Q1 2024 Recap - Revenue Benchmarks
This report reviews the data from Q1 2024 and explores changes in Budget, Conversion Rates, MQLs, Pipeline, and Revenue.
All HockeyStack Labs reports are done using anonymized HockeyStack customer data. We did not partner with anyone on the creation of this report and it was not sponsored by a vendor.
HockeyStack Recap 2023 - B2B SaaS Benchmarks report was my first Labs report, and oh boy did it get so much heat. It was a really good lesson for me; never assume that people read the whole content and understand your definitions. So in this report, I’m starting with the methodology.
Methodology
MQL: Direct form submissions such as demo, pricing page, and contact us. This doesn’t include any ebook downloads, webinar registrations or anything like that. Currently there’s an inflation of terms in B2B marketing, some say ‘hand raisers’, some say ‘high intent conversions’. I’m calling this MQL simply because I like the sound of it. If anyone says MQLs have an average of 5% conversion rate, it means that they haven’t even read up until here, ignore them.
SQL: Pipeline created. Every company has different definitions, but we unified this on the backend and used the SQL definition for when the pipeline is actually created.
ACV: Total new business revenue added divided by the number of closed-won deals (also known as Average Contract Value, Deal Size, Selling Price, Deal Value)
CW: Closed won deals, net new business, new revenue.
Sample Size: 94 B2B SaaS companies.
Attribution Model: Position-based because it offers a balanced view on the importance of each touchpoint in a customer's journey towards a conversion. This method assigns more credit to the first and last interactions and distributes the remaining 20% among the middle interactions.
Sample Description:
- Using HockeyStack at least since October 1st, 2023.
- At least $25k monthly paid spend per company
- From $5M ARR to $2B ARR; average ACV from $7K to $150K.
- 72% NAM, 20% UK, 8% Europe
What we analyzed:
- More than $130M ad spend for Q1-24, and more than $125M ad spend in Q4-23.
- More than $640M pipeline and $119M revenue in two quarters.
Caveat: This doesn't mean that the ad spend in these two quarters resulted in a 2.5x pipeline ROI and negative revenue ROI. It's important to consider the length of sales cycles. The ad spend in Q4 not only impacts the pipeline for Q4-23 but also impacts the pipeline in Q1-24. Similarly, the ad spend in Q1-24 will not only influence the pipeline in Q1-24 but it will also influence the pipeline and revenue in Q2-24.
Part I: The State of Budget
In the 2023 Recap report, we found out that B2B SaaS companies spent most of their budget on Google, followed by Linkedin, Facebook and Bing.
Google: 47.72%
Linkedin: 45.84%
Facebook: 4.8%
Bing: 1.6%
When we look at the Q4 average, we see that more budget was allocated to Google than the yearly average, which makes sense because companies most likely focused more on short-term wins before the end of the year. We can validate this by also looking at the Bing budget; while the average was 1.6%, in Q4 it jumped to 3.05%.
In Q4, the average ad spend by channels was:
48.28% Google
40.86% Linkedin
6.87% Facebook
3.05% Bing
Capterra, Display ads, Reddit, and Youtube each received less than 1% of the budget.
Seeing an increase in Google spend makes sense because for most marketers, Google is always the low-hanging fruit to generate quick conversions.
However, we’re seeing a shift in strategy in Q1-24 where the budget allocation for Google decreases, and for the first time, Linkedin becomes the leading channel in paid, with an average of 42.74% of the budget.
However, if you look closely, you’ll realize that the budget allocation for Linkedin isn’t higher than what we saw in the 2023 average. The reason for Linkedin becoming the top paid channel is that the budget allocation for Google has significantly decreased from 47.72% to 39.85%.
So where did this budget go? Interestingly, to Facebook…
While Facebook only had an average of 4.84% in 2023, it received 6.87% of the budget in Q4, and in the first quarter of 2024, it received 15.78%.
This means that more than 2x more budget was allocated to Facebook in the first quarter of 2024. This not only shows that more companies are using Facebook, but it also suggests that Facebook is probably not being used just as a remarketing channel anymore.
