 29,000 contacts, so that's actual versus goal. You can also see all the deals created and all the revenue generated. All your campaign-created contacts, deals, and revenue will automatically attribute back. If that's not enough, what's so beautiful about this is you can pull up for a beautiful review across all of your campaigns. You have this executive view.
If you wanna jump to the PhD level without having to go get a PhD, you'll find everything you want with rich drill-down reports. These have the rich attribution models you've gotten used to with HubSpot, and we have nine now. There's first touch, last touch, linear, time decay, but most importantly, the reports are these fantastic opinionated defaults, and you can click on them and open them in the custom report builder. What that means is that you can add in any data you want, and you can slice, dice, and open up the entire flywheel journey with Operations Hub dataset, and custom reporting. That's campaign. Many of you may be familiar with Loom, who's a great customer of ours who builds these wonderful demo recording videos.
They are already building campaigns over 80% faster than they were before with HubSpot. This is just one of our app experiences helping you maximize every dollar by bringing all of your data together. Now, it's not enough to kickstart a campaign. What you really want is a clear view of the entire customer journey. For this, I wanted to share a story with you. This year was a family rite of passage for us. My husband and I have ten-year-old twins, and we took our twins for the first time to Disneyland. Now, I don't know what it was like when you were there last. In my day, you just show up, you get a paper map to Space Mountain, show up at 7 A.M. with some suntan lotion, you're all set. Now Disneyland is like a zoo of lines.
Trying to get through there for me was like a 3D quantum computing version of the traveling salesman problem. You have to get the plans, paths, the sequencing all just right. Now, if you get it right, it's awesome. If you get it wrong, there's no Space Mountain for you. Now with customer journeys, it feels like the same story. You're trying to map your way to maximize conversions, but there's more complexity than ever before. Now, when we went to Disneyland, we had one awesome day where we hit all the rides, and it wasn't 'cause we bought some expensive pass. It was thanks to our friends. They really helped us hack the park, and it was just incredible. Just like that, we at HubSpot wanted to help you. That's why we have built Customer Journey Analytics, which we're announcing for the first time today.
Now, you already know you can connect all of your activities in HubSpot, but now you can view all of those marketing moments on one timeline. You have the ads, email, page views, everything. You can see where people continue on the path. You can optimize every route, dynamically tuning your assets or pruning the paths that don't work. You can even filter on key data. Let's say you have a list of contacts, and you can take that list and see their path to purchase all the way through for every asset they touch. Now, most importantly, these reports are designed to capture reality, which is that some people are gonna take different paths. By embracing each path to purchase, we help you find all the fastest ways to grow. Customer Journey Analytics is a connected graph of your journey.
It's another great example of how helpful it can be to have a beautiful user experience over strongly connected data, creating insight. It has had fantastic feedback in private beta, which is why we're expanding it to public beta already next month. Okay, but everybody here knows the power of reporting is only as good as the data that you have underneath. What if all the data that you have is a mess? The thought of untangling it is completely overwhelming. It's like that time a lot of us have had when you open up the box of holiday tree lights. It's like they sneak around tangling themselves up in there when you're not looking. If you feel that way about your data, you're not alone. An astounding 60% of CRM data goes unused. 40% of all ops time is spent cleaning and preparing data.
According to Harvard Business Review, only 3% of companies' data meets basic quality standards. Okay, fun exercise. Everybody here, I want you to look to the person on your right. Okay, now look to the person on your left. Okay, all those people have terrible data. We've been thinking really deeply about this and how can we help you, help us, help everyone have great data. That's why at HubSpot, we now help you create data that is clean, that's clear, and connected by default with a crafted approach to data management. Here, I wanna take you on a tour through just a few of the tons of features we added. First, we make it easy to get off to a great start.
You can get your setup right by modeling how your business works in data with a new data model overview that will visualize the data quickly and easily. Now, what about the custom objects you've added? If you have to call your ops team every time you customize those, it's not a great use of time. You wanna save developer time for something that's more important. That's why we added the custom object builder. What this will do is help you easily create and edit with an awesome visual tool. Now, second, we'll help you keep bad data out. Almost half of new records are gonna have some piece of incorrect data. It's bad format, missing data. What we've done is include all the foundation features that you need to stay clean. Property validation is a simple feature that helps you enforce your data model.
Here I've created a bunch of rules that will proactively protect because those simple data mistakes can often really foul things up down the line. I'll show you how easy it is to create a new one with a basic example like ZIP code. You can add min, max, and screen everything, so now you're catching errors before you import. Now, another really common problem is missing data. Just an example. Every time your sales reps sign a contract, you'll need to know when it renews again. We could have every single sales rep, every single time, have to get out a calculator and a calendar and calculate the end date. That's never gonna happen. That's why we've automated it in the CRM.
Now you can use our automation tools, so whenever a contract is created, the tools will help you use start and end date to auto-calculate and auto-complete fields like end date. Now, those are just two of the many tools you'll find in HubSpot for keeping your data clean and complete. Now, finally, what about clearing up the data that's snuck in that's not quite right? Our new data quality command center is like a mission control. It will constantly watch your data and pipeline so you can catch common problems. You can find and fix broken data things. You can watch out for duplicates that sneak in, and you can make sure the formatting stays just right. Now, personally, my favorite has got to be the AI-powered automation recommendations. These will go even further. They use machine learning to auto-review data and suggest fixes for you.
That's the data quality command center. That's a quick tour around just a few of the many ways we'd like to help you create data that's clean, clear, and connected by default. A single accurate source of truth is what everyone needs to do your job right. Okay, now we're getting great data in. That's good, but your teams are gonna want this all organized and accessible while you work, especially organized. Now, here's a funny story. I know a lot of you in here have kids like me and like you, many of your kids probably love Legos. The unfortunate truth about Legos is that in a year or two, what you really have is a gigantic mess. It's a huge pile. Now my sister and I were always talking about better ways to organize our household.
Luckily, I have a ton of friends who are obsessed with organizing LEGO bricks. A friend of ours, he even built this fantastic LEGO shop. His kids have to check one LEGO in in order to check the next LEGO out. I know. You can always find exactly what you want. Those kids have built that same LEGO ship over and over. Sometimes a hint of obsession can lead to good things. Now in the same way, when it comes to customizing the CRM, we wanted to do the hard work for you and create a great easy-to-use system. Instead of this messy pile of parts, you have my friend's LEGO shop, where you can find and build exactly what you need. Now you can build custom integrations directly into your records.
With a new custom tab in the middle, you can curate the space with exactly the content you want, custom cards to display there. You can tailor what shows on the sidebars, change the cards, change the actions. If each of your teams across sales and service, they'll often want different views, so you can serve your customers in just the right way. You can now create different views for different teams, so everyone can find exactly what you need. This is in beta already. We would love to get your feedback. It's really simple enough that you can try it yourself or you can work with our partners. This level of extensibility really marks the next chapter for HubSpot CRM, where everyone can build your business on HubSpot, and we have a flexibility to showcase and customize to get exactly the data you need.
All right, we've talked a lot about connected insights over the course of today, but there is a piece that's missing, and that piece is. What about helping companies transact online, especially newer and scaling businesses? The majority of B2B sellers are planning to move to online selling, but most of them take over five tools to finish a sale. The majority of buyers are finding these experiences really frustrating because they've become accustomed to easy e-commerce. That's why last year, here at INBOUND, we announced the first alpha of Payments. Now, the vision was making it easy to extend from sales to e-commerce, easy for you and powerful because we can pipe that commerce data back in. With those transactions, you get end-to-end insight. Now, this year, the team has a ton to show. First, we make it easy to purchase.
We connect you to your buyers in all the ways they buy using all the tools you already know and love in HubSpot. You can send links, send emails with links to pay. You can create quotes and send them out on your site. You can create links to click and pay anywhere. You can add forms to capture the purchase. If what you're selling is not a physical good but your time, we've made that easy as well with paid meetings. Now, all this means it's incredibly simple to bring your commerce online. Second, we make it really easy for customers to pay you, and that's great because your time is money. You'll find that customers can pay you with credit card payments using any major credit card. They can pay directly from your bank account using ACH bank transfer. That means no fees for you.
To automate even further, you can set up recurring payments, which you can use for subscriptions, memberships. Recurring means you can set it and forget it. Now you're making money even while you sleep. Now, recurring plus ACH means the automated renewal increases your revenue and ACH decreases your fees. That's a great formula for more money.
Whoo!
Now, the last piece I admit is one of my favorites. Here we make it easy to connect your team together and to connect to the back office. The number one ask we've had after we built all these other pieces was to flow payments into accounting. That's because wiring those two together can be a pain. We were wondering, could we take all the work out of this? Now we integrate with accounting system. When a payment succeeds, you can trigger, and we will auto create the invoices in accounting software for you. Here we can flip to QuickBooks, and you'll see that we automatically create the invoice and mark it as paid. Now, HubSpot also integrates with accounting systems like NetSuite and Xero, and we'll be adding commerce support there soon too.
Payments and commerce are connected to the CRM, so you have a 360-degree shared view to create, grow sales, all on one platform. It is huge changes in one year. Payments is about convenience to make your customers happy, cash, which makes your CFOs happy, and clarity, which makes everyone happy. We're on a mission to build the most connected payments platform ever. That was a quick tour around our connected platform and apps, bringing teams together and unifying your business and all of your data in one place for insights to grow. Now, our customers who have marketing, sales, service, and CMS have won over 51% more deals than those with one hub. Already over 60% of our customers have multiple hubs. I hope you have a chance to check out the full suite if you haven't already.
I have to say, I'm very proud of the team, and there is so much more launching today that I just did not have time to cover. In the Sales Hub, we continue to make incredible strides from deal management to tools for sales reps, data sync integrations with over 1,100 now. Service Hub has transformed. It has a full-featured help desk, ticketing. There's support for every channel, inbound calling, email, chat, and all the reports and automation you need. There's more. From Marketing Hub to Operations Hub to payments to CRM platform. For new businesses starting out, we have made so much of our CMS Hub absolutely free. To learn about everything you saw here today, you can head over to hubspot.com/new. With that, it is my pleasure to introduce Dharmesh, who's gonna talk to you about our next theme, connected community.
On behalf of the team, I'd like to say thank you very much and take care.
Greetings, fellow humans. Whether you're joining here in person or you're home in your pajamas, which I fully endorse, welcome. I'm Dharmesh. I live on the internet, but I was born in a tiny town in the state of Gujarat, India. Any Gujus in the house? Gujus? Okay. So there was no hospital in the town that I was in, so I was born at home with a midwife. There were no phones in the town that I was in, so the answer to the question, "Who you gonna call?" Nobody. We don't have any phones. Doo doo doo. Anyway, I'm sorry. Grew up on Ghostbusters. So I was also an introvert, so I was a tiny, disconnected dot in the massive graph of the universe.
