How The Hell Can You Create A Competitive Advantage For Your Business? | Rand Fishkin
Many people don't have the patience, they don't have the strategic foresight to be able to make that investment, they don't believe in the power of long term investing in these marketing channels. They need the provable ROIC of I invested one hundred dollars. I got one hundred and two dollars back. And so Facebook and Google dominate the online marketing space with their advertising products. I think if you're looking to build a competitive advantage, you can often win by being more creative. Welcome to the Quest for Questions podcast.
Today's guest is a digital marketing dinosaur who dedicated his professional life to helping people do better marketing for his blogging videos and speaking engagements all around the world. Rob has co-founded Eskow. Moze now called Musse, and over the seven years as a CEO, he grew it from seven employees to one hundred thirty four employees, revenues from eight hundred thousand dollars to twenty nine million dollars and traffic from one to thirty million annual visitors. Currently, he's the co-founder and CEO of Spark Daro, a digital PR tool which we'll talk about at length in the interview, according to his bio.
If you feed him great pasta or give him a great whiskey, he will give you a cheat code to rank number one and Google. The three main questions me and Rand are exploring today. What kind of business you should start as an up and coming entrepreneur or product based, service based or something else, which is more important idea or execution. And finally, the age old question off. What does my audience pay attention to and where do I market to them? So this is kind of the area I'm out to attack here.
And here's a conversation with an author of The Lost and Found there a painfully honest field guide to the startup board, the one and only Rand Fishkin and XYZ Surround. I'm super excited to talk to you. The reason specifically is that I'm not a long time fan, so I'm quite new in the digital marketing space. But immediately, when I kind of went on your site, Spadaro, which is like your new project, I kind of caught my eye like those few things that I'm looking for in guests. And it's quite rare these days, which is why it is that you have a lot of like kind of contrary opinions on different topics and you are not afraid to speak them out. The other thing is that it seems like you have your you know, your expertise is forged in experience rather than some assumptions and theories, like a lot of, I think, younger marketers and people like your space.
And the last thing I think, which is like the most for me, like the thing that caught my eye the most is that you are actually like a good person. You actually, you know. Yeah, yeah, yeah. Actually, I like it based on their book articles I read, like you're honest and you're not afraid to say what's on your mind, the good and the bad as so you're not just showing the glamorous side and all of these showing the winds only showing the successes. So with that in mind, like the first question I wanted to ask is actually starts from the from the other side, which is kind of like your worst time in life, which is, you know, let's let's get back to take me back to 2004 and specifically the fall of 2004, because in your book, you mentioned that this that in 2004, in the fall, there were like two most memorable moments of your career. So could you kind of guide us through that time? Like, what were those two most important moments of your career? And like, what are some lessons that you learned from their.
Sure, yeah, I. First off, I think I should qualify this by saying I don't think I'm not sure if I said this in the book and it is false. And for that I apologize.
But I don't think that these are the most important moments in my career. I think they're memorable and interesting, make for good stories. Butyeah.
So I basically had dropped out of college in two thousand one and started working with my mom, Jillian, doing web design. And then eventually we see, oh, mostly because we had been very bad at choosing clients and and very bad with our expenses. And so we were going deeply into debt. We couldn't afford to pay our subcontractors, which included people who are doing work for the websites we were building.
And so I had to learn it myself. And I started this this website called Mor's, which eventually became a company Maw's, which is relatively well known in the in the search engine optimization space these days. And initially, you know, when we were doing a lot of our early stage building, we had funded it with credit card debt, taking out a ton of bank loans and equipment loans and pre financial crisis of 2008. You could you could get ridiculous amounts of money thrown at you by banks that would not really check your credit very carefully. And so we we had, I think, about one hundred and fifty thousand dollars of actual debt.
Around that time, but we stopped being able to make the minimum payments, so. Oh, well, you owe twenty thousand dollars on this card. You have to pay five hundred dollars this month. Shoot. We can only pay like one hundred dollars this month.
What do we do? Right. We're going to we're in a real tough spot of our own design. We had it was it was our mistakes that had put us there. But regardless, when we stop doing that, we started getting the debt collection notices and we had a we had an actual physical debt collector, I think maybe two. But the one that I remember, the one who came looking for me was just like this, the stereotype of a guy. Right. Big, big dude,
big heavyset guy, gold chains, hairy chest, far too many buttons unbuttoned, wife beater underneath. Now, just me looking guy. And and when he came into the office asking for Ran Fishkin, I was like, he's not here.