Another interesting thing is the situation of Bing, which is now receiving less than 1% of the budget. I think there was a hype with Bing AI in 2023, which I was also involved with during my time at Cognism. The search volumes were improving, and we were generating pipeline, but I believe that hype is now over, and ChatGPT and Claude won the war, perhaps even Gemini. This resulted in spend for Bing decreasing from 3.05% to 0.6%. In Q1-24, Youtube and Reddit received more budget than Bing.
Part II: The State of Conversion Rates
This part was another controversial part in the 2023 recap report where some people found that +20% MQL:SQL conversion rate was unreal - I like to highlight again that the way we define MQL is the website form submissions. so if they don’t see these conversion rates from pricing or demo submissions to opportunity, it means that there’s something really wrong with the way they help their clients.
In 2023 on average, we see a 36.2% MQL:SQL conversion rate from the Linkedin conversions, followed by 22.7% on Facebook, 22.3% on Bing, and 21.7% on Google.
We’re seeing mostly similar results in the first quarter of 2024. The conversion rate of Linkedin has decreased slightly to 35.82%; while we’re seeing an increase on Google with 25.79%. I think the reason for this is that since the budget allocation is lower for Google now, companies are focusing less on broad match campaigns perhaps, and they are spending their budget on the campaigns that actually convert.
Conversely, we’re seeing that the conversion rate for Facebook decreased from 22.7% to 13.93% in Q1 - this is almost a 2x decrease. Although the budget has significantly increased on Facebook, unfortunately this didn’t translate into a pipeline - Facebook is generating MQLs, but we don’t see these MQLs converting.
When we look at the other channels, we’re seeing that Display Ads have the worst conversion rate with 1.6% which aligns with what we found in the What Does it Take to Close a Deal report where we found out that display ads actually do more harm than good to your pipeline.
Although the budget for Bing has been mostly cut, we’re seeing the similar conversion rate; the average was 22.03% in 2023, and it was 22.01% in Q1.
Apart from these, although the spent was statistically insignificant for these channels, Youtube had an average of 6.2% and Reddit had an average of 4.5% conversion rate.
One thing missing in the recap 2023 report was the SQL:CW rates by channels. We decided to include them for this report. The pipeline data will be analyzed comprehensively in the next chapter, so I’m just going to give the numbers by channels here.
As expected, Linkedin has the best SQL:CW conversion rate with an average of 30.41%, followed by Google with 16.51%, and Facebook with 12.25%. Although Bing had a relatively smaller dataset, we’re seeing a better conversion rate here than Facebook, where the average is 14.62%.
So in a nutshell, Linkedin has the best conversion rates both on the MQL:SQL and SQL:CW levels, followed by Google, where we see an increase in conversion rates compared to last year. However, although the spend is getting higher, we’re not seeing promising conversion rates throughout the funnel when it comes to Facebook.
Part III: The State of MQLs
In our analysis of the 2023 data, Q1-23 emerged as the least productive quarter for MQLs, comprising only 17.5% of the total MQLs generated throughout the year. January stood out as the weakest month, contributing just 4% of the annual MQLs.
As we move into 2024, it's important to monitor whether Q1 maintains its position as the weakest quarter. While it's still early to draw conclusions from just one quarter of 2024 data, initial observations suggest that Q1 may not repeat as the poorest-performing quarter this time.
Compared to Q4-23, B2B companies spent 6% less in the first quarter of 2024; however, the number of MQLs generated increased by 24.7%.
Although this indicates a decrease in cost per MQL, it doesn’t necessarily mean that the ad channels got cheaper. When we look at vanity metrics like CPCs and CPR, we're actually seeing almost identical numbers.
So how do we see an increase in MQLs? Well, the answer lies in the website. We're noticing a significant uptick in website conversion rates in Q1. Although the number of website visitors didn't change much, these visitors are now converting better. This indicates that companies are getting a more qualified audience to their websites.
In a way, we could say that this may be connected to what we see in the budget allocation part. Companies are investing more money in Linkedin, where their targeting is more effective than on any other platform. As a result, they attract more qualified website visitors. While the number of visitors doesn't necessarily increase, the conversion rates get higher. I certainly don't want this report to be a promotion for the company, and I intend to maintain a neutral position. However, we can't ignore the fact that these companies are using HockeyStack to gain a better understanding of their funnels, which helps them optimize their processes for a better ROI.