When friends asked me, "Hey, Dharmesh, do you wanna go out and do something?" My standard response was, "Sorry, I've already done something this month." Over time, I've come to think of my introversion as more of an attribute rather than an ailment. When I see people in real life, I don't put up my hands and say, "Hey, hey. Step back. I've tested positive for introvert." Fast-forward 20-odd years. Yes, they were odd years. Changed 18 schools. I moved to the U.S., and I got my first computer. My mom bought it for me using most of her life savings. That first computer cost more than the family car, but my mom somehow knew it was going to be important for me. Mom always knew. She got me.
With that computer, I was able to teach myself to code, but then I could connect to services like CompuServe and America Online, which let me do this magical thing, connect with other like-minded people. There were online communities for everything, word puzzles, classic Bollywood songs, competitive Rubik's Cubing. Yes, that's a thing. I was a competitive Rubik's Cubers. Made it all the way to state finals in Gujarat. Didn't win, came in second. Did not make me a loser. I'm from India, so it made me more of a disappointer. Once I discovered community, I never looked back. It's the one place I felt like I truly fit in. Community matters. When I think of community, I think of people as dots because dots and lines form graphs, and I love graphs.
When I see an audience like this, I picture a bunch of dots. I find that to be calming and soothing. Many years ago, I had a completely non-calming, non-soothing day. I was having that awkward, anxiety-ridden first day of school. Only I'm not seven going to grade school. I'm 37 and starting grad school. Yes, I was having one of those, "How do you do, fellow kids?" moments. It's the first day of class. I have to get there super early, like 8:45 A.M. For me, that's super early. I'm a night owl, so the only reason I'm up early is if I've been partying all night. Okay, fine. You got me. If I've been coding all night. That morning, I had to wake up at 7:00 A.M. like a farmer. By the way, do you know why farmers get all the accolades and awards?
It's because they're outstanding in their fields. Sorry. I get to tell three dad jokes in every talk. It's in my contract. I got there early to grab a seat in the back row, specifically the back row because that's the easiest place to avoid eye contact. You know what I'm talking about, back row. You get me. There I am in the back row. I don't know a single soul, and once again, I'm a disconnected dot. Only this time, I decide to do something about it. I set up an online community website for my classmates. There were 85 of us. Every single one of them joined the community. Now, this didn't make me the life of the party. It made me the admin of the community, which is way cooler, at least in my head.
The site had interest groups, and the most popular was poker. I was not a member of that group because poker requires picking up on subtle signals. I'm terrible at that. Ask anyone that's tried to extract themselves from a conversation with me about graphs or frameworks. By the way, do you know the two best pro tips for winning at poker? Number one, keep them guessing. Number two. That was the second dad joke. To those of you that say, "Hey, wait a second, that doesn't really qualify as a true dad joke." To them I say, "It was apparent." Two down, one to go. That student website was my first exposure to the power of community, and I learned that a community does not have to be huge in order to be valuable to its members. It just needs to connect the dots.
Sorry, I keep pointing at the dots because I have dots up here anyway. It's a me thing. Turns out, of the dots in that class, one was an exemplary dot, and I don't use the word exemplary lightly. I don't use it at all. That was my first time. The dot called itself Brian Halligan. He and I connected, and we hit it off, and we ended up starting HubSpot together in June 2006. Yeah, we became BDS. BDS, Best Dots Forever. Now, it wasn't a bromance. It wasn't like we were Owen Wilson and Vince Vaughn high-fiving each other all the time. No, it wasn't a romance or a bromance. It was a growmance. Our mutual passion was helping companies grow. Instead of giving each other the look, we co-authored a book. It was called Inbound Marketing.
Some of you OGs may have read it. Thank you. Inbound was about pulling customers in instead of pushing messages out. It was about adding value before you take value. Inbound wasn't a product, it was a philosophy. While we were growing HubSpot the company, we grew Inbound the community right alongside it. Now here we are celebrating 16 years of both HubSpot and this Inbound community. Thank you. Thank you. It's been really gratifying over the years to watch you grow your companies, develop your careers, and share your creations. Speaking of sharing creations, in 2011, I created my own dot. Well, technically, my wife, Kirsten, created him, but I was there with helpful tips like breathe and push. We named our little dot Sohan. Well, actually, I wrote a Python program to generate Sohan's name.
That last sentence should tell you everything you need to know about me. I introduced Sohan to you at INBOUND 11, and I shared my joy, my excitement, my confusion. It's like, where's the USB port on this thing? How do I upgrade the firmware? In 2017, I lost a major part in my life. My mom passed away that year, and I shared an emotional moment with all of you. That was the hardest talk I've ever had to give. It's been five years now, and I still get emotional, and I can't make eye contact with my family over here, so I don't tear up. I connected with many of you that year as you shared your own stories of loss. As humans, we have a craving to connect. It's one of the defining characteristics of our species.
There have been times where I felt down, dejected, disconnected. With the challenging times we have now, you may be feeling some of that too. Nothing seems to be working. I'm clueless. Why can't I figure this out? Everybody else probably has this figured out. I'll let you in on a secret. Nobody has it all figured out. You are not alone. That's where community comes in. A community whispers to you with a quiet confidence, "You belong. You have value. You matter. Doesn't matter who you are or where you are or how the numbers look, you matter." As Yamini said, we're living in a crisis of disconnection. She's right. Community can help. That's why community matters. Communities don't just help with our personal relationships. They can help us professionally too.
They can help you grow your company and further your career. If I were to describe Inbound in modern terms, I would call it value-led growth. Here's the evolution of value-led growth at HubSpot. Many of your companies likely had a similar evolution. It starts with sales-led growth. That's just a person selling to another person. In the early days of HubSpot, Brian was doing all the selling, so for us it was Brian-led growth. The value sales added to the process was consultation. The best salespeople consulted with customers, helped them understand their challenges, and connect them to possible solutions. Came marketing-led growth. The value being added here was content, things like blogs and white papers and videos. This didn't replace sales. This fueled sales. There was product-led growth. Value here, code.
In HubSpot's case, we have our free CRM and our free suite of connected applications. Now there's community-led growth. It's the new kid on the block, and it has all the right stuff. You just have to take it step by step. Thank you. The value added with community is connection. How does connection create value? Let's say you're experiencing some challenges at work. Rather than tap dancing around the issues, you can tap someone on the shoulder in real life or virtually and ask them, "Has your organic search traffic taken a dip this year? Has your sales cycle gotten longer? Are there any tactics you've used that have worked?" That ability to connect and trade notes and share experiences and ideas is invaluable. Communities can add a lot of value by allowing people to connect.
How does one craft the ideal community, the one that maximizes the potential value for all the members? I think there are several elements. The first is the community needs to support identity. It's not just about knowing what companies you've worked for, what roles you've had, or what schools you went to. It needs to go deeper than that. It needs to know what products you use, what you're looking for, what you care about. I'm gonna geek out with you a little bit on graphs. It'll be brief. Imagine one big unified weighted graph with nodes and edges, connections between dots. Every person, every company, every product, every course, every event, and every other community is a node in that graph. That would be totally awesome. What would be awesomer is if it were a weighted graph.
Imagine if each node had like an authority value with something I call NodeRank. It's like Google PageRank, but applied to the professional graph. At 2:00 A.M., it's gonna hit you. It's like, "Wow, that was a big deal." Anyway, we'll move on. Thank you for indulging me. The next thing you need in a community is diversity. The community should bring together people with common interests, but different backgrounds and experiences, so you can connect to people that are in other roles, other industries, other geographies, other cultures. The more diverse a community, the greater the potential for high-value connections. Next, community members need to have a way to engage each other. Like me and Brian back in the day, you want to create a romance. You want to gaze fondly into each other's dashboards.
Instead of long walks on the beach, you want long talks about reach. The community also needs a way for people to take action and conduct a transaction. The community should have a marketplace right inside so that members can buy and sell products, services, content, anything. Last but not least, there's learning. This could be as simple as someone posting in the community. It's like, "Hey, I'm thinking about starting a new customer community. Should I get my teenager to help me set up a Discord server, or should I look at a product like Circle? Like, what do I do?" The community should help you connect the dots between the things you need to learn and the product, the content, and the courses that will help you learn them. That's my framework for creating the ideal professional community.
Yes, I wrote a Python program to come up with the acronym. Just, yeah, just so you know. I love frameworks even more than I love graphs. We've been talking about the power of a professional community and how to craft it. As you might have figured out by now, I care a lot about community, and you might be wondering, "Okay, so where is he headed with all this? Where is HubSpot going?" To answer that question, I'm gonna have to do something I have never done on the Inbound stage. I'm gonna let you take a peek behind the curtains and tell you about how HubSpot works and how we make key decisions. This June, this past June, HubSpot leadership team had a strategy offsite, which is shorthand for let's cancel all our meetings for three days and replace them with even longer meetings.
The theme of the offsite was think big. To set the stage, I started with a quote from one of my favorite leadership thinkers, Ted Lasso who said, "Don't bring an umbrella to a brainstorm." We wanted to have open minds and open hearts as we talked about big, bold, audacious ideas. By the way, do you know if Ted Lasso can jump higher than a LEGO tower that's six feet high? Absolutely, because LEGO towers can't jump. Dad joke quota reached. Achievement unlocked. Thank you. I'll be playing all week. At the offsite, we focused on the most important core guiding principle at HubSpot, which is solve for the customer. Whatever decisions we make and bets we place, we wanna be in alignment with that core principle. How do we best solve for the customer?
Of course, it starts with a fantastic platform and products, and I'm thrilled with all the work the product team has been doing. That's just shared a bunch of stuff with you. Amazing, amazing stuff. However, we've long realized that great software is necessary but not sufficient to solve for the customer. We also needed to provide great content too. That's why we've invested in content so much over so long. It may sometimes feel like there's like a media company embedded inside of HubSpot. That's because there's a media company embedded inside HubSpot. But even software and content don't get us all the way there. There's still one missing piece. You guessed it, community. HubSpot aspires to be a software as a service company. Our mission is to help millions grow better.
At this offsite, we decided to make a big bet and kick off something new, which brings me to this moment. It's a cue for myself, although you're welcome to breathe as well, just so I don't tap out on stage. This is a moment I've been looking forward to for years, and I'm thrilled to share a new initiative that HubSpot has kicked off. It will be a connected community that helps you connect the dots. We creatively named it HubSpot Connect, and it will live at connect.hubspot.com. It will be the connected community for growth professionals. Thank you. Thank you. I, too, am very excited. This is me excited. That's, yeah. HubSpot Connect will be based on the ideal framework. It'll combine a network, a marketplace, an academy, and put it all together in one place.
Visualized here is a Venn diagram because I love Venn diagrams. The order is frameworks, graphs, Venn diagrams, which is also in alphabetical order, which makes me even happier. Little things, little things. All right. Thankfully, we're not starting from zero. HubSpot has an audience of millions, and we'll be working to turn that audience of millions into a connected community for the benefit of all you guys. The second guiding principle at HubSpot is to simplify. We want our products to be easy to use, our platform to be easy to build on, and our community to be easy to connect with. We want connect.com to be an open community, just like Inbound is. It doesn't matter what CRM platform you're on, doesn't matter what products you use, doesn't matter what sports ball team you cheer for, you are all welcome in this community.