So that was a good deal. Yeah. One of the big formative experiences around how not to fund a business. And the other one was that that was itself. The blog had started taking off and getting a little bit of traction after a couple of years of my writing. And it was I think that that holiday season, basically over Christmas, New Year's, I wrote something called The Beginner's Guide to Seattle that is still very popular today. It's been it's been republished and edited many times by myself and then by other folks.
It was like Sarah Shepard and then Brittney Miller and and other folks. And that that beginner's guide Deseo is is a document that's been read by probably upwards of a million people in the digital marketing space and really help them. Learn the practice and further their careers. I'm very grateful for that. It certainly was one of the things, along with the blog and some of the events that I started to do that put me and Moz on the map in those early years.
And I think it's kind of like by accident, like the guide, the beginner's guide, you didn't really plan on becoming so big. Yeah, I mean, the thing the thing about content marketing was up until really two thousand, nine, ten, maybe even 11, content marketing was not a digital marketing practice that had seeped deep into the ecosystem. So not everyone understood its power and potential. I certainly didn't. I don't even think it was called content
marketing yet, right when I put out the beginner's guide. So, yeah, I had no real sense of how poorly or well it might do I. All I knew was, oh, no. There's going to be an article written about Maus in Newsweek magazine, which did not wasn't actually a big thing. Write it. It sent us a few thousand visits.
It was not huge at all. But I was worried that a whole bunch of people would come for the magazine article to our website, and they'd be like, I don't understand what's this thing that they do. And so I wrote this guide hoping to help people who might want to learn the practice of SEO and understand why it's important and how to do it. And then it took off.
It got picked up by at the time Slashdot, which I think Slashdot is actually still around it. You can kind of think of it like the homepage of Reddit of its time and what the thing was. They like the key to becoming big. What was it just that simply you poured your heart and soul into it and it was just like a really great piece of knowledge and people just got so much value that it had to go this way. Or was it just some, like, lucky breaks? Yeah, I think it was mostly lucky breaks.
I mean, I, I put a considerable amount of effort into it, but at the time, I mean, you can go back and read that early version. I think it might still be online in the archive dog. And it it's mediocre at best. Like you can tell that this Rande guy in his early twenties is not a great writer.
You know, he's not some extraordinary guru or whatever. It's just a guy writing about SEO. And the key was it was great timing. It was a time when I was getting very hot.
Google was growing like a weed. Lots of folks were getting interested in it. There weren't other resources like it. Google themselves were very secretive. Most of the field was very secretive. And it happened to hit at just the right time when some of the Slashdot submitters and editors upvoted it. And I thought it was interesting
as well that that is really most of what happened. Like that makes sense. And how much do you think it happened? Like in the grand scheme of things, where now you look back at it and then where Moore's got to, it became, as you said, quite big, quite popular, quite famous in the whole space. If not the number one tool in space, then how how do you think what was the importance of that of the article? Kind of like do you think it was like such a big key to becoming big? I was just kind of in the grand scheme of things, it wasn't that important that that one moment in the grand scheme of things, not very important. The reason it was so important was because it showed me the power of producing content that had a high viral coefficient and reached a lot of people and branded your company and help them understand what you did. And that was a formula that I followed again and again and again.
So you can see with documents like the search ranking factors or a lot of my presentations that have gone viral over the years or big blog posts I've had that that did very well, or other guides that we put out the video series Bayport Frideric. I continue to invest in content production and creation and distribution because I saw the power early on of what one successful piece could do for you. Hmm. OK, OK, that makes sense.
And that was that kind of the beginning of your approach, like the general approach to business of thinking more in like long term, like long term steps in consistency rather than rather than different hacks. Because like one of my favorite things from from your book actually is the importance of sticking to your values, even if that doesn't make money in the short term. And one of your top values. Which is. Which is. So I was I guess my question here is like, where where was that kind of point of view born for you? I don't know that it was necessarily like a. A business decision from whatever financial and growth standpoint, I think it's just that.
