Vocus, an unsung SaaS success story

It's been a quiet week in the SaaS world, but one company that chose to stick its head above the parapet is Vocus, the on-demand applications provider to the PR industry. Yesterday the company announced the Summer '07 release of its software, adding support for inbound RSS, video clips and Natural Language Processing that claims to "analyze the sentiment of news coverage and determine whether articles are positive, negative or neutral." Existing customers are already live with the new features, which are available either as part of a standalone news management service or within the complete Vocus suite along with media relations and news distribution.

Vocus is another of the many unsung success stories of the SaaS sector. I was surprised to see when I looked up its SEC filings that it is reporting annual revenues of around $50 million and that year-on-year growth has just notched above 50%, having been steadily on the rise for the past year. Considering that Vocus targets a specific vertical market, those figures are pretty impressive. Regular readers will remember that when I last checked out SuccessFactors' IPO paperwork, the on-demand talent management software provider had not even reached the $40 million annual revenue mark, and that's despite a much bigger target market and spending almost exactly as much on sales and marketing alone as it takes in from sales. Vocus, in contrast, is breaking even with a higher revenue figure and a still respectable growth rate.

Vocus completed its Nasdaq IPO in December 2005, when its annual revenues were $28 million and its annual growth rate was less than 40%. Since then, it seems to have gone from strength to strength, steadily increasing revenues and growth while maintaining costs in line with revenues. In August last year, the company spent $20.9 million of its $40 million IPO proceeds on acquiring online press release distribution service PRWeb. It completed a secondary offering in April this year, yielding a further $22 million in net proceeds, giving the business a strong balance sheet and the potential to either invest in yet more aggressive organic growth or to make further significant acquisitions.

The PR sector is an excellent choice for an on-demand venture, as the company spelt out in its annual 10K return earlier this year:

"The characteristics of the PR market make it well-suited for the on-demand software business model. As news distribution and communication services continue to move from manual, paper-based systems to automated digital services, the Internet and the on-demand software model provide an efficient and collaborative platform for PR professionals to access, manage and share information and resources. The simple user interface and rapid deployment of web-based software make it ideally suited for users with little or no technology background. On-demand software provides a dedicated, modern and sophisticated technology infrastructure to PR departments that would otherwise typically receive limited internal IT resources. Finally, in contrast to sensitive customer or financial data, organizations are generally comfortable with PR content residing on an external hosted platform."

With more than 2,000 customers, a strong growth rate and a very stable financial condition, Vocus is an object lesson in making a success of SaaS with a vertical or specialist application offering.