Yesterday Xero announced its latest customer numbers: 371,000 globally, up 76 percent in the past year. The biggest growth, however, is in the hotly contested Australian market where Xero is up against incumbent MYOB.
Xero hit 158,000 businesses, up 100 percent, “cementing its place as the leading online accounting software for small businesses in Australia”, the company crowed in a press release.
Not so fast, says MYOB, which for a long time has proudly worn the accounting software crown at no.1.
“It’s important to differentiate between Xero’s clients that are on simple ledgers through accountants (practice ledgers) and those that are similar offerings to our do-it-yourself cloud solutions (business ledgers),” says MYOB CEO Tim Reed.
Reed points to a research paper by Macquarie Group published in July that estimated 60 percent of Xero’s reported ledgers were business ledgers. In a like-for-like comparison, Xero had 88,000 online paying businesses at its last count of 147,000 in August, Reed claims. (Or 94,800 based on yesterday’s updated figure of 158,000 Australian users.)
“The (Macquarie Group) analyst confirmed the 60/40 split,” Reed says.
MYOB says it doesn’t bother counting practice ledgers among its official figures because their value is so low. Xero sells it for $1-$5 depending on volume, while MYOB gives them away as part of its practice management software suite.
“We don’t count those numbers (practice ledgers) but Xero does. They don’t add a lot of revenue; you can’t charge much for them because they’re only used once throughout the year,” Reed told Digital First. “There is a downside of us in publishing customer numbers because the side by side comparison is a bit skewed.”
Reed says MYOB doesn’t reveal the total number of ledgers including the practice ledger and MYOB’s recently released cashbook product.
“On 21 August we had over 88,000 online paying users in Australia. We are confident that we are leading in this space,” Reed says.
“MYOB’s numbers are inaccurate,” says Chris Ridd, Xero’s managing director for Australia. “I don’t think Xero could be any more transparent. If (that 60% figure) was indeed accurate we would not be showing 115 percent revenue growth because the ledger is only a $5 product.”
The ratio of practice ledgers is 20 percent, not 60 percent, Ridd says. Included in Xero’s 158,000 customers are businesses using the cheaper cashbook program which costs A$19 instead of A$49 to A$99 for the business edition. Xero doesn’t share exact figures for cashbook users, Ridd says.
“We don’t split out the cashbook. It’s difficult to break them out. There are a lot of upgrades from cashbook to business editions. They will move between some of those plans. We need to focus on the overall number,” Ridd says.
Ridd claims that MYOB is combining its Australian and New Zealand users to reach its claimed 100,000 users of software subscription services. Xero’s latest press release included the tally of Australian and New Zealand users, now 270,000. Ridd also says MYOB is inflating its figure by including users of non-accounting products such as the Atlas website builder.
“We are substantially bigger in the market than MYOB,” Ridd says.
Ridd also questions MYOB’s recent claim that it had achieved a record period of growth of 21 percent. “Less than 7 percent was from the core business. The rest was the acquisition of BankLink,” Ridd says.
What about that Macquarie Group report? “Even though the report is recent, they were basing it on outdated numbers,” Ridd says.
“I think people are easily able to see the average revenue per unit (ARPU). If we were selling a truckload of ledgers it would be reflected in the revenue numbers. If MYOB say they have 1.2 million customers (for desktop and online accounting software) then the ARPU is $4. Maybe their customers include someone who brought the product back in the nineties. The important thing is all our customers are paying subscriptions.”