Over time, as I got older, I realized that pursuing. Financial success at the to the exclusion of all other things was obviously the way to be an evil, bad person, if you're if you're willing to give up right. If you're willing to give up and sacrifice sort of whatever health and safety of other people like, I won't wear a mask because you can't tread on my freedoms. Well, you're a bad person. That's like at the core. That's what makes you a bad and evil human being.
Right. And goodness is I will put the health and safety of others above my own comfort or well-being or my rights or whatever it is. Right. I'm happy to sacrifice things so that other people can do better.
Right. So I don't drive drunk because I don't want to. Murder people in my car, I wear a mask when I go to the store because I don't want to accidentally infect someone who's then going to infect their grandmother and kill her. The fundamental core to being a good person and the same thing is true in business, right? So you you have the option of doing things like, hey, if you want to cancel your moor's account, you've got to call us on the phone, which is quite common and it's evil. Right.
And I get that's a that's a bad thing to do to your customers and users. We all hate it. I have had a New York Times subscription for the last six years.
And almost every month when I see the bill, like, oh, God damn it, I really need to call them and cancel that, but it's such a pain to call them and cancel for the seven dollars a month or whatever deal I've got that I don't do it. And so they've gotten whatever it is, seven dollars a month from me for one hundred months because they made it a pain. If it was cancelable or mine, I would have canceled like five years ago. Right. So, look, I mean, I like some of the stuff The New York Times does, so it's not that big a deal.
And luckily, seven dollars a month is affordable for me. Right. But you add friction to those steps and you know, you can make money, but, you know, you're doing it at the expense of sort of the right thing to do. Right. So and that is obviously way, way, way different than I'm not wearing a mask or I'm drunk driving or whatever, I'm going to put my toddler in the car with no seatbelt or those kinds of things. Right. But
it is. It's the way I have always thought about things. Yeah, I can't really I can't quite fathom another another way to think about these.
I had a I don't know if you're active on Twitter or not on Twitter so much. It's not a it's a very American thing. Yeah. Yeah, it is definitely very American. And I think there's a healthy number of folks from the U.K. I know it's big in Japan too, but yeah, I mean, I was chatting with other folks to some folks on there the other day who were like, yeah, I know wearing the mask is important, but I don't like the government telling me to do it.
And so, you know, out of principle, I'm not going to do it. I. Yeah, I think. You know, some some of the people I'm like, oh, yeah, I've met you in person, you seem really kind.
We've been out to dinner. I like you. And you're probably a bad person, probably a bad human being who's willing to do evil, harmful things to other people. Just to hurt them because you feel like it, and I think when I write about keeping maintaining values for the long term, I think that what what what decades of experience have shown is that over the long term, when you invest in consistent high values behavior, you attract high values people to your organization and to your life.
And you have better both financial and human outcomes. You have a happier existence. You feel less shame. You feel more fulfilled. You have positive romantic relationships and friendships and people who care about you. And when you don't do those things, you.
You might be very, very financially successful, you might even be very successful in other realms, but you're you know, you're going to be Donald Trump, right? That's sort of your your pinnacle, your high point, which feels to me like a low point, right? I don't want to be that person. Right. That's really inflicting evil and malice and selfishness on an entire nation. And, yeah, I would be ashamed. Right.
I would be just ashamed to have have that be part of my legacy or life. Yeah, but you just did it once. And I think that's something that a lot of people don't think about. It's so simple that, like, the reason you want to be a good person, it's not to get something in life event or or have people talk about you nicely.
It's that you you can look in the mirror and not be like kind of ashamed of the person you're looking at. It's that simple. If you if you put this you said, like, I think business above our money, above everything else, then then yeah.
Maybe in the short term you get more money. But 10 years from now you will have to drink to to be OK with yourself. Right. Like you, because it's going to be hard for you to really accept how bad things that you've done. Yeah.
I mean, we're worse than that. Right? I think that the the reality is that what happens and I know plenty of people like this, but I've seen it in family and friends. I'm sure you have to, which is that people who sacrifice their authentic selves, who do bad things and justify them to themselves until they no longer feel that it was the wrong thing to do right.
