SparkToro’s Year 2 Retrospective: Can Chill Work, Alternative Funding, and an Indie Approach Scale?

Rand FishkinBy Rand Fishkin

Two years ago today, at the nerve-wracking start of a global pandemic, we launched SparkToro. Since then, we’ve learned a lot, and uncovered plenty of unanswered questions, too. As is tradition, I’ll try to share the good, the bad, and the interesting in the hopes it can help other entrepreneurs, especially those considering an alternative to standard, venture-backed funding.

First, a look at SparkToro’s growth.

We’re not yet sharing financial performance publicly, but this semi-anonymized graph should give you a good sense of what’s going on:

  • Most months have growth rates in the 2-5% range
  • A few months (usually after we launch new features like demographics, text/hashtag insights, content & profile data, and email contact info) have growth rates in the 5-10% range
  • Overall, SparkToro approximately doubled from year 1 to year 2. My guess is we’ll slow to ~50% growth from year 2 to year 3.
  • Churn is a drag on the financial growth rate… if you think of churn that way, which I do not. SparkToro basically has two lines of business: long-term subscribers, often agencies and marketing teams, and short-term subscribers who use the product once every year or two. We don’t want to turn away anyone who gets value from the product, even if they only use it for a month or two. Obviously, that wouldn’t fly in VC-land, but it’s great for us (and for a lot of our customers!).
  • The way I think about growth is that we have two jobs:
    • A) Keep improving the product for our long-term customers, delivering features and upgrades that make their marketing lives easier
    • B) Attract, mostly through our industry’s sources of influence, both long-term and one-time customers. Many will use and get value from the product, then quit after a month or two… but… come back again when they need an audience research problem solved (even if that’s 2, 3, or 5 years away)

Our Weird Marketing Funnel

The classic SaaS marketing playbook is probably quite familiar to most readers of this blog. It usually looks like:

  • SEO-focused content with the goal of ranking for relevant keywords potential customers search for in Google
  • Advertising on some combination of Google, Facebook, YouTube, and LinkedIn
  • Conference sponsorships/booths
  • Outbound sales (mostly LinkedIn and email) if you’re enterprise-focused and/or have a sales team

We do… absolutely none of those things.

Most surprising to long-time followers of my work (i.e. my previous startup, Moz) is the complete lack of SEO. Literally the top 100 keywords that send SparkToro traffic (according to Google Search Console, if you trust them) are all branded terms like “SparkToro,” “Spark Toro,” “SpurkToro,” and even the “Fake Followers audit” (a free tool we created).

It’s not that search sends us no traffic, but that SEO doesn’t really factor into it. We’ve built our brand name (which brings ~60% of all our Google visits) and our various free tools and resources (which account for another ~30%), and then we unintentionally rank in unbranded search results with a few of our blog posts and other resources.

In my SEO-focused years, I’d be apoplectic. No rankings! No unbranded search traffic! Why am I making all this content?!

Beautifully, though, we’ve found an alternative strategy that’s working: influence (no “r”) marketing. I described this fairly thoroughly in last year’s retrospective, so won’t spend too much time on it here. I will, however, show you how that’s going:

As you can see, we get a whole lot of folks coming “direct” to SparkToro. Most of that (we think) is a combination of dark social and dark email (i.e. folks who click links in social & email apps). When a blog post or other resource on our site gets lots of traffic from Emails, LinkedIn, Facebook, Twitter, etc. it also gets a lot of simultaneous “direct” traffic. That’s almost certainly not “type-in” traffic. It’s dark traffic – because many links on the modern web frustratingly remove referral info.

Those folks who visit often create free accounts, run some searches, and get a sense of the product. This is great. Well… It’s great so long as they *get* the product. But that’s a steep hill given how unique SparkToro is vs. other long-standing marketing tools..

That’s why we do a good bit of “product marketing,” with things like:

All of this might sound like a lot for a tiny team, and it is, but we make up for it by having virtually no workplace overhead, i.e. no Slack, almost no meetings, no daily standup, no reporting, no quarterly performance reviews, just working on things we want to work on and believe will provide value.

Our Big Challenge

What’s not so great is that we continue to see a lot of folks who assume that SparkToro does something with SEO or search keywords. We don’t. This makes many free users unhappy, and it makes us unhappy, too. We’ve tried a lot of messaging around this, tried making the tool look less like it supports SEO, tried changing calls to action, our email campaigns, the text around the search box… but we’re not sure it’s working.

That’s why I make videos like this one:

It’s also why Casey and I invested in the high-production quality video you’ll find on SparkToro’s homepage. We worked with video and brand strategist Phil Nottingham to design, script, film, and produce a fun, compelling 2-minutes that is (hopefully) having a meaningful impact on the ~3% of SparkToro site visitors who watch it each day.

Long term, I’m hopeful the message of what SparkToro is and isn’t makes progress. For now, the biggest lesson is that ~2/3rds of marketers who try an online tool will rely on their prior experiences and pre-conceived notions vs. reading copy. On the plus side, there’s a lot of opportunity for SparkToro if we can ever convince them to better understand what we do (and don’t).