We won't be able to do it all at once. We like to dream big and iterate small. Here's a glimpse of the big dream. Imagine years from now, the community has millions of members, and you can connect to those millions of members. Here are some examples. Imagine using Connect to hire someone with verified experience using a part of HubSpot, like hiring an ops person that's used our custom objects feature. Imagine you're in HubSpot Academy, and there's a Connect button, and so you can join a study group for any course inside HubSpot Academy. Imagine you're a creator, and you wanna create a specialized course for social media growth in the higher ed industry for Latin America. That's something HubSpot would never be able to do, and that's the power of community, is that all of us together can do something that none of us individually can.
I've been excited about this for a long time. Gives me goosebumps, just like my first computer. Please note this is not a product roadmap. I'm not promising features. I don't do that. It's in my contract. HubSpot Connect is still a tiny dot, but I'd love for you to join me in this community. You can create a free account and claim your username and future bragging rights that you joined when there were fewer than 10,000 members, not 10 million. Community matters. It can bring together people that are different, introverts like me and extroverts like my lovely wife, Kirsten. She's been to every INBOUND. It can bring together people that might not have otherwise connected. It helps us avoid that awkward, anxiety-ridden first day of school. A community gives us a space that shrinks the space between us. Who knows?
Maybe, just maybe, it even helps us find true romance. Usually, I end sentences with a period, but after this talk, there's still so much to be written by all of you. Rather than end with a period, I'm going to end with an ellipsis, otherwise known as dot, dot. Thank you. Enjoy the rest of INBOUND. Hope to see you in the halls. Thank you. Hello, INBOUND. Wait a minute. Surprise. We have all gathered here to learn.
To grow, to connect, to be inspired, and to hear these next three words. Welcome to INBOUND. My name is Troy Sandidge, and I am thrilled to be your host for INBOUND 2022. I've been a big fan of HubSpot. I absolutely love the HubFans community, and I'm a proud member of the HubSpot Podcast Network, where I host a podcast, I Digress. We have phenomenal speakers, talks, and meetups in store for you. You already know that. What I need you to know in this moment, that we are not just here to consume content like a sponge. We are here to spark conversations, share insights, and build communities. Again, I can't emphasize enough how ecstatic I am to be here, especially since this is my first ever in-person INBOUND experience. I digress.
Speaking of which, by show of hands, how many of you are experiencing INBOUND for the very first time? How many of you remember your first INBOUND? I would be remiss not to emphasize that it's been three years since we've had an in-person INBOUND experience. Oh, what a gift to have a moment like this again. What makes this moment ever so special and so significant is that this is the first ever hybrid INBOUND experience. Meaning, while we are here in Boston, there are thousands of people tuning in right now, streaming from all over the world. All of that to say, and I think Adam Grant said it best, there is this collective sense of collective effervescence, which is the tangible, unmistakable energy.
Hello. How's everyone doing? Welcome. Welcome to INBOUND and Analyst Day, and thank you for joining us, whether you're joining us here in the room or online. Did you enjoy the keynote?
It's good. Thank you. It's so fun to see a lot of you in real life after a couple of years of virtual, so thanks a lot again for joining. I'm going to actually spend a little bit of time talking about our durable strategy for long-term growth, and I'm so glad to be presenting in front of all of you. In terms of our agenda today, three things. I'm very excited to talk about our vision, our strategy, as well as the opportunity that we see ahead in terms of HubSpot. I'll start with a quick look at our 2022 momentum. Spend a little bit of time talking about our lens and view of our total addressable market and opportunity ahead, and then finish off with our long-term strategy for durable and profitable growth.
Let's start with a quick look at the momentum in 2022. Now, HubSpot is a mission-critical platform for scaling companies, especially as they are pivoting to digital. You can clearly see this in terms of the results that we have. We're growing revenue by about 36% in constant currency year over year. We're generating $200 million in free cash flow. That's about 12% contribution margin. We have about 150,000 customers as well as over 7,000 employees globally right now. That clearly shows momentum at scale, but more importantly, I think it positions HubSpot as a rule of 40+ company at scale. While that's certainly good and impressive, I think for us, what's behind those results is really important. What's actually behind those results are three things. One, our focus on solving for our customers.
Second is our pace of product innovation. I'll spend a lot of time talking about that today. Third is our breadth of distribution from a go-to-market perspective. The combination of these three lead to the impressive results, but also sets us up really well for the future in terms of where we go from here. Next, I wanna talk about our market opportunity. If you look at marketing, sales, and service, these three markets are mega markets. Now, if you look at the past few years, these markets have grown at about 11% annually, while HubSpot grew 35%. We've seen 3x outsized growth. That clearly shows that we are gaining traction within this market, and we are becoming a leader within this market. Now, while that's great, we really care about where we are going in the future.
What's even more exciting for us is where we are going in the future, and we keep saying at HubSpot, it still feels like very early days for us. I wanna talk about where we are going in the future. The total addressable market within marketing, sales, service, CMS, and ops, these are our current, you know, portfolio of products, is projected to grow to about $70 billion by 2027. That is large and expanding market. We did not include commerce and payments within this market because we consider both of those as emerging opportunities and left it out. I wanna make a couple of points in terms of our TAM. First one is that if you look at it, the biggest opportunity is mid-market. Companies with 100-1,000 employees contribute about 50% of our total addressable market.
This is where we have great product market fit. We have great go-to-market fit. This is our sweet spot in terms of the market. The second point I'll make is that across all three segments, we have low penetration rates, single digit in terms of penetration rates. What that means is we have a lot of opportunity to continue to expand and continue to become platform leader of choice. As you can see, by no means are we opportunity-constrained as we look into the future. Who are our customers, and how do we think about the market? While the market itself is large, you know, the SMB market is very underserved. Scaling businesses today have couple of options in terms of driving front office productivity. On one hand, they can actually take and stitch together disjointed point solutions.
It starts out being an easy entry, but then turns out to be very disjointed, disconnected, and cost-prohibitive, especially in an environment like this. Not a great option. On the other hand, you can have customers that can adopt enterprise-grade CRM that have typically been cobbled together through acquisitions. Again, starts out being a known path in certain cases, but turns out to be very complex, multimillion-dollar path for our customers. Again, not a great option. HubSpot is the perfect fit within this market. In fact, we are the only connected CRM platform that has been crafted and built for scaling companies. We have a very simple value proposition. We're easy to buy, we're easy to use, we're easy to adopt, and that resonates within all of the segments that we serve. Who are our customers? What are they buying from HubSpot?
Well, we have customers across multiple stages of their journey, their digital journey with us. There are customers who are newer to digital. This might come as a surprise, but there are companies that have maybe one or two point solutions, but they're mostly running their front office on spreadsheets. We talk to a lot of customers like that. An example is Viessmann. They're air conditioning manufacturing provider. They wanted to boost up their digital marketing efforts but did not have any marketing automation platform before HubSpot. They got Marketing Hub. They were able to increase their revenue by 15%, increase their conversion rate by 57%, and increase leads again by another 16%. Incredible results for going and joining to be a digital platform. We have customers who are early to digital.
These are companies that might have a handful of point solutions, but they're finding it hard to consolidate those point solutions, and therefore they're looking for a platform. An example is Payplug. They are a digital payment solution provider, and they were having a hard time connecting multiple point solutions and being able to drive customer insights. They purchased Marketing Hub, Sales Hub, CMS Hub, and they were able to boost their website traffic 5x, blog traffic went up 5x, and leads went up. The power of a consolidated platform like HubSpot. Finally, we have customers who are more digitally mature. They have legacy systems in place, and they're finding it really hard to get the return on investment and value from that. An example is WyreStorm.
They are an AV signal distribution company, and they left behind a CRM legacy provider because the user licenses costs were expensive, and it was not effective for them, and they were not able to get the value out of that platform. Therefore, they consolidated on Marketing Hub, Sales Hub, and Service Hub with HubSpot. They were able to eliminate 5-point solutions. They were able to reduce their costs for CRM by 75%. And the best yet, they were able to increase their user adoption to 95%. That is really the Holy Grail for us. We want to be able to get the user adoption high. In this case, they were able to achieve that. As you can see, we help customers scale across their digital journey with us.
What are our customers' challenges and priorities, and how are we uniquely positioned to be able to solve it? I hope a number of you caught the keynote this morning, and I spent a lot of time talking about the crisis of disconnection that our customers find themselves in. We've been spending a lot of time talking to customers over the last six months to help them understand what's holding back growth and how they can get past that. Across all of those conversations, it comes down to three big disconnects. One is systems are disconnected. Too many point solutions that are not connected. Second, people are feeling disconnected, both internally as well as externally. Finally, most importantly, companies are finding it really hard to connect to their customers.
All of the old ways and go-to-market methods of email, blogging is just not as effective anymore. Our customers find themselves in this crisis, in this moment, and we are perfectly positioned and uniquely positioned to help them solve it because we can help them bring together the data. We can help them connect with their customers and through community, be able to connect them with other growth professionals. That is our strategy in a nutshell. We're bringing together a powerful combination of connected applications, connected platform, and connected community. The combination of all three is our connected customer platform. Now, you heard me talk about this.
What I wanted to do is actually take the next 10 to 15 minutes to go deeper into each of these layers and walk you through what our focus is and what our vision is for each of these layers. We'll start with connected apps. Our focus in terms of connected apps is to be the number one market share leader for marketing, sales, and service. These are mega markets. We want to be the number one leaders here. I hope you heard the long and exciting list of enhancements that we just announced just between Q2 and INBOUND. That list is about 80 new enhancements deep. It's really long.
what I wanted to do is just put that in perspective for all of you to really help you understand where we are going in terms of Marketing Hub, Sales Hub, and Service Hub, because those are our three anchor hubs. Let's talk about Marketing Hub. This is our largest product. We've delivered strong growth over the years. It's crossed $1 billion, and it's going after a massive multi-billion dollar opportunity. A lot of runway left ahead and lots that we can do. While that's impressive, I think I'm most proud of the fact that we support our customers' impressive growth and scale. If you look at the last 12 months, we have helped our customers deliver 48 billion emails. We have helped them deliver and host 50 billion website sessions and help them manage more than $8 billion in ad spend. That's scale.
Now, while that's good, there's just a lot that is happening within marketing. It's not static. There's just so much that is going on within marketing right now, and our laser focus is helping marketers really thrive and innovate. If you think about marketers today, they care about omni-channel and driving effectiveness across multiple channels. They care about getting customer insights across the entire journey that they're serving, and they want to be effective in a privacy-first world. It's not as easy. That's our focus in terms of Marketing Hub. The Campaign 2.0 functionality that we just launched today, that provides the single place for a marketer to be able to plan and execute on omni-channel efforts. The Customer Journey Analytics that you probably saw in the main stage today, that's fantastic because it gives the marketer the ability to look across the whole journey.
