Privacy Stories: Sparktoro

Imagine if you created a list of thousands of your potential customers (i.e. the folks you know would probably buy your product if they knew about it). Then, you went to each of their public social media profiles and found out what they were posting about, what hashtags they used, and topics they were interested in. And then finally, imagine if you took all of that data, removed all the personal information from it, and looked at the general trends that data presented.

That information would give you a clear sense of what your audience was interested in, paying attention to and thinking about. And, as a business owner, the value of that above data would be that you could learn how to make your product a better fit for those people, you would see what types of content they were looking for, and it would all lead to one of the most important parts of running a business: learning how to best serve those who pay attention or pay you for a product.

This type of information is integral to your business because if you don’t know (or assume you know) what an audience wants from your product, you’ll be guessing at how best to serve them.

This is precisely what SparkToro does. To put it in shorter terms: they identify where an audience spends their time and attention (using public information on social media). Before their software, this was done through surveys and user research (both of which can cost a decent amount of money).

I caught up with Rand Fishkin, the co-founder of SparkToro (previously the CEO of Moz), to talk about his new venture, his views on digital privacy, and how he’s running this new company very differently from his last. You can listen to the full interview here or keep reading below for the highlights.

SparkToro solves a practical problem, and it’s one no other company had done in the same way previously. This is both good and bad: good because it’s less competition (not always bad, as we’ll cover) but bad because it requires teaching the market why this specific solution is worth paying for. As Rand said in our interview, no one is searching for “data about my audience’s sources of influence, but not from surveys.” So how the company is positioned and explained is critical.

SparkToro’s business beginnings and bucking off of the unicorn

Rand and his co-founder Casey Henry started SparkToro in April 2020, which was also around the beginning of the pandemic. And while Rand had raised about $30 million in Venture Capital for Moz, he began Sparktoro with just $1.3 million from private investors.

They also open-sourced their financial and investment documents and how they raised the money they did, so others who were interested in a non-VC approach to raising a small amount of angel funding could do similar. The gist of the investment structure is this: they pay out their investors before the founders can participate in profit sharing, and then founders and investors participate in profit sharing. The idea here is that they don’t want to build a business, grow it as quickly as possible, and then exit/IPO (i.e. “unicorn” it), but instead, they want to build SparkToro in a way that’s sustainable long-term, profitable and makes everyone happy (founders, investors, and customers).

Obviously, that’s now how MOZ started (taking $30m in VC funding). But Rand couldn’t have known before trying that, while MOZ was and is excellent, structurally speaking, it hobbled itself to not be able to see “min-range success” and be a perfectly profitable company at $5–10 million ARR. For any bootstrapped or lightly funded company, that type of revenue would be amazing and considered a success. Unfortunately, in the VC world, that’s simply not enough, and most VC firms would trade $5–10m ARR for $20–50m in losses if the growth rate were high enough to merit it.

Instead, SparkToro would rather be a zebra. Believing in organic and profit-driven growth. The end game being profit and sustainability for as long as possible (instead of the exit-focused, IPO or monopolistic views of unicorns).

In this method, similar to how we operate Fathom, there’s no zero-sum, winner-take-all approach. Because there’s room for lots of small businesses to all have some of the market, and be wildly profitable with their share.

And this approach is working. SparkToro became profitable in September 2020 (5 months after starting) and has seen growth of about 10% month over month so far.

A company of two

Rand and SparkToro feel that as small business owners, they want to hire the best consultants, freelancers and agencies, pay them well, and not build a staff of full-time employees. Basically, keeping their business a company of two (a ban pun on my last book title).

In doing this, they get the best work from the best experts in their fields and only hire temporarily to solve a specific problem. That way, there’s no need to focus on building the business and product as well as managing a team of people. They can pay their contractors well, hire them for specific projects as needed, and keep things lean and focused on their end.

Rand also knows that (in America, at least), hiring high-end consultants and agencies seems expensive until you consider the cost of the alternative: paying full-time employee healthcare costs as a small business with not a huge staff. In the US, since healthcare costs are typically the responsibility of an employer, if you’re a small company that wants to provide good healthcare, it can cost upwards of 33% more on top of the person’s salary.

There are also obviously other costs of hiring employees as a startup. As a business owner, when you do that, you split your time between building a product and managing people. And personally, I would rather build a product than manage people, knowing that the trade-off is I get to do the work I enjoy doing, and by doing that, my company won’t grow in staff (but can definitely keep growing in revenue).

We also agree that the world needs more small and medium businesses. One that doesn’t care about monopolies, ones that provide healthy competition and spreads the wealth around. Huge companies centre wealth generated by many to the pockets of a few. Whereas economists have found that having more small and medium businesses does not create a negative drag on economic productivity and they create much more income equality (more people earning decent amounts of wealth).

SparkToro on respecting their customers (and their customers’ searches) digital privacy

If you care about digital privacy (as most of our readers/listeners do), then you’ll be pleased to know that Sparktoro’s software:

1. It doesn’t collect any information about anyone that isn’t public, just like Google’s search.
2. It strips out personal information (PII) because they aggregate audience details into overall trends, like “15% of people who say they are audiophiles listen to podcast X”.

So, just like our software (visitor details shown in aggregate), SparkToro shows trends without personal information because that’s useful in making smart business decisions. Just like a census.

Caring about privacy and being a reasonable person

While Rand and I respectfully disagree about targeted ads, we have common ground around the idea that marketing and respecting privacy can exist together and at the same time.

There seems to be a divide online between hardcore digital privacy advocates and marketers. The former feels all marketing is “evil,” and the latter thinks that fewer tinfoil hats would be a better fashion statement. The middle ground appears to be a position where a business can both market without feeling gross about it and respect privacy while doing so. After all, the purpose of marketing is to simply build trust and inform the folks who could benefit from what you’re selling. And if what you’re selling isn’t evil, then your marketing efforts probably won’t be either.

Rand believes that targeted ads (for innocuous information, like shoes) are generally a good thing if done correctly and provide a better browsing experience (i.e. we only see ads for things we probably want). My disagreement here comes from not trusting Big Tech (the sole gatekeepers of targeted ad information) to be the judge of what’s innocuous and what’s sensitive (i.e. maybe I was searching for baby shoes, but then my wife miscarried or our adoption efforts fell through, and now shoe ads are mentally problematic for me). Rand does very much believe that there should be protections on sensitive information and protections on how that data is used.

Luckily, we both agree that Big Tech’s monopolistic powers have been thoroughly abused and that they’ve used their powers to attempt to breed misunderstanding about digital privacy in general and put the onus on individual internet citizens to protect their own privacy. The problem here that we both have common ground on is that Big Tech stores ludicrous amounts of data about our habits and tastes, and they’re the only ones who get to know exactly what is stored and how it’s used. Most of all, they’re the only ones who see the final incentives from having that data (as in, we don’t get paid as individuals if we choose to sell our data to see targeted ads or similar).

When you shed your horn and grow some stripes

Going from the unicorn to zebra style of starting and running a company hasn’t been without its challenges, but it’s been something Rand has enjoyed. He’s bucked several SaaS “best practices” to instead focus on building a profitable company where their customers enjoy the product and tell others about it.

They believe that SparkToro can make its own rules around practices that generate goodwill and create long-term advocates. The best part is that they can make sure their product is simply a great experience and a good product marketed well (without being evil).

Listen to our interview with Sparktoro's co-founder, Rand Fishkin