Making Our Customers Happier

One of the toughest jobs I have as CEO is prioritizing our tiny team’s efforts. It’s just me, Casey, and Amanda. We have to decide on which features to build and support, which to deprecate and when, what to change on the website, whether to spend our time on new videos and blog posts vs. podcasts and webinars vs. going on other people’s podcasts and webinars.

Thankfully, existing SparkToro customers, whether they’re teams who’ve baked our data into their processes, or individuals who just need to solve one audience research issue once, appear to be extremely happy with what our tool does, especially for the price:

The wide array of applications means we need to support a lot of use-cases, but thankfully, a simple interface combined with lists & exports seem to be doing the job.

Image

We continue to do simple, customer-centric things like no-questions-asked refunds, extra search credits when folks have issues, and our well-referenced billing notice before we charge anyone’s card again.

In the next few months, our big goals are to release two very meaningful, very challenging-to-build features:

First: Audience Tracking Over Time

For many SparkToro users, there’s deep interest in a few specific audiences. Perhaps you care a lot about the audience that follows your company’s social accounts, or use a particular hashtag, but not much beyond those.

Frustratingly, if you want to see what changes with those specific groups from week to week or month to month, you’ll need to run a report, export it, and manually do an analysis of changes in your favorite spreadsheet program. The fact that some SparkToro customers are doing exactly this, setting reminders in their calendars to re-run reports, trying to get Excel or Google Spreadsheets to visualize the deltas… well, it means we’re letting folks down.

In the near future, you’ll be able to run a search and click “Track Audience” then get recurring, weekly updates about what’s changed among that group:

Are they following new accounts? Listening to new podcasts? Did a hashtag or topic rise (or fall) in popularity? Audience Tracking can tell you all of that, without the need for manual scheduling or exporting.

Casey’s got an alpha version working today, and we hope to email our customers soon, nudging them to start tracking audiences ahead of the public launch (so when we do launch, you’ll already have historical data!).

Second: Coverage of German and Spanish Language Profiles

Today, SparkToro is almost exclusively English-language-profile focused. We do, unintentionally, index some public social and web profiles in other languages, but not in the quantity needed to build truly useful datasets. It’s one of the biggest requests from folks who use our product, and we’re starting with the two most requested languages: Spanish and German.

In the months that follow, assuming the process goes smoothly, we hope to add Italian, French, and others (generally in the order we get the most demand and traffic).

Keeping Our Team Happy

SparkToro has a weird order of operations when it comes to priorities:

  1. Customer satisfaction
  2. Team happiness
  3. Community value
  4. Investor performance

Our team’s happiness comes second only to customers’, and since the overwhelming majority of our customers quickly find value in the product (even if they only use it a few times) without any training or input from us, we’re able to practice Chill Work.

We work to live. We communicate almost exclusively asynchronously. We barely have deadlines. We barely have meetings. We try not to hold each other up, but don’t stress about it too much if/when we do. We aim for <35 hours of work each week. We don’t worry if we go under, but we do worry if we have too many weeks significantly over.

It’s a dramatically different approach than most American companies take, more similar to our friends in Europe.

But, more than that, we try to make work enjoyable. That doesn’t mean it’s always “fun” the way games or socializing might be, but rather that our work brings us satisfaction through learning, evolving, challenging our skills and our critical thinking, rewarding our efforts with growth and customer satisfaction, all of that.

Rand & Amanda do “dinosaur hands.” Because we’re grownups.

We want SparkToro to be a company that lasts a long time – decades, even. But to do that without burning out, getting frustrated, losing motivation, we need it to be a workplace that replaces most of the things we might get in more traditional careers.

Rand, Casey, and Casey’s kids make pesto (because the girls just watched Disney’s Luca and wanted to try it)

It needs to give us opportunities for a social life, both a personal one (getting together as friends) and a professional one (meeting interesting people in the professional world and hopefully forming friendships and learning relationships with them). It has to, obviously, give us the ability to earn a good living, and be financially rewarded for smart decisions and high quality execution.

And, last, it needs to give us opportunities for growth, learning, mastery, and the drive to do our best work.

All of those are on my mind for our future. I believe all of them are achievable, too, and if we make the team happy, wonderful things will follow for everyone else on that list.

Making Our Investors Happy

SparkToro has 37 angel investors, all of whom took a chance on a completely new, unique kind of funding structure. They know we’re not trying to build a billion dollar business, or even attempting to grow at the maximum possible rate. But our unusual business design doesn’t mean that we intend to let them down. Quite the contrary.

One of my biggest missions in life these days is to prove to other investors and other entrepreneurs that our structure is worthy of consideration by many of those who currently pursue VC or decide to entirely bootstrap. We’re in the middle of those two models – reducing the immense monetary pain that comes from bootstrapping while dodging the company-threatening risk inherent in the growth-at-all-costs venture model.

To make our investors happy means first returning their money, then distributing profits in the years ahead.