More importantly, it allows them to measure the impact of the campaigns that they are driving. That is so powerful. This, again, very excited about what's happening in marketing and the kinds of innovation that we can drive within that market. All right, let's talk about Sales Hub. Sales Hub has had a banner year in 2022. Just fantastic. It's fast approaching $ half a billion in terms of install-based ARR. We've seen significant traction up market this year, and you can see 100% growth in terms of 100-plus seat deals within Sales Hub. It shows the power and sophistication of the product. If I look into the future, there are two big areas that we are focused on. The first one is continuing to drive that momentum for Sales Hub to be enterprise-grade.
Again, today, we announced a powerful set of permissions, granular permissions, and data quality tools. I know it doesn't sound that fancy, but it's so critical for admins within larger companies. The second thing that we announced is UI customization. To me, I think UI customization is really the next chapter of HubSpot CRM because it's going to allow our customers to be able to model their business, extend based on their business, and customize the UI. It's really powerful for our customers. The second area of focus is sales rep effectiveness. Given the selling environment that we find ourselves today, it's very timely, and we are gaining a lot of traction. Customers are adopting things like conversation intelligence, manager call coaching, and the new playbook functionality that we just launched in terms of Sales Hub. Again, all of those driving sales rep effectiveness.
As you can see, tons of innovation, and our focus is to continue to drive this innovation within Sales Hub. How about Service Hub? The youngest of the three anchor hubs just crossed $100 million in install-based ARR last month. Nice milestone there. As you know, we've been driving a lot of innovation to this hub this year, and we can see that in usage. Our active users and usage ramped up by 80% year-over-year this year. What are the areas we are gonna be focusing on in terms of Service Hub innovation? Well, we believe that the modern help desk is really the place to bring together marketing, sales, and service. That's why we're focused on the unified inbox that we just announced as well as the mobile help desk. Both of those are really key.
Now, in addition to that, I talked a little bit about omni-channel for marketing. The same thing holds true for Service Hub. It's all about omni-channel, providing omni-channel support. Therefore, our WhatsApp integration that we just announced, as well as inbound calling that we announced in Q2, are really key. The third area is service rep effectiveness. This is an evergreen theme within Service Hub, and we'll continue to be very focused there. Hopefully, that gives you a glimpse in terms of how we're driving the pace of innovation in each of our anchor hubs to be able to drive market share gains here. Let's talk about connected platform. Our focus here is to build and deliver a flexible and extensible CRM platform.
HubSpot has always been easy to buy and easy to use, and now our focus is on making it easy to build with and integrate with as well. We've made a ton of progress in 2022 on this. In fact, we now have over 1,100 app application integrations, 1.5 million customer installations that grew about 74% year-over-year. Pretty significant adoption of HubSpot as a platform where businesses can bring all of their data. In addition to that, I think there's just a powerful part of our connected platform story. It's our secret sauce, something we call as primary colors. I wanna take a minute to explain what that actually looks like. If any of you are artists out there and you like to paint, you may start up with a couple of primary colors, three primary colors, red, blue, yellow.
Because when you start with these colors, the combination of colors that you can create is just endless. It's really powerful. It's the same concept of primary colors within HubSpot's product and unified framework. We have six primary colors, including payments, and I'll talk about this in just a minute. What these primary colors allow you to do is really to drive the pace of innovation. Having this concept of primary colors is exceptionally valuable for our customers because when we improve one primary color, let's say we improve automation within Marketing Hub, it actually shows up in other hubs. That means continuous improvement for our customers. The second is the data is not in silos because it's all part of a platform that's valuable for our customers.
Third, it makes it easy for our customers to adopt new products and solutions because the user interface is exceptionally cohesive. A lot of value based on how we approach crafting solutions for scaling companies. Now, in addition to that, this is the secret sauce for HubSpot's pace of innovation. We're able to drive the pace of innovation because we made this as part of our architecture. Very exciting. One other thing that is super exciting is our payments and commerce. Now, you probably know our favorite quote from Warren Buffett by now. It's something like, you know, someone's sitting under a tree today because someone planted it long time ago. That's how we think about the payments and commerce market. It is a seed that we are planting now for future growth. It's been exciting to kind of see this get, you know, shaped.
I want to talk about the momentum that we have seen to date, as well as how that ladders up to our long-term vision for commerce in the next few years. We officially launched payments and commerce about 9 months ago, and since then, we have been iterating, learning, and improving the product pretty significantly. You can see from this slide we have a lot of new product enhancements and features that we announced. It's kind of. Yeah, it's probably an eye chart. It's a good kind of eye chart because we have a lot of innovation that went into this. The good news is that we now have a good, solid foundation for our payments product.
We're focused on payments discoverability across our entire product, and then making sure that the customer experience from the point that they discover payments to starting an application to completing the transaction is just really great. Early feedback from customers have been very positive, have validated the hypothesis that we entered into this market with. Kate is going to be covering a lot more in detail who our customers are, how they're leveraging payments. How does this ladder up to our longer term vision? Our longer term vision is grounded in solving customer problems. There are three customer problems that we think we can solve better than anybody else. One is simple commerce. Here the problem for our customers is they want to be able to sell touchlessly online.
today, the payments tools, the payments processes that they have don't allow for it, and therefore they're missing out on a revenue stream of being able to sell online. Our vision here is simple. Commerce is by embedding payments as a primary color. This is a decision that we made this year where it's going to be a primary color, and it's going to show up in all the touch points across HubSpot product. It'll show up in CMS forms, it'll show up in marketing emails, it'll show up in meetings and more. That's the vision. Now, the second, you know, set of customer problems is streamlining quote to cash. This is a pretty gnarly problem for B2B companies today.
If you can just follow through what happens after a sales rep closes a deal, they will have to send it for e-signature, get it back, send it to finance. Finance will create, you know, a PDF, send it out as invoice. They wait for 30-45 days, and they receive some kind of a check, and then it tries to, you know, get it into the back-end systems. Never makes it into the front office. It's that crazy. Our vision is to provide a crafted quoting and contracting system that will help streamline and make it easier for our customers to get paid faster, because getting paid faster is really the lifeblood for scaling companies. Third, longer term vision, we wanna be the single source of customer and commerce data.
Having commerce embedded deeply within CRM is a game changer because your marketing teams can now drive very specific cross, you know, campaigns, cross-team campaigns. Your sales and service reps are able to take all that information about the current value of a customer and prioritize their conversations based on that. The kinds of use cases that we can imagine in the long term is just limitless. We're starting small with adding a commerce object into CRM, so we can track things like subscription, payments, orders right within CRM. I think long term this is going to be exciting for our customers. As you can see, just a lot happening from a commerce and payments perspective, and we're being patient, and we're really making the right architectural choices so that we can go far. All right, let's finish off with connected community.
Our vision is to become the leading community for growth professionals to connect. Dharmesh just launched connect.hubspot.com. What connect.hubspot.com does is it provides this community for growth professionals. It brings together all of the educational content, the assets, experts within our marketplace, as well as the whole community within a network together. As he talked about this, we're starting this out as a seed, and it's for any growth professionals, whether they're using HubSpot or any other CRM. We just want this to be a community for growth professionals. Just exciting to see how this is going to take off in the future. As you can see, we are well on our way, transforming from a single app marketing automation company to a connected CRM platform. What has driven this whole journey is the pace of innovation from a product perspective.
What about go-to-market? How are we scaling our go-to-market efforts? This is where our breadth of distribution is a real strength. If you know, we got started early on with a partner-led growth and a sales-led growth motion, and then we actually added a freemium motion on top of that. Now we have the breadth at scale. A few highlights here. If you think about the freemium motion, we've been spending a lot of time really driving scale from a freemium perspective. We now have 1 million weekly active users of CRM for free. Then what we also have is CMS Free that we launched in Q2. We think of CMS Free as a growth engine for this freemium motion because it's really important for scaling companies to get started digitally early on. The combination of these two are very powerful.
In fact, 60% of our vet-driven ARR gets started as part of this freemium motion, so we know it's scaling and growing. The partner motion is also scaling. We now have over 6,000 solution partners contributing more than 40% of ARR. The last couple of years, we've really focused on partners to sell and service with them, and that co-selling motion is really working. In fact, the contributions of co-selling in Q2 was the highest. 100% year-over-year growth rate in terms of selling with our reps. We know that motion is working. Finally, the sales-driven motion is also scaling. We now have our sales teams much more focused on the mid to upper end of our customer segments as the freemium motion is scaling on the lower end of our segmentation.
Here we're driving enablement to drive much more multi-hub adoption, much more team selling, and much more of a complex sales motion here. You can see that we're gaining traction in the numbers because we now have 60% of our install base with two or more hubs. All three are beginning to really scale and drive this breadth of distribution for HubSpot. We're in the middle of some massive transformations here at HubSpot. We're going from a single app marketing automation company to a connected platform. We're going from what I call the S portion of SMB to the S&M portion of SMB, focused on mid-market and scaling companies. We are making important investments for our future with payments and commerce. All of those provide us diverse levers for durable growth.
Kate is again going to go into this in much more detail, but I wanted to just hit on the highlights. In terms of how we land with customers, we now have multiple front doors to be able to land. Marketing Hub, Sales Hub, Multi Hub, CRM Suite, Starter Suite, free CMS, free CRM. All of these are front doors with which we can land in our own customers. We also have multiple ways to expand. We can take our customers through the multi-hub journey as our product portfolio is broad. We can also help them upgrade to other tiers and additions as the additions are powerful and deep. Finally, we have new opportunities like commerce and payments that provide us new categories that we can continue to grow in the future.
All of this gives me a tremendous amount of confidence in terms of where we are heading at HubSpot. I'll close out by saying this, we have an incredible opportunity. We're a $1.7 billion company operating in about a $45 billion market today, going after a $170 billion TAM. It's really large and expanding, and we are uniquely positioned to be able to be the platform of choice for scaling companies. The combination of pace, of innovation from a product perspective as well as the breadth of distribution from a go-to-market perspective fuels our growth. Then we have an incredible team and a culture of learning and growing within that team. The three provides just a winning combination in terms of driving durable growth in the future. I'm so excited about the journey ahead. With that, I'm gonna hand it over to Kate.
Thank you so much for your support, and I hope you enjoy the rest of INBOUND as well as Analyst Day. Thanks a lot.
All right. Hello. I will say it is really nice to see you all in person together again here at the BCEC. For those of you who were not able to join us in person and are listening on the webcast, welcome. I am Kate Bueker. I have probably met most, if not all of you, but for those who have not met me, I am the CFO at HubSpot, and I am excited to share some perspective with you on our financial performance. I'm maybe a little biased, but I think I got a great agenda for you today. I'm gonna cover three things over the next 25 minutes or so. First, a bit about our strong business performance over the last year or so. I'm gonna dive into the strategic levers for durable growth that Yamini mentioned toward the end of her presentation.
Then finally, I'm gonna talk to you about how we're thinking about balancing growth and profitability, both over the short term and over the long term. All right, first, let's reflect quickly on our strong business performance. Since 2018, we have grown our revenue at a compound annual growth rate of 35%. This year, we expect to deliver revenue of just south of $1.7 billion, which represents a growth rate in constant currency of 36%. This top-line performance has translated into a strong and profitable business. This year, we expect our operating profit to exceed $140 million and translate into $200 million of free cash flow.
