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What is SaaS?

SaaS: Software rented by subscription instead of bought once.

Where SaaS fits

SaaS is part of Subscriptions & Platforms in Digital & Tech. Software firms sell subscriptions (SaaS) for recurring revenue. Network effects, APIs and the cloud help them scale; churn and acquisition cost decide their health.

Practical tip

Cut churn before spending more on ads.

Related terms

Recurring revenue
Income that repeats predictably, like subscriptions.
Network effect
A product grows more valuable as more people use it.
Scalability
Ability to grow sales a lot without costs growing as fast.
Cloud computing
Renting computing power and storage over the internet instead of owning servers.
Freemium
Offering a free basic version and charging for premium features.
API
Rules that let software programs talk to each other.
Open source
Software whose code anyone can view and modify.
Data analytics
Examining data to find patterns and guide decisions.

Formulas you will use with it

Average order valueChurn rateCustomer acquisition costAnnual recurring revenue (ARR)

Test yourself

Which term means: “Software rented by subscription instead of bought once.”?

SaaS · Network effect · Open source

Answer: SaaS

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