They create layer upon layer of false information and false beliefs and false morals in order to justify their bad behavior. And they dig themselves so deep into that that there is there's no escape. There's no there's no true happiness. Right. There's no release or relief. And you attract other people like that, people who are going to try and grift you and cheat you and be disloyal to you. And, you know, as soon as you don't have power and money, they're going to turn on you and you know it, right? I mean, if it is look, I think late stage capitalism that we're in right now, especially in the United States, right where there's no social safety net is very brutal.
And so I understand the. The drive to build up as much capital as you possibly can personally, as fast as you can, because if you don't, your health could suffer and your well-being and the people, you can't help people around you and you can't support your family and all these terrible things that can happen to you that we see happening to our fellow citizens all the time. Right. The brutal prison system here that is is just by and large, mostly for people who can't afford to escape whatever problems or justice they should face. And that that drives a ton of people, myself included, to be scared of being poor, to be scared of not having enough money.
And so to do a lot, be willing to do some more sketchy things to get money. I don't know that that's something I'd love to see changed, but I don't think that changes by. Doubling down on it. I think we need a kinder system, we need better incentives, and then we can we can start to improve.
I think that what is true in the in the business world, in the entrepreneurial world, what marketing world, whatever it is, is that you can you can see pretty clearly this. Trend over the long term, where people who focus exclusively on the financial outcomes tend to have worse outcomes than people who are values driven. So the correlation, thankfully, the correlation even in the environment that we're in, is that you you tend to do better if you are a good person who surround yourself with good people and does generally good business practices. And like everybody, you slip up sometimes and make mistakes, but you hold yourself to account and other people hold you to account.
And you. Desire to get better. Unfortunately, I don't know what's your perspective on this? I think you've changed a little bit, but like from for me, for somebody that's like was super outside of this space of, let's say, digital marketing, I went into it like a one one and a half years ago and.
For me now, the perspective is that it's unfortunately, it's very much at this point, it's very much full of people that that will, I think, put money above everything else. Most of the time, like, I don't know if that's your perspective, but I'm not saying like 90 percent, but like majority. It seems like at some point we went the wrong direction. And and this is that it's a difficult choice because people are afraid and you kind of have to put others above yourself and your family. But but I don't know if it's as prevalent in the normal business like business as in local business restaurants doing that compared to digital marketing. And I'm curious, what what's what's what's your take on it? If you think that digital marketing is some some super soft and then other other kind of technology in general? Yeah, I think it really depends which sector you go into.
So I think there's like there's little pockets of the digital marketing universe that are very black hat, gray hat manipulative. The affiliate marketing world is is very money above everything else. The I think there's a lot of worlds of personal brands and promotions, like sort of the YouTube stars of the digital marketing world. Yeah, there's a lot of toxic masculinity culture there. There's a lot of toxic capitalism culture there. But my experience has been the opposite.
Right, that essentially over the last 20 years, the vast the overwhelming majority of people who call themselves digital marketers and whose skills in their bio on LinkedIn or whatever include things like content marketing and search engine optimization and email marketing and social media marketing, et cetera, that field has gotten far, far more professional and far more generally ethical and moral in both the behavior of the wide group and the individuals in it. And that is very true for like the most of the events that I go to and speak at. Right, you can see the folks on the stage and off just treating each other with a great deal of kindness and support and agency owners sort of getting together and helping one another. Granted, I think you can you can find those those other pockets. And there's definitely the like. I've done some of the shows with some of these guys.
Right. Like very aggressive, very pure financial focused, exploit everything types of players they exist to. But, Conrad, if you want, you can break out of that universe. There's like there's a bigger digital marketing world to that say I'm not I'm in it. But it's it's it's it's it's it's it's it's it's good to it's good to hear that you have a different perspective. And maybe if I focused on the of the wrong things then I mean, I'm not a negative person.
I was just kind of very curious on what's been I've seen what you're talking about. Like, trust me, I know that world well. Right. You go to the wrong Facebook group, you go to the wrong sub Reddit like, well, it's it's pretty brutal.
One of the things that I'm very, very active on Twitter in the digital marketing world. And after I blocked about 40 or 50 people who are very negative in that universe, I don't see very much of it at all. It's a much morepositive group.
So that could be part of it, too. Mm hmm. OK, so let's switch topic a little bit, I want to talk a little bit more now, less psychology, more like your expertise. One of the more interesting takes that's a bit of controversial from you that I took away from your book is is the you are talking about this about the service based businesses, like the advantages of them and the fact that now there is a big kind of preference. Right. And it's more kind of in the media and everywhere to have the product and to be able to scale and and money and kind of the scalability over everything.