In addition, at the end of the second quarter, we had just over $1.4 billion in cash on the balance sheet, which is great because it gives us the flexibility to continue to invest in the important parts of our business, even in economic moments like this one that are a little bit more uncertain. Finally, and importantly, we've seen consistent and strong customer growth over the years. We have grown our customer count by 32% on a compound annual growth rate since 2018. At the end of Q2, and Yamini mentioned this, we celebrated a nice milestone of 150,000 paid customers, growing 25% year-over-year. Now, the drivers of this growth is diversified across a number of areas. We have a nice balance in our net new ARR across geography, across go-to-market channel.
International revenue growth for us has been very strong and represents 54% of our total net new ARR in 2022. We expect that international will actually cross over that 50% of our install base over the next couple of years. Many of you know our solutions partners have been a key part of our growth for a very long time, and they continue to represent over 40% of our net new ARR, with direct contributing about 60%. Finally, we have a pretty even split between new customer net new ARR and net new ARR from existing customers this year.
For many years, we've been investing heavily in our suite of connected apps, and we continue to deliver innovation across all of our products, both our anchor hubs of Marketing Hub, Sales Hub, and Service Hub, as well as some of our emerging hubs of CMS and Operations Hub. Yamini talked in-depth about the product innovation that we're delivering here. I'm gonna talk a bit about the financial performance. Growth across the suite is very healthy, with all of the hubs except Marketing Hub growing 50%+, which is pretty impressive. Marketing Hub is our most mature and biggest business. It's well over $1 billion, and it's growing at 30% year-over-year as of the end of the second quarter. Sales Hub is a $450 million ARR business, and it's growing in the mid-50s.
Service Hub is a $100 million ARR business, and it's still growing in the high 50s year-over-year. Now, in terms of our more emerging hubs, CMS is a $70 million business. It is growing in the mid-50s. I think you've heard Stef tease at the end of hers. Yamini mentioned it. We launched CMS Free in June, and that's important because now any website can build a custom site with a custom domain for free. We've seen some nice early traction and free sign-ups for CMS. Those free users are converting at a really nice, healthy rate into paid customers. Operations is also a $35 million business and growing pretty fast. You know, you heard from Stef in her keynote, data is a challenge for businesses, and maintaining clean data is a particular challenge.
We've launched some things today with Operations Hub that really help our customers use AI to identify and clean up data. Now, these hubs are newer, they're emerging. We think that they have a lot of great long-term opportunity. All right. I'm gonna shift gears and focus on the levers that we have to drive durable growth over time. There are three foundational levers to drive growth over time. New customer acquisition, and this is supported by a growing diversity of entry points onto the HubSpot platform. The second is a strong and balanced set of upgrade drivers across our portfolio. Finally, continued innovation into new areas like B2B commerce and payments. Let's talk about the multiple points of entry onto the HubSpot platform. Now, Yamini talked about the size of the TAM that we are addressing.
We've built a really nice business over the last 15 years, but we're still early in capturing a meaningful share of the market that we serve. We currently have only mid-single-digit market share of our large and growing TAM. Not only is this overall market gonna grow nicely into the future, we expect that our continued product innovation and go-to-market execution will allow us to expand our market share of this growing market. Now let's talk about the ways that our customers find HubSpot. The first half is through our product-led freemium motion. A growing share of our customers are seeing value from a free product before purchasing HubSpot. In 2018, about 50% of our customers started with a free product before they purchased HubSpot, and that number has grown to over 60% in the first half of 2022.
The majority of these paid customers go from free to Starter. The free product is increasingly becoming useful more broadly. We see actually about 30% of free users buying the Professional or Enterprise suite directly after seeing value from that free product. Now, our Starter edition continues to be the widest entry point for HubSpot, and the majority of our new customers in any quarter are Starter customers. We've continued to add value to the Starter tier to really fuel this motion. You may recall we most recently added automation to our Marketing Hub Starter, and the share of our new customers who land with the Starter edition has also grown from 50% in 2018 to over 60% this year. The other thing we've done is try to really inject some simplicity into this Starter purchase motion.
You may recall we launched the Starter CRM Suite at $50, and it made it a really compelling, really easy way for starter customers to land with HubSpot as a platform and really deliver a ton of value. This has really been working for us. If you look back in 2018, about 90% of our new starter customers were really just buying one Hub, and that is down to 56% in the first half of this year. Lastly, our Marketing professional and enterprise customers are seeing the value of HubSpot as a platform. In 2018, the majority of our customers bought a single Hub, right? Our primary front door was really just marketing. You know, a lot of that has changed over the last couple of years.
We now have marketing and sales hubs that are really established front doors for HubSpot, and an increasing portion of our of the professional enterprise customers are starting with HubSpot with multiple hubs. That is the majority of our customers in the first half of this year. Then you also would notice that the share of customers buying three or more hubs up front has doubled since 2018. All right. Now that we've talked about how people find HubSpot, let's talk about the growing set of opportunities we have to expand their use of HubSpot. I think you've heard by now we are on a journey from a marketing application company to a suite across the front office to a CRM platform that helps our customers create these connected customer experiences.
This journey has created a lot of new opportunity for our customers to expand their use of HubSpot, resulting in a larger and more diverse set of upgrade drivers. In 2015, the primary way our customers expanded their use of HubSpot was by adding contacts. When we added the Sales Hub, we opened up a couple of more expansion opportunities of cross-sell and seat upgrades. Our continued innovation, both in the Hubs and also in the platform, have created a growing and more diverse set of upgrade opportunities across Marketing contacts, edition upgrades, seat upgrades, and cross-sell. Now I'm gonna dive into the last three. Marketing contact expansion has been this sort of steady drumbeat for us for a long time, so I wanna spend some time on these newer motions. Let's start with edition upgrades.
Many of our customers choose to upgrade the edition of the hub they buy as their business grows in sophistication and scale. From an ARR perspective, you know, starter is the small minority of our customer base at just 4% of our install base MRR. That said, about 40% of our customers by count are starter customers. This represents a significant opportunity for those starter customers to upgrade over time to professional and enterprise. You can see a similar dynamic exists within our professional and enterprise customer base, with over 75% of that population leveraging the professional version of the product. As we continue to innovate at the top end of the tier and pour innovation in, it gives those professional customers some good incentive to continue to upgrade to the enterprise version of the product. Another key expansion opportunity for us is cross-sell.
A growing share of our customers are multi-hub. I think you all know that. It's at over 60% at this point. Over the last two years, we've added CMS, we've added Operations Hub, and we've dramatically improved Service Hub. This creates incentive, good incentive for customers to explore using more than one HubSpot hub. Now, there are advantages to HubSpot of having greater multi-product customers, but there's a lot of advantage to our customers, importantly, for them to adopt more than one hub. I've called out a number of metrics here that demonstrate the increased value that our customers see as they adopt more than one HubSpot product. The theme here is pretty consistent. Creating a connected experience actually drives business metrics across deals, leads, tickets.
Yet, despite our early success here, we have plenty of opportunity to continue to expand the share of our customers who adopt multiple products. Just over 25% of our Pro and Enterprise customers have three or more hubs today. The last expansion opportunity I want to talk about is expansion through seats. Now, on a nominal basis, we've seen strong growth in both our active users and our paid seats in Sales Hub and Service Hub. We now have 1.2 million active users and 850,000 paid seats. This growth is not just driven by customer acquisition. Both active users and paid seats have grown at a pace that is more than our customer count. What this means is that customers see value in these products, and they are actively adding users and paid seats over time.
However, a lot of opportunity does remain here to close the gap between active users and paid seats as we continue to innovate and put functionality into our paid products. All right. This significant investment that we've made in these growing expansion opportunities have resulted in our professional and enterprise ASRPC growing at a 13% compound annual growth rate over the last. Well, from 2018 to 2022. These same factors have allowed us to reach a new high-water mark of net revenue retention of 110+ over the last year.
We recognize that the current economic environment will probably pressure net revenue retention, but we feel really good over the long term at our ability to retain net revenue retention at this 110+ level, given the opportunity that we have in our installed base for continued cross-sell, edition upgrade, and seat upgrade. All right, let's move on to our next lever for future growth, which is new categories, and talk about B2B commerce and payments. You heard a lot from Yamini and Steph today about the product momentum and the future vision of a really connected and commerce-driven CRM. I want to shift the focus to the here and now and talk about who's using HubSpot Payments, how they're using it, and talk about some customer examples of how our customers are really seeing value from Payments today.
I'm gonna give you a sneak peek into some of our priorities for payments in 2023. Let's start with a high level of who's using HubSpot Payments today. Now, you'll recall when we talked about this at the launch of the payments product that we were gonna target about a third of our customer base, U.S.-based companies, less than 100 employees, primarily selling in services and software. Since the launch, we have seen nice momentum among these small and mid-size companies, with 90% plus of our active payments users in the sub-100 employee segment. We've also seen encouraging adoption among our most sticky customer segments, with more than 80% of payments customers on professional or enterprise tiers of the product and about 2/3 of the customers using three or more of our Hubs.
All right, let's talk about how our customers are using payments. About 70% of our payment volume is credit card transactions, while the remaining 30% are ACH. Simple payments is about half of the volume, and the other half is leveraging our quotes functionality, and I will talk through an example of each of these in just a moment. Finally, almost a quarter of our volume in 2022 is recurring payments, and this year is growing following the launch of recurring ACH in April. Now let's look at some customer examples where HubSpot is having a real impact. You heard Yamini talk about one of our primary problems that we are solving today with payments, and that's making it easy for B2B companies to sell online. Apps Without Code is a great example of this.
They are the first no-code university, which means that they are teaching entrepreneurs how to build and sell no-code apps. They're a multi-Hub customer, and they were processing payments using a manual system. It involved five vendors and a lot of data syncing behind the scenes. They eliminated all of these point solutions, they standardized on HubSpot Payments, and now they have payment links available directly on their site. Now, the good news is their conversion rate is up, and their monthly revenues are up 33%. The bonus is that they're also using the payment object in the CRM to automate some business process. When somebody purchases and pays for the product, workflows are triggered automatically to provision access to content and functionality. Time saver as well.
The second customer challenge you heard Yamini talk about is the messy manual quote-to-cash process that exists in many small and medium-sized companies. HubSpot Payments is helping to streamline this process. Let me give you an example. Web Canopy Studio, it's one of our diamond partners and a top 20 merchant for HubSpot Payments, reduced their payment cycle from weeks to days and increased revenue by 36% using HubSpot Payments. Historically, like many other companies, they were using a manual process that involved sending emails to customers with invoice information, collecting payment information, and on and on and on. It took them about 2 weeks from the time that they signed a deal to when they got paid. They transitioned to our quotes functionality, and now customers sign and pay right in the quote.
