For companies using a PLG model, the primary goal of most marketing initiatives is to get as many users to try out the platform as possible and let the free version or trial do its job.
But this “cast a wide net” mentality becomes an issue when you only look at the top of the funnel. Because the first conversion that has real company value — the moment when a signup becomes a source of revenue — happens when users first pay for a service.
When you’re running a paid motion, if you simply focus on the number of new account creations, you can easily be paying for signups that have a low lifetime value (LTV) or never spend money on the service at all.
We’ve found this is a common problem with PLG companies, and it was the case with Linode.
Prior to working with us, Linode’s leadership and their former marketing agency were aligned on a primary goal being the number of account creations.
By their own KPIs, the agency was doing well. New signups were consistently coming in, and their cost per acquisition (CPA) was low.
But if you took a closer look at the pie chart of channels bringing in paid customers at the time, you’d find that paid ads accounted for an insignificant amount of new paying customers.
In other words, the signups that current campaigns were bringing in never had the intention of converting.
This is why it’s common for PLG companies not to see the ROI they expect from paid ads.
But there’s a barrier that often gets in the way of fixing this issue: having an advanced enough attribution system in place to identify higher-quality signups.