When we examine the quarterly data on a monthly level, we're observing a very similar pattern to what we saw in 2023. In 2023, the worst month was January, followed by February, and March was the best month in terms of MQLs in Q1-23.
When it comes to Q1-24, this data is more or less the same. Among all the MQLs generated in Q1-24:
- 26.07% of them were in January
- 29.91% of them were in February
- 44.02% of them were in March
Part IV: The State of Pipeline
Last year, the best quarter for pipeline was the first quarter, where we saw 30% of the total pipeline in 2023 generated. On the monthly view, January and February were almost identical, with March slightly higher.
In 2024, we're seeing a similar pattern, but this time the difference between the first two months and March is more significant:
- January: 29.95%
- February: 31.67%
- March: 38.38%
I think it makes complete sense to see more pipeline in March considering that it’s the last month of the quarter.
Compared to the 2023 average, we’re seeing an average of a 15% increase in the MQL:SQL conversion rate - this is blended, therefore includes all inbound MQLs. Additionally, we’re seeing the best conversion rates in March, where an average of 27% of inbound MQLs became opportunities.
However, when we compare the MQL:SQL conversion rates between Q4-23 and Q1-24, it appears there's a 16% decrease.
Nevertheless, I don’t think this is necessarily a bad thing. When we consider the general B2B SaaS sales, we know that the qualification criteria may become slightly looser before the end of the year to maximize the number of deals and potentially boost sales.
Another factor of this decrease in MQL:SQL conversion rates could be the ACVs, especially if companies are revealing or giving a ballpark pricing on the first calls; when we compare the deal values between these two periods we see that the average ACV increased by 91% in January compared to December.
In 2023, the average ACV was $20.8K. However, on the monthly view, we observed that January had the highest ACV at $39K, which then started to decrease steadily month by month throughout the year.
So, last year, companies started with the highest ACVs and highest qualification criteria at the beginning of the year when they didn't feel the pressure of hitting quotas. Then, over time, we started to see this decrease; in January 2023, the average ACV was $39K, while November had an ACV of $12K.
We’re seeing a similar pattern in this quarter. The average ACV in Q4 was $15.6K, and in Q1-24, what we’re seeing is an average of $29.7K.
This $29.7K average is slightly lower than Q1-23, where we had $31.6K.
Hence, I suppose this increase in ACVs could also explain the decrease in the MQL:SQL conversion rates between Q4-23 and Q1-24..
On the monthly view, we’re observing a similar pattern as we saw in 2023. January 2024 had the highest ACV with an average of $36K, and then it dropped to $24.5K in March.
Part V: The State of Revenue
Similar to the decrease we see in the MQL:SQL conversion rates from Q4-23 to Q1-24, we’re observing a similar pattern in the SQL:CW conversion rates, where the close rate decreased by 43% in the first quarter.
After analyzing the 2023 data, we found out that Q4-23 was the best quarter in terms of the number of closed won deals, where 30% of the total deals were closed; on the other side, 21% of the total deals were closed in the first quarter of 2023.
So in 2023, Q4 had 42% more closed won deals than Q1.Now let’s have a look at the first quarter of 2024.
In Q1-24, with the decrease in the MQL:SQL and SQL:CW rates, we are seeing that the total number of closed won deals decreased by 23% compared to Q4-23.
This is interesting because we’re observing almost an identical pattern to Q1-23.
Another pattern that continues is the revenue data. Yes, Q4 was the best quarter in terms of total closed deals in 2023. However, when it comes to total revenue, Q4 fell behind Q1 and Q2.
Although there were 30% fewer deals closed in Q1-23, in terms of total revenue, it was the best quarter.
On the monthly view, we’re seeing that more than 4 out of 10 revenue in Q1 was added in March, which was expected.
Just like the pipeline side, we’re not seeing a huge difference between January and February; 29.52% of the total revenue in Q1 was added in January, and 28.84% of the total revenue was added in February.
The last interesting thing is the discount rates. As highlighted, January had the highest ACV and we had seen a decrease month-on-month in February and March.
When we compare the original proposal to the final signed contract, it's clear there were basically no discounts given in January. The difference between the proposed pricing and what actually got signed was just a measly 1.5% that month.
But then in February, that gap widened to 6.2%, by March, the difference between the proposal and the signed deal blew up to a 15.8% discount!
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