I will just say, as a CFO, this really warms my heart because it does two things. One, it's got real impact to the top line, and second, it gets cash in the door faster, which are both excellent outcomes. Now I wanna share a little bit about our priorities for payments in 2023. As we've said since the launch, this year is really about building the foundation for payments and validating the drivers of value in the product. Like Yamini, I feel really great about the momentum we've had on the product development cycle, and as you can see in the last couple of examples, our customers are seeing real value out of our payment solution. You know, as we look forward to next year, we're gonna shift our focus from product market fit to really driving volume.
Increasing active merchants is our North Star for 2023, and there are three pieces to this motion: discovery, activation, and adoption. We have focus plays across all of these areas for 2023, some of them are listed here, to really drive the volume and usage of active merchants. Now, as we've discussed before, we continue to expect that the impact of payments on HubSpot's overall financial results is gonna take some time. You heard from Yamini and Steph. This is a long-term bet for the company. We believe that the impact from payments to growth and profitability in 2023 will be modest. Okay. Finally, I wanna talk about our long-term financial model and how we're balancing growth and profitability, both in the long term and the short term.
First, I thought it would be helpful to ground ourselves in our overarching philosophy on balancing growth and profitability. Both Yamini and I have talked about the fact that we are early in a very large and growing opportunity that is $70 billion by 2027. With that in mind, our philosophy is really unchanged. Our number one priority is to continue to invest to drive durable, long-term revenue growth at scale. That said, we will consistently look for ways to become more efficient and scale our business, driving margin expansion over time consistent with our long-term model. This philosophy has driven a strong track record of delivering growth and margin expansion. We're growing faster today than we were four years ago. We're generating positive operating profit, and we've experienced expanded margins over that same period of time.
Now let's talk about where we wanna see it go over the longer term. Our target long-term model remains unchanged. We continue to believe that our business can generate 20%-25% operating margins over the long term. That said, let me quickly double-click into the line item where we are furthest away from our long-term target, which is sales and marketing. Sales and marketing spend has remained in and around 45% of revenue, and it is the furthest away from our long-term target. You know, we believe that we've made the right near-term choices for HubSpot by focusing on revenue growth here because we have strong unit economics, and we're delivering a lot of value to our customers. That said, there are a few areas where we are focused that we believe will generate leverage over time for sales and marketing.
First, we're making purposeful investments in data and systems that we believe will drive rep efficiency. We are also going to continue to focus on innovation in our freemium acquisition channel. Finally, we're investing in nonlinear growth opportunities like commerce. Okay. Now, I know everyone's also interested in how we're thinking about operating margins next year, and we're just really getting started with our 2023 financial planning. Let me walk you through how we're thinking about the moving parts to the P&L. I will obviously have much more to share in a couple of quarters here. Our gross margins remain healthy in the low 80s. We're gonna continue to invest in the platform reliability, while at the same time trying to drive increased efficiency in our infrastructure. On balance, we expect gross margins are gonna remain around 81%-82% next year.
We plan to sustain investment in product and development. We believe it's the foundation for driving strong organic growth into the future. As a result, R&D expense as a percentage of our revenue will remain around 20% in 2023. We talked about sales and marketing leverage over the long term. Many of the plays we talked about are multi-year. Over the short term, we're gonna ensure sales capacity, and we're gonna drive efficiencies in other more discretionary areas. This will translate into sales and marketing as a percentage of revenue that is again, pretty consistent next year. Finally, we have seen steady improvements in G&A as a percentage of revenue over the years, and we expect that we're gonna continue to look for ways to drive leverage in our overall business support.
All right, where that all nets us out is operating margins that are roughly flat at 8% in 2023. Okay, let's wrap up with a few key takeaways from today. HubSpot continues to deliver strong and balanced financial performance. We're early in our market and have a massive opportunity ahead of us. Our diverse levers for growth enable re-resiliency in the short term and durability in the long term. Finally, our long-term financial model remains unchanged as we balance growth and profitability. With that, I'm gonna ask the executive team to join me on stage for the Q&A. Thank you.
All right. How's everybody doing?
Good.
Yeah.
Sounds good.
Good. Everybody doing good. So here we are. We're in Q&A. Jenna and Ryan have got a couple of mics on the left and right. Can't imagine if there's any questions, but if you wanna just throw up some hands, and I just ask that people stick to maybe one question, and if we have time to come back around, we'll do that. But just reflect the fact that we have a few questions so that'd be great. Thanks.
Great. Over here. Thanks, everyone. Great to be with you all this year again at INBOUND in person. Great to see you all. Thanks so much. Great event. Really enjoyed it. My question is on the channel. Channel mix, you just mentioned here at 43%. I think it's actually up a little bit from several years ago. I think as you guys embarked on this enterprise journey, moving upmarket, multi-Hub deals, we thought maybe the direct business would take front seat, and we might see a mix shift towards direct, which, I mean, it hasn't, which suggests you've been able to bring that channel along with you in this journey. My question is, what's the secret sauce? How have you enabled this? Should we expect that going forward to remain kind of stable at these levels? Thank you so much.
Yeah.
Well, thanks a lot for the question. Really appreciate that. You're absolutely right. I think we've done a lot of work to continue to bring the partner channel along as we've gone on this breadth of portfolio as well as distribution mix that we have going. It's still pretty balanced, you know, as you saw from the results. I'd say a couple of years ago, we went to our partners, and we said our strategy is to co-sell with you and enable you to service our customers. We explicitly said that we didn't want a services business. We said, we're gonna do a lot in terms of enabling that growth. A few things happened.
I think they saw that we were going from this marketing automation company to a CRM platform, so they started upskilling themselves and really going on that journey to become a CRM implementer, a multi-hub implementer, getting both the technical skills as well as the business skills that were required to be able to help our customers. Because when partners get involved with our customers, their value goes up. You know, revenue retention goes up, customer dollar retention goes up. It's helpful for our customers, therefore it's good for HubSpot. We've gone on this journey with them. I think the second point I'd make is that I talked a lot about our total addressable market and how we see that growing and expanding. One of the research work that we did with IDC is to look at our ecosystem.
What we found is that for every dollar of software spend, there's between $5-$6 of ecosystem spend. Now, that is really motivating if you go and talk to partners and say, "Look, you're building this business on us, and we are expanding, but more importantly, the opportunity for you is even bigger." Then the third thing I'd say, more execution-oriented, is we really enabled this co-selling motion. Brian and I have always talked about how to make one + one equals two or greater than three, and the co-selling motion is that. How do we get the partner channel and the direct sales channel to be able to really engage in a way that is valuable for our customers? That's the co-selling motion that we have enabled.
Again, there's just a lot more work to do, but we're very happy with the progress that the partner channel is making. Anything else you would add?
Yeah. I would just add it takes a village to implement a go-to-market. You know, if you're a 500-person company, you've got a complicated go-to-market model, and you're putting in our Marketing Hub, Sales Hub, Operations Hub, everything, you're gonna need some help. It actually doesn't surprise me that it went the other way and that partners are actually more strategic now than they were, let's say, four or five years ago. Really pleased with the progress. I think Yamini’s and the team has done an amazing job on aligning the direct and partner together, which is not an easy game to play.
Hi, good afternoon. Keith Bachman from BMO Capital Markets. Kate, perhaps I'll direct this to you. You have a lot of drivers of new growth, and yet you also mentioned the economy is an issue, I would say particularly for HubSpot with such exposure to Europe. Salesforce was out a few weeks ago, clearly saying their Marketing Cloud had weakened. As you think about the multiple drivers of growth that you have, where do you feel like there might be some exposure or things that we should be watching out for that may not run at a consistent rate or may degrade a little bit? Again, you have new logos, you have land, a lot of land and expand, but just anything you wanna call out that perhaps might slow that ASRPC growth and/or the new lands. Many thanks.
Yeah, thank you. Maybe I'll start, and then I will open it up if others have ideas. You know, I think I said directly in the comments that over the near term, we may see some pressure in net revenue retention as a result of the economic situation. The reason that I say that is that I think we see a bit more exposure in downgrades, and also in the pace of expansion, particularly around adding seats, for example. You know, one of the things I don't know if you were here for Brian's fireside chat earlier, but one of the things that he talked about us doing really well at the point in time where the pandemic hit was to really come to the aid of our customers.
I think what we saw was, as a result of some of those customer-first plays, we saw a lot more downgrades, but a lot more people stayed with HubSpot, and I think we would see a similar motion, to the extent that we continue to see economic uncertainty for a period here.
I think that's great. Yeah. I, you know, Keith, the other thing I would say is that right now the focus is on solutions that drive direct revenue impact or solutions that drive direct TCO and cost savings.
Mm-hmm.
Both in terms of new as well as installed base, those are the conversations that are clearly resonating with our customers, and that's what is top of mind for customers. Both from a partner channel as well as a go-to-market direct, you know, motion perspective, we're really focused on enabling them with driving direct revenue impact with our solutions as well as helping them consolidate point solutions to be able to drive cost savings.
Right here. Hey, Rishi Jaluria, RBC. Thanks so much for taking my question and great to be here. Great event today. I wanted to ask maybe a bit of a longer-term question. How do you think about the potential to maybe enter more back-office type functions for the customers? Especially because a lot of the SMBs maybe don't, you know, that we've talked to at least, that don't distinctly view back office and front office the way a lot of large enterprises would and would definitely want systems that are disparate but talk to each other, right, and are built on the same platform as you've been able to do with all your front office apps so far. Thank you.
I can take that. I don't think you'll see us rushing into the back office, but there's a concept in my mind, like the middle office between the front and the back, that's the messy middle. It is tons of little apps, tons of little spreadsheets that are moving around between the back and the front office that creates a lot of extra work, a lot of pain for IT, in addition to any customer experience. That scenario when we talk about commerce, that we wanna start building solutions in, solve some pain there, and enable a really great customer experience. We're interested in that area. I doubt you'll see us rushing into what Xero's doing, NetSuite's doing, and QuickBooks is doing. They're doing a pretty good job.
Rishi Jaluria, I think it really goes back to the TAM that's right in front of us.
Yeah.
Right? If you look at marketing, sales, service, commerce, each of those are really capable of supporting multi-billion-dollar businesses. For us, what drives our decision is how can we solve for our customers in each of those mega markets better, and how do we make sure that we are connecting the dots? Hopefully, that came out in our presentation. A little bit of connection. That's what we're focused on.
Thank you. Mark Murphy with JP Morgan.
Whoo.
Brian, it is just so good to see you and have you kind of basically telling us that it's still the good old days here. Seeing you up on that stage. Just amazing.
Thank you.
I wanted to ask you, I think the reason most software companies acquire is because they feel like they just can't build enough, right? They can't cover all this ground. You know, it feels like AWS does in infrastructure.
Yeah.
feels like Google does and maybe Snowflake. It's the infrastructure part of the world. How do you not overwhelm your engineers, and how do you know, how do you get them to say, "We're gonna do all of everything you just described on stage"? How can they cover that much ground, and how do you, how can you be the kind of the only apps company, that that's really able to, you know, get that done?