Year one of SparkToro: one of our biggest investors, Geraldine, gives Casey a hug

We can do this anywhere along a spectrum whose endpoints look like:

  • Keep costs very low, potentially hurting our possibly growth rate, to maximize profit
  • Spend every penny of profit pursuing greater growth

As you’d probably guess, we’re operating in the middle of those, but fairly close to the “keep costs low” extreme. With the exception of three salaries, healthcare, and AWS cloud charges, SparkToro costs almost nothing to run. Gross margins exceed 85%, and we think may get as high as 95%+ over time. Net profit, while we’re still small, is obviously nowhere close to that (Amanda, Casey, and myself all have good salaries).

We’re currently on a path to return our investors’ initial sums in Q1 of 2023, and turn on profit-sharing thereafter.

Answering Your Questions

I solicited some questions around our year 2 retrospective on Twitter, and got a few great ones I’ll tackle below.

Choosing between marketing and product development has been a real challenge. It’s also hard to balance with speed of customer support and general industry favors. I get a healthy amount of email every day asking for pieces of my time on everything from fundraising founders to folks struggling to get the right search query in SparkToro to folks seeking a job or recruiting for one, and 5,000 similarly miscellaneous topics.

I try to prioritize in this order

  1. Live up to scheduled commitments like webinars, interviews, events, etc. and important admin stuff like taxes, legal issues, investor notices, etc.
  2. Don’t hold Casey up from making new features
  3. Answer every request from SparkToro customers
  4. Answer every request from non-customers seeking help with SparkToro
  5. Don’t hold up Amanda on marketing initiatives
  6. Brainstorm/design new features that will be useful to SparkToro customers (and possible for us to build and support)
  7. Intentionally pursue new marketing opportunities

Of course, I don’t always succeed. For the last couple weeks, I’ve been seriously holding up Casey’s progress on the new Audience Tracking feature and feeling guilty about it every day. Hopefully I can buckle down and get it done this weekend.

What I like about the above is that I know what I want to do and have to do most each day. What I don’t love is that unlike my previous startup, I don’t have much backup. It’s either me or Amanda/Casey, or no one!

On delegation – there’s one more wrinkle, which is our outsourcing. We’ve been working with Claire and Gia at Forget the Funnel on some customer journey and messaging stuff, then with John Saunders and 5FourDigital on a new homepage design. We work with OnPointe Partners here in Seattle for accounting, Joe Wallin for legal, and BPCPA for taxes. All of these providers are stellar, and all of them take significant tasks off our plates.

Privacy changes like those from the EU, California, Canada, and (perhaps most significantly) Apple, have created a much bigger market for the problems SparkToro solves. Weirdly (and maybe this is my fault), I’m not sure we’ve benefitted directly from conversations around those topics. The idea that aggregated, anonymized, public social behavior could solve some of the issues around ad targeting vs. privacy hasn’t made its way into many conversations.

In terms of other ways we can impact the world around us, I think our biggest opportunity is in leading by example on things like Chill Work, social issues like racial injustice, kindness from-and-toward customers, and alternative funding structures. I’m proud of what we’ve done here so far, but it is by no means enough.

Since these two questions around SEO topics are tied together, I’ll address them both real quick 😉

@Miriam – we haven’t done much analysis of the Trending URLs or activity. The Trending tool is still quite useful to me in finding non-SEO marketing topics and articles, even though it is often 40%+ SEO stuff. I will say I haven’t seen SEO Twitter get less active, but I also have been intentionally trying to move away from it!

@Steven – thankfully, no! I’ve found it liberating to focus on new ways to reach audiences and market a product that doesn’t have much search demand. And to be honest, I’ve been so unfocused on SEO the last four years that I feel almost unqualified to help anyone with it anymore (myself included). That probably means that if we ever do invest seriously in the practice, I’ll recruit help.

So far, choosing these radically different paths – on funding, marketing, company structure, management style, etc – has been nothing but positive. I think we somehow lucked into just the right amount of things done in opposition to a previous, bad experience vs. things done based on a road we’d been down many times before and knew well. I credit a huge amount of that to my and Casey’s relationship. We balance each other out. Sometimes I’ll suggest a path that’s too far off course and he’ll bring me back. Sometimes he’ll resist making a change and I’ll push until we try it. Whatever the case, it’s working.

I think my favorite SparkToro use-case is still the “we saved a TV show” story. Obviously, it wasn’t us, but a consulting team working with the production company for a niche TV program (with a big LGBTQ+ following) used SparkToro to get insight about the audience for the program, and pitched it to a new streaming service after it was dropped from one of the others. Seeing SparkToro data be part of what saved the day and made so many fans happy brought me immense joy.

Here’s to Amanda, Casey, and all of you who’ve helped make SparkToro’s journey a wonderful one. The future almost certainly has more bumps in store, but with a team, structure, and community like we have, I’m quite optimistic in the long-term outcome of this strange, amazing, small business we’re building.

If you’ve got more questions, feel free to leave ’em in the comments below.

Keep up with SparkToro®