Domopalooza 2024 - democratizing intelligence and getting Domo back to growth

Stuart Lauchlan Profile picture for user slauchlan March 26, 2024
Summary:
The combination of consumption model and freemium is starting to deliver, says CEO Josh James.

Domo
Josh James

As Domo’s Domopalooza conference kicks off today in Salt Lake City, the analytics firm is pitching the event as being about AI+Data. It’s a solid message, building on what founder Josh James said on the firm’s recent analyst call: 

When I started Domo, it was about democratizing data; now with AI, we are democratizing intelligence.

What has also moved on since the last Domopalooza is perhaps less idealistic in nature and owes more to fiscal pragmatism as James states:

My top priority is getting Domo back to growth. 

As noted previously, the firm has had a rough ride on Wall Street from skittish investors. Although the latest quarterly numbers show continued improvement - full year revenue of $319.0 million was up three percent year-on-year, while a net loss of $75.6 million was down from last year's loss of $105.6 million - but that’s not moving fast enough for many. 

Domo has pinned its hopes on its shift to a consumption model. As James put it: 

All roads lead to consumption-driven, freemium-enabled, highly discoverable, product-led growth.

PLG

Product-led growth (PLG) has three foundational components to how Domo operates and “lubricates the entire customer adoption life cycle”, he added: 

First, the consumption model, which we’ve fully embraced, enables everything else. Second, a low cost and effective customer acquisition model through our freemium offering. And third, discoverability of the breadth of our platform, shown entirely in line while customers are using the product.

We do this by displaying use cases, demos and data-driven pathways based on the customer’s behavior that ultimately leads them towards optimal success. Of course, this will correlate high net revenue retention and will drive ROI for both Domo and our customer. Both sides are completely aligned in a PLG model and I know every Domo sapient is excited to stand behind our ability to have our product speak for itself.

The appeal to customers is obvious, he argued: 

Consumption makes it easier for Domo customers to put their data to work across the entire organization with all of their users being included being free. They can now prove value before adding to their investment and they can expand immediately, without delays like lengthy contract negotiations or seeking approval around IT restrictions on new users, for products without budgets allocated beforehand. Already consumption is proving its potential to open doors to new and exponential growth for Domo.

Over the last two quarters, our consumption customer base has doubled, just two quarters doubled. In Q4 consumption deals accounted for over 90% of the dollar value of our new logo deals. Very significantly, of our consumption customers that have already been on the consumption model for at least six months, around half of them are already pacing to use more credits than what they originally contractually purchased. We anticipate this number will increase meaningfully as that time span increases from six months to nine months and 12 months, and we believe this will lead to many more upsell opportunities in the year.

He cited some anonymised examples of the impact of the new model, beginning with a new, enterprise customer in diversified manufacturing that was looking to expand from tax to other finance use cases, including inventory planning: 

The consumption model absolutely facilitated this deal and we’re optimistic it will continue to open doors with this customer to expand as they roll out use cases across the finance department and other departments in the future.

Next example, a large healthcare company hired Domo to provide an integrated patient data network across multiple systems, a requirement for a business transition the company was undergoing. The consumption models helped us strategically map anticipated costs as the company scales their use cases across the organization.

Freemium

Last Fall Domo switched to a freemium model based on credits used from a previous free trial model that had “a short and expiring timeframe”, according to James. The freemium offering is made possible because of the consumption model, he added: 

We can now offer a free version of our product that lets even more users experience the power of Domo with no time limit and a natural path to becoming consumption customers as the expand usage and find value. Importantly customers do not start paying until after they are receiving value. Coupled with this freemium experience, discoverability is a critical investment in our product navigation that will let us capitalize on the user growth we've gained from both freemium and consumption. 

Four months from its introduction, users of the freemium model who are “actively connecting data about their business and exploring Domo” have more than doubled. That’s a meaningful increase at the top of the freemium funnel, noted James: 

And we are just getting started. That’s only four months in and we believe this is an incredible signal of the PLG potential. As we continue this momentum we’re leaning into freemium as a strategic lever for sales. Our sales teams are actively offering it to keep long lead customers engaged and to convert code called customers faster. Not only that, but with a growing pool of active users, we’re improving our sales and marketing strategies with more tailored messaging based on the user activity data that we’re gaining. 

But although these benefits have been seen quickly, it’s still a long game that’s in play as James confirmed: 

We have not seen a material impact on our financials yet from these initiatives, but extrapolating these numbers out and understanding the improvements that we believe we’re going to see as we continue to refine the process, we think this is going to be a very cost-effective customer acquisition vehicle with a meaningful impact on our long-term growth.

My take

The new consumption model is clearly showing promise and seemingly clocking up wins, but as noted above it’s going to take time. It will be interesting to hear from customers at this week’s Domopalooza just how significant a factor the new pricing approach is in their adoption strategies around Domo. Alyx MacQueen is on the ground in Salt Lake City - watch this space.

Loading
A grey colored placeholder image