Okay. First of all, these are the good old days. Right now. This room, these are the good old days.
Mark, come on. This is the good old days.
We're just getting started. 20 years from now, you're gonna be looking back and talking about these being the good old days. I think we're able to do it because we have a fantastic product organization, engineering organization that we didn't have when we first started. It took a while to build it up and really build an amazing product organization, engineering organization. That organization has a mindset of really solving for the long term, really not being afraid to take two steps back, so they can take 10 steps forward in making big bets. One of the biggest bets they made, and I remember they made it, we had our Marketing Hub, and we were building our Sales Hub, and there's a Marketing Hub team and a Sales Hub team.
The Sales Hub team was about to build their own workflow engine. The product organization's like, "Why are we doing this? Let's build one workflow engine that both of them can use, and then we'll build a Service Hub, and everyone else can inherit it." I think that sort of fundamental bet on ourselves, on our platform, on that set of shared services underneath, has enabled that organization to really hire well. People love working for our engineering organization, to move quickly and to really innovate. I think you saw that in Steph's presentation. Most of that goodness she showed is in that layer below the apps that's inherited by all those apps. I think you're right about acquisitions. Like I see when people start making acquisitions, I won't name names, but like then all their engineers end up integrating those apps.
They don't have time to build something new. The next thing you know, they kind of lost that mojo. They can't build anything new. They sort of lost those creative people, like, to build new stuff. We still very much have that mojo of wanting to build ourselves and have lots of creativity and lots of engineers who like to do that stuff. These are the good old days, my friend. Anything to add to that?
No, I think it was great. No, the only thing, it always surprises me when I look at like HubSpot and what we've been able to do, what Brian and Dharmesh have been able to do over the decade, and we're doing is counterintuitive bets. One of the more fundamental counterintuitive bets was crafting while everybody was cobbling. I don't know the number of times you've all asked us this question of: What are you gonna do with M&A? Our answer is always the same. We will craft mostly, and then we'll figure out what we do. I think that's a counterintuitive bet. I think staying focused on the market right in front of us, you know, is a counterintuitive bet. Staying focused on front office, you know, not getting distracted is a counterintuitive bet.
These are the bets that allow our engineering organization to be focused, because once we have them focused, then their level of innovation and productivity is exceptional.
Hi, everybody. Michael Turits from KeyBanc. Thanks very much. It's really fun to be here. Kate, on the margins and maybe for Yamini too, thanks for giving the long-term view and also for giving some sense of where the leverage will come from in sales and marketing. Maybe you can give us a little bit more granularity on the flat guide into next year and where those incremental investments would be. Thanks.
Yeah. I think it's really a continuation of the conversation that we had at Q2, right? Our first priority will always be to continue to sustain investment in our R&D organization so that we can continue driving the innovation that's really fueling the growth for the long term. When I think about like, where are we going to.
Focus and continue to invest in 2023. That's, like, our number one priority. Then the other thing that you saw me say specifically is that we wanna make sure that we have the sales capacity to address the market opportunity that's in front of us. As we're working on some of those plays that will ultimately drive leverage in sales and marketing, we wanna make sure that we are continuing to serve the demand that is right there in front of us.
Hi. It's just really great to see all of you in person again, so thanks for having us. Dharmesh, I think this question is for you. I know connect. com has less than 10,000 users, can't wait to be the next one on there. I can't help but have the wheels spinning and thinking about LinkedIn and Sales Navigator, and really, as I think about the Hubs as long-term side effect of marketing solution to suite to platform, and now ecosystem comes to mind as well. Just how should we think about what the ambitions for connect. com are beyond bringing people together, but what the value is of creating that ecosystem for both current users and external to HubSpot, and what's maybe the monetization opportunity there long term?
Yeah. Yeah, in the keynotes, I spoke primarily about how connect.hubspot.com serves the community. Here's the value the members of the community are going to get. There's a flip side to it, right? We've got this kind of diabolical plan to build what I think of as the community and network of record. Ten years ago, we would have talked about building the system of record in having our CRM. What we're doing with connect.hubspot.com is having the network of record for the growth professionals. We want every marketing salesperson on the planet, there's 100+ million of them, to actually be spending time there. That's how they connect with their peers. That's how they get work done. That's how they do hiring.
We want all that to exist in that network, and no one has really done it yet. There are kind of pockets of these communities and these networks, but no one has pulled together the combination of a network, a marketplace, and that kind of academy piece and pulling all those three things together. The idea is to build a strong network effect that will benefit pretty much every constituent and every product in HubSpot. We were talking about solutions partners earlier. Imagine if they had a place to go where they have all these prospects, right? Right now, they'll participate in our support community, which is limited to just HubSpot customers. Imagine if there were millions of people that were in there asking questions like, "building out my tech stack," and they can now use that as a prospecting tool.
They can be in there adding value themselves. Our application partners can say, "Hey, we've got a direct, you know, application to lists." Ratings and reviews are one thing, but to be able to click a button and say, "I wanna have a discussion with seven other customers that are using this integration from HubSpot." We have literally 50 ideas and use cases that we'll kind of filter through to see, you know. It's a long, long-term bet. We think it will be accretive to value. Like, across the products will benefit because we'll have in-product assistance someday that says, "Hey, I need help with this webpage. Let me click a button, and we'll connect you to an expert," and kind of pull all those pieces together.
The ambition is large, but as I said, we dream big but iterate small, so we're just gonna go through the iterations. I'm personally super excited about it.
Awesome. Over here, Ryan MacDonald with Needham. Wanted to ask about the product roadmap around Customer Journey Analytics. You talked about the announcement of that today. You know, I think, Dharmesh, you talked about in your keynote that you've essentially built a media company inside of HubSpot. I wanted to understand, beyond empowering your customers to utilize their own first-party data, is there a view on the roadmap to sort of take the proprietary data you've built with the media aspect of HubSpot internally and be able to help your customers sort of monetize that or combine that as well over time? Thanks.
It's definitely on our mind. I'm not sure how much we were ready to talk about this particular year. You know, the media company inside of HubSpot was something, you know, we've been working on for a long time. Now, the way to think about it is an ecosystem inside of HubSpot that can kinda tap into all those kind of components of value. We're looking for building direct relationships with millions of people that are in our industry, and we'll see where that road leads. Once we have that network, I think new use cases will kinda emerge. Yeah. Stay tuned.
Siti Panigrahi from Mizuho. Yamini, you talked about your TAM expansion to $72 billion, and also you talked about different customer, like, digitally mature customer base. Are you thinking about expanding to the, you know, TAM $72 billion? What are the challenges you're seeing? It appears to be more displacement kind of market opportunity. What do you need to do to achieve that, you know, growth?
Yeah. Thanks a lot, Siti. Good to see you. I will tell you that, if you look at the three examples and customer case studies that I mentioned, we walked you through that journey for a very specific reason. Because the general assumption is that most of our TAM and market opportunity is ripping and replacing some other legacy vendor. It turns out it's not. In fact, the first two buckets of the customer, customers in the digital journey, newer to digital and early to digital, they comprise a pretty fair majority in terms of the customers that we end up seeing within the market. In that case, the first bucket, sometimes they have no, you know, applications there. They may have one or two point solutions.
There, the challenges are educating them on the benefit of going digital, the benefit of having a consolidated platform. There's a very different aspect of how we go to market for early in their digital journey. This is also why CMS makes such a great sense, because CMS is one of the first products that companies need, right? You build a website and then try to get customers onto the journey. This is why CMS is important. This is why a free CMS is actually important. It gets customers early in their digital journey, and then we can continue to scale with them. I think the second case that I was talking about, there the challenges are quite different. There's a lot of point solutions.
In fact, over the last couple of years, people have just gone on a buying spree and bought a ton more point solutions, and now they're all looking at it and saying, "Okay, how are we going to get value out of all of these disjointed solutions, and how is that actually benefiting our end customer?" There, the conversations are very, very different. The reason I call those out is that those two scenarios end up being fairly major portion of our install base as well as opportunity going ahead. There's still a ton of non-consumption left. Now, there's certainly value in terms of our ability to consolidate with a legacy player and ripping and replacing, but that's what we see. Pretty excited about the market opportunity.
Yeah. Hi, Taylor McGinnis, UBS. Thank you all for taking the time. Kate, maybe, one for you on margin. You know, the flattish or, you know, monthly op margin improvement that we've seen over the, like, last couple years has coincided with a lot of great diversity in the metrics, whether that be partner contribution or, you know, some of these hubs really gaining scale and, you know, seeing a lot with the enterprise and professional adoption. I guess, what would you have us look out for, you know, to say, hey, this is when we can start to see more leverage or efficiency gains in the sales and marketing, line. I guess, you know, even too, what are you looking for there?
It's a good question. I think that what we have seen over the last couple of years, as Yamini indicated in her keynote, is really this, like, rollercoaster. I think what we are focused on doing now is finding a path to something that is stable, where we can really drive focused innovation and efficiency in our go-to market. I think what you will see is. It's not gonna happen overnight. It's gonna be a steady state of small improvements in the systems, in the data, in the process that we use to go to market that will, over time, translate into just more efficiency.
I'll just add on that, on that. One of the numbers we've looked at since, like, the first year of HubSpot is unit economics. What does it cost us to acquire a customer? And then over time, what's the lifetime value of that customer? Those are incredibly healthy metrics right now. As we look at it, we're like, we should continue to invest. There's a big market opportunity here on a unit basis. It's incredibly profitable. Let's giddy up and get after it. That's why we continue to invest.
Hey, everyone. Hiding over here in the corner. Ken Wong from Oppenheimer. Just a quick question on the commerce-enabled CRM. You guys talk about attacking simple then complex and then aspirational for a commerce-powered CRM. With the anchor hubs that you guys have now and some of the services that you guys have tacked on with the primary colors, like, can you address that aspirational goal, or does that require kind of additional building on your part or tighter partner integrations, whether it's accounting, commerce, whatnot?
I think all of the above, Ken. You hit all of those. It is a big opportunity. The reason we laid it out as a multi-year opportunity is because the kinds of problems that we're trying to solve for our customers have been around. This is kind of the middle, you know, not the front office, not the back office, it's the middle office problem that Brian has been talking about. I think one of the more fundamental yet very powerful, you know, implications in terms of the decision is treating payments as a primary color. That happened, you know, somewhere along the journey this year with our products and engineering organization. Because what it does is it allows us to be able to embed payments in every aspect of a hub.
Because we could have actually gone on to build a payment hub or a commerce hub. Instead, we chose to say that we are going to have payments embedded as a primary color across all of those hubs. What that means is it's one of those things that we'll look back years from now and say, "That was a smart decision." It took us maybe a little longer, but it really is one of those decisions that we are making to slow down to go far. I think you'll see the impact of all of that. Now, looking at, you know, complex commerce, that is a complex problem, which is going to take multiple years for us to solve. Then if you look at the aspirational goal of being the single source of truth for commerce and CRM, that is exceptionally powerful.
