SMB Ecosystems vs Universes: What’s the Difference and What Do They Tell Us?

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Much has been written about the SMB space and hundreds of companies work diligently to provide services and solutions to it.  Industry organizations regularly stage panels to discuss trends, analysts pen pieces projecting where the space is headed, and investment money often follows.

Defining the SMB services space, quantifying it, and measuring movement is particularly difficult because so many providers are private and do not make data readily available.

Nevertheless, a few attempts have made been over the past few years to illustrate the layers in this space.  As you’ll see from the examples below, the terms “ecosystem” and “universe” have been used interchangeably.  But ignoring the terminology for a second, even when infographics depicting the SMB space are produced, they only provide a snapshot of the many companies in the space grouped by their primary service or product provided. Look at a few examples over the years:

While comprehensive and attractive, these infographics don’t tell us much about the SMB world other than many vendors exist to create a complex space.  If you’re an SMB, how do you decide what to do?

Three years ago, in an effort to understand how the companies behind these logos actually performed, I compiled my own infographic that used social media followers as a measure of popularity.  This method is not an exact science.  It favors those companies who actively engage in social media.  It also favors companies whose product line spans multiple categories and/or appeals to a segment of the consumer market.  With that said, this first attempt resulted in an infographic that identified bigger players from the rest.

This version was only slightly better than earlier ones the information presented could still be improved.  Could an SMB actually work with these vendors?  Could the companies be even more differentiated?  Which ones were growing, which ones shrinking?  How big was the actual category?  Were these vendors private or public? Were they in the US or abroad?

The terminology that defined these infographics was misleading as well.  Ecosystems are defined to be a community of interconnected organisms.  These infographics do not show the interconnectedness between these companies.  And, in fact, most of them are not interconnected at all.

But ecosystems in the SMB space DO exist.  For example, many CRM providers depend on other email providers to complete their offering.  Ecommerce providers are integrated with payment providers. In these cases a clear relationship between companies exists.  Below is an infographic that depicts the email/CRM ecosystem:

So, to better define the SMB space, a database of over 5,000 companies was compiled that periodically track their social media followings. Many of these companies focus on the enterprise space, are white label resellers, are small local ad agencies that focus on search, or pertain to some other function unrelated to the SMB market.

From analyzing the companies that specifically target the SMBs, this space is better depicted by a series of galaxies that swirl independently of each other and offer the SMB a myriad of choice.  If one looks at these galaxies from the SMB perspective several provider groups disappear.

In order to be included in this universe, a company needs to predominantly target the SMB market.  Their price points need to be affordable by an SMB.  SMBs should be able to purchase directly from the vendor – so white label products that can’t be purchased directly are excluded.  And, traditional media focusing solely on selling audiences are also excluded (more methodology described below). With this new criteria, I was able to identity just under 300 companies that represent choices facing SMBs across 10 or so key categories.

This database contains much that can be analyzed.  For purposes of this article, below are some summary data.

      Number of Companies
Category Cos Measured FB Followers Private Public USA CA Foreign
Ecomm 18 42,625,020 10 4 10 5 8
Payments 21 29,727,480 10 7 18 5 3
Site Builders 20 10,550,077 14 2 12 7 8
Email 42 4,202,014 31 4 25 7 17
Social 31 3,510,227 27 1 14 4 17
Mktg Auto 25 3,332,360 17 2 19 6 6
CRM 39 3,177,693 28 3 27 15 12
Schedulers 21 276,785 20 0 14 6 7
Listings 18 232,850 11 2 15 3 3
Loyalty 16 210,375 13 1 9 3 7
Reputation 17 114,547 14 2 12 6 5
Phone Tracking 15 17,991 13 1 10 3 5

Summary Data from the 2018 SMB Service Provider Universe

With this approach, you can now begin segmenting the galaxies, making some bigger and identifying the companies within each that are big players.  For example, it is clear that 5 of these categories are far smaller and the companies within them are generally smaller that those in the other categories. You can also start identifying companies whose followings are significantly growing or shrinking (listed as green or red) and use that as an indicator for trend information.

There is one other key differentiation in this new infographic.  The products from most of the providers within each galaxy can be directly purchased by an SMB.  However, an entirely different scenario also exists in this universe and that is the DIWM/DIFM providers who work with SMBs across multiple products and lend advice and guidance to the many SMBs who are unable to do this themselves. Thousands of these providers exist across the United States.  Most are small, regional agencies.  However, a few providers are large national outfits and have become quite dominant.  For example,

With all that said, the latest infographic of the SMB provider universe is below:

Identifying the galaxies and following the players in each only begins answering questions.  It is also possible to gather information on pricing for companies in each galaxy. The differences between the various offerings and the DIY vs DIFM worlds is clear.  DIY pricing is generally affordable to most SMBs.  However, competently deploying these products requires planning, knowledge, and time.  The premium paid to obtain guidance and help is reflected in the price points of the DIWM/DIFM ring and they are several times more than the DIY prices.

While white label technology providers and vertical providers are excluded from these infographics, they play an integral role and reside in galaxies outside of the one described to this point.  Additional galaxies exist and, within each, an entirely new set of vendors.

The upshot of all this work is that some stars are shrinking and others are growing.  Bigger companies are actively acquiring and consolidation is increasing.  Companies in this space have deployed several different go-to-market strategies. SMBs vary considerably in their desire to adopt digital. Going forward it will be interesting to continue monitoring this space and seeing who grows, who shrinks, how the DIWM/DIFM companies fair versus the DIY ones.  Will the investments by bigger firms pay off? Will additional acquisitions occur? Will vertical providers gain strength among their target SMBs?

This work has created a methodology to follow this space more closely and address many of the questions raised in this paper.

I welcome comments, suggestions, and criticism

Note on methodology: After careful analysis, Facebook followers are the most indicative measurement.  However, some companies do not use Facebook.  So, if absent, Twitter followers are used, followed by LinkedIn.  Some appear in more than one category & are over weighted as a result.  Some categories have big vertical players and they are not included.  This is particularly apparent in the Real Estate, Restaurants, Franchise and Auto categories.  A few big players, such as Wix, Paypal, GoDaddy, etc. also appeal to the consumer market.  When this scenario arises, significant manual adjustments are made to pare back those followings.

Lorren Elkins is a digital media executive with experience in traditional media, digital advertising, CMS platforms, SaaS platforms, and digital services technologies.  He currently works with Camilyo, a leading digital services provider offering resellers a white labeled platform that combines many of the galaxies depicted above into a single integrated platform.  @Lorren_Elkins