The Amplitude Journey: How Engineering, Sales, and Persistence Built a Product Analytics Powerhouse
Serendipity in early customer acquisition
The early days of Amplitude were a “classic startup grind,” with a small team working long hours and making sacrifices to bring their vision to life. Determined to avoid the same mistakes the team made with Sonalight, the founders talked to 30 different companies to gauge interest in the product – but crucially failed to ask whether these companies would be willing to pay for it. “Out of that initial 30, none ended up paying for the product, at least in the early days.”
It wasn’t until mid-2013, when Skates had a chance encounter with Bret Terrill, the co-founder of mobile gaming company Super Lucky Casino, that he realized the value of the platform. “We show up, we give the pitch, we walk through the demo, we get to the end of the whole thing, and he asks a question that I had never been asked before up to that point: ‘How much does it cost?’” Skates, recalling pricing lessons from other online entrepreneurs, blurted out the largest number he could think of – “$1,000 a month” – and was blown away by Terrill’s response: “Wow, that’s so cheap!”
“Every dream I have ever had about building software was validated at that moment.” – Spenser Skates, CEO of Amplitude
Skates admits they weren’t initially strategic in targeting product managers as their early customers, instead building whatever was needed to close a deal. Still, Terrill’s mobile gaming connections proved a boon. “We started meeting more people in that community – ex-Zynga product managers who had gone on to build their startups. That was the source of so many of our early customers” – already used to using analytics in the same way Amplitude envisioned and willing to put up with a less-than-perfect product that provided the data they craved. “That was our bootstrap out of nothing. A lot of ‘em were pretty hardcore,” Skates laughs. “They gave the best feedback.”
TAKEAWAY: Be open to serendipity. While strategic planning is essential, be open to unexpected opportunities that may arise, such as chance encounters or connections that could lead to valuable partnerships or customer acquisitions.
Learning from Mixpanel’s mistakes:
Product analytics was already a competitive market in 2016, with Amplitude’s stiffest competition coming from industry giant Mixpanel. With a healthy bank balance and boasting nearly 20,000 customers and almost 50 percent of their revenue coming from enterprise, the company made for a formidable foe.
For Skates, being the underdog wasn’t a drawback; it was a strategic advantage. Playing catch-up allowed Amplitude to learn from Mixpanel’s mistakes and take a more measured approach to growth. “They [Mixpanel] ended up being an incredible source of leads for us,” Skates explains. He notes that Mixpanel made the mistake of expanding too quickly, hiring a massive sales team and trying to roll out multiple products before reaching $100 million in revenue – a gamble that ultimately failed.
In contrast, Amplitude scaled sales much more gradually, focusing on the needs of a single buyer. “You need to prove our product market fit within one product first before you try to go to multiple products,” Skates noted. “The consolidation play doesn’t work below a hundred million [in revenue].” Keeping sales overheads low meant Amplitude could offer their product at a much lower cost than Mixpanel – an intentional strategy to attract users. Amplitude provided 10 million events for free, breaking the industry standard and giving users a reason to switch from competitors. This decision led to a surge in free users, many of whom converted to paid customers.
Skates also explained how Amplitude looked to previous generations of analytics companies like Omniture to learn from their successes and failures. “Omniture was the OG data analytics company,” Skates recalls. “It was uncanny – they were like the exact same business, only 20 years earlier.” These insights from past companies helped Amplitude win larger enterprise customers, focusing on collaboration, data management, and, crucially, the segmentation of Amplitude’s offering into preset packages, what Skates calls product line extensions. By offering B2B account management and data taxonomy, among other features, as distinct packages, Amplitude’s sales team could start to talk about the differentiated pieces of value within the wider product portfolio.
TAKEAWAY: Learn from industry examples. Analyze the successes and failures of other companies in your space, and apply those lessons to your product strategy. In the case of Amplitude, focusing on customer-centric metrics rather than vanity metrics has been a key driver of their success.
On the transition upmarket and shifting positioning
Like many tech startups, Amplitude started by targeting small and medium-sized businesses (SMBs), as it was easier to sell to them initially. The company didn’t have a clear marketing strategy at the beginning and relied heavily on engineering and sales to grow the business. “We’re an engineering and sales company,” Skates noted. “So it’s like, all right, what does the next deal need? Okay, build that.”
Despite needing more direction, Skates still reached the first million in revenue in only nine months, but the team struggled with high customer churn. Around 2014, Skates noted that to scale the company, they needed to move upmarket and focus on enterprise clients. “We realized the money’s in the enterprise,” Skates says. The team landed Intuit in early 2015, followed by Atlassian in 2016.
2016 also marked a fundamental shift in Amplitude’s messaging and branding from mobile analytics to product analytics – an insight gathered by sales representatives during customer conversations. “One of our early sales reps named Bryan Parman came up with the insight… and that ended up weaving our way into the whole company messaging and branding. That was a huge revelation.”
“We recognized we need to go upmarket to the enterprise to really be able to scale this.” – Spenser Skates, CEO of Amplitude
But the transition wasn’t always easy. Skates recalls how the company built features like crash reporting and white-labeled analytics, only to realize later that these were distractions. “We actually built a lot of things outside of analytics in the early days that were really stupid.” But Skates recognized in hindsight that it was only after eliminating these distractions that the company could find clarity in its offerings. “Anything that ended up growing product analytics, we would build. Anything that was outside of that, we’d just say no, and that was okay.”
TAKEAWAY: The most effective strategies come from within the organization instead of being dictated by the C-suite and other stakeholders. Skates believes these field insights were more valuable than anything market analysis consultants or PR firms could provide. Conversations with customers from those on the front lines – salespeople, support staff, or other roles – are gold for early companies like Amplitude.
The future of product analytics
Skates doesn’t see the trend of customer centricity slowing down anytime soon. As the digital landscape continues to evolve, he believes that companies will increasingly rely on data to make informed decisions. “I think the future of product analytics is going to be driven by machine learning and AI, helping companies predict user behavior and make better decisions even faster,” he says. Far from the company’s early days with ex-Zynga product managers, Amplitude now helps households names grow their usage – Chick-fil-A boosted their average order value with upsells based on Amplitude’s data, and NBC began tailoring its homepage based on user history, doubling its 7-day retention rate. “There’s so many examples of us doing this with companies out there where we are providing the data that drives their product strategy.”
In the meantime, Skates remains focused on growing Amplitude and staying true to the company’s mission of helping businesses make better decisions through data. “We’re making a lot of big bets this year to drive distribution,” he hints. “Our ultimate goal is to help companies build better products, and we believe that by focusing on customer-centric metrics and fostering a data-driven culture, we can make a real difference in the world,” he says.