You know, we went into this market, and we officially launched about nine months ago, saying, "Hey, we want to validate this thesis." Every customer conversation we've had, we've validated that thesis, and so we're building for that, and it's going to be a multi-year journey, but a fun one.
Brian McWilliams from Barclays. Just building off that last answer, that's good. An activity begets more activity on the HubSpot platform. Since that large starter base, you know, remains a valuable upsell opportunity, could payments be an unlock for seasoned starter customers to move up tiers? What have you learned over the last year on the payment side?
Yeah, that's a great question. It is a great question. I would say we think about there being a big opportunity for payments in starter, and that is one of the things that what we found as a very interesting learning. You know, you heard me say that 80% of our payments customers are actually professional enterprise. The first adopters of payments were small companies, but where they're pretty sophisticated for the size. We think there's a really big opportunity in starter, but we need to make it even more simple in order to unlock that. That's one of many things that we are thinking about over the next sort of period of time here.
Brent Bracelin here with Piper Sandler. I had a think big question for Dharmesh.
Sure.
Before I go there's a running debate whether or not you're an introvert. I think presentations you give get better every year. We'll see if that debate carries on. My question is really around this idea of a knowledge graph. You mentioned graph actually more times than dad jokes.
Oh.
I have to ask, and I actually saw that you actually filed a patent and received a patent on messaging and knowledge graphs. The think big question for you is really around dots, connection, knowledge graph. Is knowledge graph the next primary color? How are you thinking about incorporating this knowledge graph into this multi-hub connection dotted world? Thank you.
The opportunity here is, you know, I kinda hinted at this in the keynote, is around kinda what I think of as V2 of a professional graph. I mean, we've had, you know, social graphs and professional graphs before. What's been lacking is that, they haven't had, like, marketplaces embedded in it, so you couldn't really transact. You have the marketplaces like Fiverr and others, and you have professional networks like LinkedIn and others, but the two things have never really meshed, and there hasn't been this unified graph. That's kind of thing number one.
Thing number two, the opportunity, once you have those connections, is to do this notion of a weighted graph that says, you know, right now, if I have 2000 connections, let's say, on your professional network of choice, all of them are treated equally. You know, from my perspective, I see 2000, it's like, okay, well. But if one of them is Yamini, that should be weighted much, much higher than the intern we hired two years ago, and I can't remember their name. Right now, no one's really doing that. So I think we have the opportunity to kind of pull all that. The other thing that has me excited is the fact that HubSpot itself has a lot of first-party data on product usage and our blog and content consumption and our courses.
If we can pull all that in to say, "Hey, I'm looking for someone that's actually used this feature of HubSpot for four-plus years." It's not something they type into a text box. We actually have the data. It's like GitHub for developers. We have the kind of marketing sales data around conversion rates, click-through rates, everything is sitting in the HubSpot database. If we can surface that through a network or an ecosystem of some sort, I think there's lots of latent value there that we can unlock. I'm a big believer in efficient markets, and right now, that market is very, very inefficient. People can't find each other. There's not enough trust. We think we can solve some elements of that problem.
I'll tell you why I like it. It's like we've always had a pretty big network. We've never had the effect.
Yes.
We had to have a network effect.
DJ Hynes from Canaccord Genuity. Maybe one for Brian and Yamini. You guys have managed through a bunch of different economic cycles. In your experience, how does the SMB typically behave coming out of an economic downturn? I mean, I think there's a case to be made that maybe take more of a wait and see. It would be a later cycle recovery play. On the other side, you could say, well, there's less approval layers, maybe they could act a little bit faster. Just curious what you guys have seen and maybe how you think about it playing out this time around.
I think you and Kate are better at answering this.
No, go for it.
No, I think I don't know the answer.
We're just, like, trying to put him to use. There's a lot of you here. I will start this one. No, I'll start it.
Kate, I think Kate actually knows the answer, right?
I wish I had a crystal ball and knew the answer. I think that, you know, we certainly have run a number of scenarios to try to give us some idea of the range of potential outcomes. I do think that what we saw in the latest economic downside was that there was an acuteness to action that was required in small and medium-sized companies, that they reacted very quickly to digitize. Probably, I don't have the data because we are not in the enterprise, but probably more quickly than enterprise. Now, what that translates into in the current economic cycle, I think, is like, we can both debate that in a nice and healthy way. I do think there is some ability to move faster in smaller companies.
One thing I'll add, since we have lived through one of those downturns before, and it had some similarities. The behavior we saw is during the downturn, you know, people kinda hold back, retention rates might go down. What happens afterwards is that, they often will kinda accelerate their digitization because that particular project is not perishable inventory. It's not like, oh, yeah, we haven't need to digitize before. We had this downturn, and now that has kind of, you know, gone down the river. It's no longer important. It's just pent-up, latent. Here's stuff we know we need to do.
We had to pause it for a little while, and once kind of the clouds clear, and they can actually kinda see the future a little bit better, there's an argument that can be made similar to what we saw last time, is that there's a pickup in kind of catching up on those projects that they had kinda put on pause. They're not projects that are killed, they're projects that are waiting, is what it ends up being for digitization.
Those are two good answers. Surprised you didn't pass over to the resident economist over here.
Go ahead.
No, no. I'm glad you got it all.
Go ahead. You'll be complaining about it later. Go ahead.
Done.
Arjun Bhatia with William Blair. Thank you. I want to go back to payments and commerce for a second. If we think about just the longer-term definition of success, do we think about it as a direct revenue stream, or is there a broader kind of halo effect to happen in the customer base through deeper engagement, more sticky customers? How are you defining it, and how should we think about it?
I think I'm gonna go with Yamini's answer. That's yes, all of those.
Yes.
That's
I think all of those. It is a direct monetization play. There's no question about that. The way we are going about it is we are making all of the decisions now to build a really solid platform to make payments exceptionally discoverable within the product. What we have found in the first year of operating is that every step from the time that a customer actually discovers payments to the point of repeating transactions counts. We're really having the engineering teams and the product teams being focused on driving that type of activation and adoption of the payments workflow. As we think about long term, it is a direct monetization opportunity. We wouldn't be investing so much otherwise, and we think it's a mega market. We think it's a market that is.
LTV to CAC unit economics, having seen healthy numbers today, consistent improvement over time. With the advent of multi-hub lands that Kate talked about to LTV, in addition to efficiencies on CAC with models like freemium, can you just give us some color on how those unit economics have trended or would be expected to trend from here?
Yeah, why don't I talk about
Just, you know, a quick follow-up maybe for Dharmesh is the mix. I was interested in Mark's earlier question on overburdening your development organization, mitigating against that. How do you balance from an innovation roadmap the right mix of the primary colors, the foundational building blocks.
Yep.
Versus layering on those features such that you execute as close to perfection as you possibly can without shortchanging your opportunity. How full is your set of primary colors today? Thanks.
Yeah. I'll start. Even though that was a sharp violation of our one question. We will answer. I'll start with the unit economic question. You know, if you think about the way our business has evolved over time, there are two points where I think you saw big changes in unit economics, one on the CAC side and one on the LTV side. The big change on the CAC side really happened when we invested very significantly in the freemium motion, and I think that's probably now a few years, Lauren, I'm looking at you, probably three years ago, where we saw that step function change in our cost of acquisition. That's when we saw, like, that freemium motion really take hold. It's been pretty consistent since then.
The other step function change has been on the LTV side, and that has happened, well, as we broadened the set of upgrade drivers that we see in our install base and moved our gross retention over the last 24 months from something that looks like the low-to-mid 80s% to something that looks like the mid-to-high 80s%. Really, those two things have increased LTV in a meaningful way. What you saw is since the IPO, really these sort of two moments of change in our unit economics, one with the advent of freemium and now with the sort of build-out of this CRM platform.
On the product question, there's actually three buckets we look at. One is around the core primary colors and making those colors richer, if you will. For instance, we have messaging as a primary color, but there are new channels emerging in terms of messaging with WhatsApp and other things. Every one of those kind of core primary colors needs to get richer over time. We're very, very excited about that because it adds so much leverage and value across all the application hubs. There's new primary colors like we do with payments that says, oh, if we add this new color, it's gonna allow a whole different set of things to be built. We're excited about that as well. In terms of how we balance it, the one-word answer is carefully.
You know, Stephanie Cuthbertson, Stephanie, who you met earlier, she is a genius of the sequencing and how do we allocate and keeping the dev team motivated, exceptional addition to the HubSpot product org, in my opinion, and others. It's you're trying to titrate over time. You're saying, okay, right now, here's where we think we can get the most leverage, but we're gonna always spend some amount of time on the long term, let's make the primary colors better, and then every now and then we'll look at adding a new primary color. There's no perfect science to it. You just have to iterate and kinda watch it as you go and see what the customer demands are.
I do think the way we've started, you know, really articulating where we are going as an organization, we now have four clear priorities. I walked you through those, you know, in terms of marketing, sales, service, and then commerce. These are big areas of investments. We start with those. Then we go to our product and engineering organization, we say, "What are your best needle-moving ideas to be able to make change happen in these areas? Let's start with those." I think the level of alignment we now have from company strategy to product pace and innovation to go-to-market execution, that alignment is much clearer now, and we're able to drive focus within the organization. Because every time we make a decision to do something, we're also making a decision to not do something else.
That choice is becoming very clear with the level of alignment we have.
Okay, I think we've got time for maybe one more.
One more.
Hey, guys. It's Brian Peterson.
Oh, hey. Oh, hey, Chuck.
Sorry to just beat a dead horse here on the go-to-market, but, you know, I'd love to understand how much of the sales and marketing investments next year may be somewhat foundational as you have more products and you're going upmarket. Are there certain aspects that aren't necessarily kinda headcount related, different types of heads or different type of SIs
Yep.
that maybe are driving future growth? So it's more about that LTV and less about the CAC. If you can unpack that would be really helpful. Thank you.
Maybe I'll start with that and certainly add to it, Kate. So as we've gone upmarket, there have been a couple of consistent, you know, foundational elements for both the partner channel as well as the go-to-market channel. The first one is really enabling them to sell multiple hubs. That's been part of the journey. I think earlier there was a question in terms of how we've done this with the partner channel. With our sales teams, it has been very clear in terms of enabling them to be able to sell Marketing, Sales, Service as their primary anchor hubs, and a lot of enablement goes into that. In addition to that, over the last couple of years, we've invested in technical consultants. We have invested in a lot more of enablement resources. We have invested in systems and automation.
We have really upped the level of execution excellence that we look for from our go-to-market organization, and it's just that, right? It's really being able to drive all of those investments up as we get them more and more proficient in selling multi-hubs to our customers. Same thing goes for our partner channel in terms of driving enablement and making sure that they're able to co-sell with our go-to-market channel as well. I think.
I think that's great.
Yep.
Yep.
All right. Well, I think you guys have asked it all. Hopefully, we've answered it all. It's great to see all of you in person. We appreciate you guys making the journey here to Boston to be here with us at INBOUND. Have a great rest of the day, and look forward to seeing you guys soon.
Thanks very much.
Thank you so much for your support.