Zoho CEO compares current SaaS market to dot-com bubble burst, cites heavy spending on marketing

• ByStartupStory     |    April 3, 2023

Zoho co-founder and CEO Sridhar Vembu has compared the current state of SaaS to the dot-com bubble burst, stating that SaaS companies invest heavily in marketing and sales, similar to the dot-com era. During a press briefing in Tenkasi, he noted that companies spend a significant amount of their revenue on marketing to other SaaS companies, reminiscent of Yahoo’s revenue source from advertising to other dot-coms. Vembu remarked, “Money-losing companies spending a lot of money on other money-losing companies” is a common occurrence in the SaaS industry today.

According to Zoho co-founder and CEO Sridhar Vembu, many SaaS companies are spending heavily on marketing and sales, similar to the dot-com model during the burst of the dot-com bubble. However, Zoho Corporation is spending only around 20% on marketing, enabling them to attract a different global customer base. While major SaaS companies mostly focus on the US market and generate most of their revenue from North America, Vembu said that Zoho’s revenue from the US is a smaller proportion than their competitors, accounting for about 38%.

Zoho Corporation’s strategy of prioritizing non-G7 countries has proven successful, according to co-founder and CEO Sridhar Vembu. The global technology company, based in Chennai, has gained traction in countries such as Jordan, Nigeria, Columbia, Brazil, and Mexico with its suite of products. Vembu stated that Zoho’s approach of targeting countries outside the G7 is unique, but it was an early priority for the company. The G7 is a grouping of advanced economies, including Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, along with the European Union. Vembu added that Zoho spends only 20% on marketing compared to other SaaS companies, who spend between 40-60%.

 

According to Zoho co-founder and CEO Sridhar Vembu, India is the fastest-growing market for the company, followed by the Middle East, Latin America, and Africa. He added that developed markets like the US, European Union, and Japan are slower in comparison. Zoho has been focusing on geographical diversification, particularly in India, which has become the third-largest market for the company. Vembu expects India to surpass the European Union as the second-largest market in about three years and could potentially replace the US as the largest market within seven to 10 years.

Zoho CEO Sridhar Vembu said that India is the hottest market for the company, with the Middle East, Latin America, and Africa following closely behind. He added that developed markets like the US, European Union, and Japan are more sluggish. Zoho has been targeting geographical diversification and made a strong push for India, which is now the third-largest market for the company. Vembu expects India to overtake the European Union and become the second largest market for the company in three years. Additionally, he believes that India could replace the US as the largest market for the company in seven to 10 years. Zoho has been investing in rural revival efforts, and has opened two ‘hub’ offices in Tamil Nadu. It plans to open more offices in Tamil Nadu and Uttar Pradesh in the future.

Zoho is expanding its Kalaivani Kalvi Maiyam learning center, which was established during the pandemic to educate children from villages in and around Tenkasi. “Many of our product development teams today sit out of these hub and spoke offices, including some teams that are involved in deep-tech R&D. The long-term vision of these efforts is to create self-sufficient and economically prosperous rural communities,” said Vembu.

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