Peer Review Sites Are Changing the Way Business Buys Software
Business technology buying behavior has evolved in recent years. In the past big enterprises would consult with major analyst firms, such as Forrester, Gartner, and IDC, before making a significant technology purchase. Small or midsize businesses would turn to a middleman, like a value-added reseller or channel partners, for help.
Now, businesses are buying in a different way. They’re doing their own research and making their own choices. Which is good because those traditional methods are slow, outdated, and expensive.
The new way of buying has been spurred by several trends. One is the rise of cloud software. It’s easily available and easy to use, and it’s driving the consumerization and democratization of software. Two, buyers themselves have changed.
In the past, software buying was a top-down exercise. The CIO would make the decision and everyone else had to follow. Today, software buying is often a bottom-up process. Let’s say a small group in a large company starts using an application. They like it and recommend it to colleagues. Gradually, more departments start using the app. When half the company is using it, the CIO decides it’s time to negotiate an enterprise deal.
The third and perhaps most influential trend is the growing popularity of peer review sites. More business technology buyers are now researching software ahead of purchase by reading customer reviews, as if they were shopping at Amazon.
The power of peer reviews
Over the years, we’ve learned to interpret user views and understand which are useful and which are not. Millennial and Gen Z workers are digital natives who have shopped this way all their lives. As they enter the workforce, they naturally bring their shopping habits with them. They make decisions faster and largely based on their own independent research. What’s more, many have an innate distrust of middlemen and put far more stock in what their peers are saying. In fact, a recent study based on a survey of hundreds of B2B software buyers found that only 4% trust traditional market research firms and analysts the most when making major software purchase decisions. That’s why most buyers across all business software segments are increasingly turning to peer review sites to inform their purchasing decisions.
Of course, buyers still consult a variety of sources, such as a software company’s website. But only a minority of buyers now consider vendor-created content, like case studies, whitepapers, and reports, to be a trustworthy resource. That’s why third-party validation like peer reviews is now essential to cloud software companies. It creates trust and demonstrates transparency. In fact, 86% of software buyers use peer review sites when buying software.
Increasingly, resources like review sites, vendor content, social media and industry influencers are working together to complement each other and help buyers build a well-rounded purchasing plan backed by trusted-user validation. Then, when business technology buyers have formed an opinion and identified what’s right for them, they move quickly through the buying process. Indeed, the bulk of the decision-making process is already done by the time buyers ever make themselves known to the vendor: the above survey found that 67% of companies usually engage a salesperson at a software company only after they have already made a purchase decision.
How to find a review site that’s truly helpful
There are three main attributes that make a great review site. First is trust. Neutrality and authenticity of reviews and the presentation of information are important. Review sites are for profit companies, but many buyers are leery of peer review sites that use “pay to play” methods when listing vendors.
Informational resources like review sites should limit paid promotions and make it obvious when those promotions are present. Most software vendors are better off encouraging their customers to write positive reviews than paying for promotions.
Second is organization. The best peer review sites are easy to navigate and do a good job of accurately organizing vendors into meaningful categories to aid buyers in discovery and comparing of apps. There is a lot of business software out there and if categories become too broad, it is challenging and frustrating. Some review sites, for example, have one category for, say, ecommerce software. Is that enough?
The reality is there are many different types of applications under the umbrella of ecommerce, from shopping carts to live chat to subscription billing, and you want to focus your search to exactly what you need. The best review sites invest heavily in research teams that accurately assign vendors to thousands of fine-grained software categories with clear definitions of required feature sets to ensure a great user experience for buyers and a level playing field for vendors to be compared only with their true competitors.
Third is traction. Breadth and depth are needed in terms of representing all the software that exists with high counts of quality user reviews for each company. Some review sites are starting to scale with well over a million reviews on their sites.
The clear leader in the peer-review space based on all these metrics is G2, which offers more than 2,000 different business software categories, more than any of their competitors and arguably the best-researched and curated. G2 also has scale, with more than 1.6 million reviews on its site. That’s why G2 is now the world’s largest B2B software marketplace, with more than 60 million buyers every year using G2 to make software decisions.
Why we invested in G2
G2 is disrupting the status quo in business technology buying. The company’s model is validated by a massive $157 million Series D round raised last year. We are proud to be investors in G2, based on our deep belief in the company’s progression and our unwavering confidence in G2’s CEO, Godard Abel.
Godard and I go back to the time Godard was the CEO of BigMachines, an important ISV partner for me when I led the team that started the Salesforce AppExchange ISV Ecosystem. My team at Salesforce helped to accelerate BigMachine’s success, ultimately leading to its acquisition by Oracle for $400M.
Godard and I discussed the partnership and the holistic business relationship during the first AppExchange/BigMachines meeting. I asked Godard about BigMachines’ customer reviews on the AppExchange, and we formed a bond over our shared conclusion that clickthrough and purchase rates were highly correlated to the number of real quality reviews. Together, we built a partnership for Salesforce’s customers, the Salesforce sales and service teams, the AppExchange, and for BigMachines.
From an investment perspective, the G2 Marketplace Business Model is a perfect combination of product-led growth and business application marketplace, areas where Cloud App Capital Partners has deep expertise and knowledge. This allowed us to see the tremendous potential in G2.
G2 is also a great example of our Strategic Late-Stage Investment Thesis and shows how the network of close working relationships we have built over decades gives us unique access to late-stage investments and partnerships. I sourced G2’s Series A rounds at Emergence Capital which they passed on, Accel led the B round, and Emergence then invested in the Series C after I left to start Cloud Apps Capital Partners. Like other late-stage investments made by Cloud Apps Capital Partners — including Zuora, HootSuite, and ServiceMax — G2 was well-known to me since before its first institutional investment rounds, and I had strong connections to all these companies and their CEOs.
How G2 is shaping the startup ecosystem
Peer review sites are great, not only for buyers, but also for sellers. If you know how to use them. This is a hot topic among our portfolio companies. When board discussions turn to marketing and sales, one of the first topics our companies want to talk about is how well they’re performing on G2 and how many new reviews they’ve gotten.
There is an art to climbing the ranks on G2 and getting named a top provider. Cloud Apps Capital Partners has developed unique expertise to help its portfolio companies build a strong relationship with G2 over time. We advise our startups on the best ways to work with their customers and inspire them to submit great reviews, and how to think of their presence on review sites as a tool for lead generation and as vital “social proof” in the competitive and closing phases of the sales process.
This year, spending on enterprise software is expected to reach $672 billion, an increase of 11% from the previous year. This software is powering the digital transformation efforts of organizations across all industries. For software buyers at companies making the digital shift, trusted reviews are essential, because authentic peer reviews are more reliable than the subjective voice of an analyst or vendor. The good news is that there are now many trustworthy review sites available and they’re helping businesses everywhere change the way they buy software.
~ Matt Holleran, General Partner, Cloud Apps Capital Partners