But there was a great quote by the phrase used that it's great to start a product informed by your consulting. So so so maybe let's let's kind of dive in about your take on online service based businesses, because that's something that I want to talk about, because I was someone new. And the reason I also started with service based kind of business was because it's a lot easier to go into.
You don't need capital, like you said, and there's a lot of advantages. But as you said, like what's promoted is kind of the scale, the product. So can you elaborate on your on your opinion there? Yeah. So I think that the world of entrepreneurship and venture capital.
Right. Sort of those subcultures, the startup world, which is prevalent in sort of technology, entrepreneurship universe, those have a. Strong focus and in my opinion, an irrational bias toward product based businesses and away from services when the reality is that a service based business can be a wonderful way to build a company, and it does not have to be a separate thing from a product based business. You can have either. You can have both. You can have a little services and a lot of product.
You can have a little bit of product and a ton of services, and you can build a great company and it is foolish to arbitrarily say that one is worse than another. I think the only the only universe in which it truly makes sense to say one is worse than the other. And this is where the source, in my opinion, of the problem comes from, is if you're a venture capitalist whose job is to put money into one hundred companies, have ninety five of them go bankrupt and stop annoying, you have two or three of them hopefully become unicorns or return a ton of money that that model does not lend itself.
Well, that's sort of one in one hundred model to one hundred model does not lend itself well to the services based business because services businesses tend to be profitable from the start and for the long term, but generally not always, but generally slower growing and their. Exits are almost never in the public markets with an IPO, right, and almost never for nine or 10 figures, which is generally what venture capital investors are looking for. I think what's what's really funny, Conrad, and what a lot of people, especially entrepreneurs, do not understand is that I I myself obviously have started started a product company, Mas Mas was up to 50 some odd million dollars in recurring revenue when I left and raised thirty million dollars in venture. I own 18 percent of that company.
Still something like that. I think there's a lot of people who assume, oh, well, Rand must have financial means, right? You must be wealthy, you must have some money. Surely you have a million dollars at least. And none of those are accurate. Right. So what you what you need in the venture backed world is a huge exit at scale, which is extraordinarily rare even for companies like MOZE that end up growing to tens of millions of dollars a year in revenue moses' profitable. Right.
It's kicking off, I don't know, five million dollars a year in cash. But it's not like I get any of that right. It just it sort of sits there and hopefully the company tries to invest it and grow and find some way to get to one hundred million plus in revenue with a 20 percent growth rate so I can go public or maybe sell to somebody. And there's a there's a there's also a big misbelief that an agency won't make you money.
And I will tell you right now, I know a lot of agency owners, some of them, I grant you, are not doing great. They're struggling. They're they're having challenges. But almost all of them, almost all of the agency owners that I know who have an agency of 10 or more people and have maintained that over the last 10 years, they have way more money than I do.
Right. So, hey, being the CEO and founder and majority owner of a venture backed business might sound sexy, right? My agency friends are like, wow, your business was ten times bigger than mine and I made ten times less than your friend. Yeah. Yeah. Well, what do you think drives it like that? It's it's still kind of so skewed. The perception or the reality, youknow, the perception like what's what's what's being thrown out there, because he said the reality is completely reversed, maybe not reversed, but it's a lot more like kind of similar like what's what's possible, what the advantage is.
But I think I think it's mostly media coverage. So it's it's like it's media coverage and it is the stories that get written. So, you know, the number of stories that are written about every successful startup that has an exit or who whatever raises a ton of money. Those stories get into Techmeme and TechCrunch and The New York Times. The Washington Post writes about them and whatever The Chronicle's San Francisco Chronicle is writing about it.
And they're featured on top of Hacker News. And it pervades our knowledge about the startup ecosystem. I have never seen a story that's like owner of successful local digital marketing agency in Pittsburgh, Pennsylvania, made six million dollars this year. Hmm, by the way, they made four million dollars last year and she made two million dollars the year before that, and she made a million dollars a year before that.
Her net worth is now 18 million dollars. She is now richer than ninety four percent of all venture backed entrepreneurs over the last decade. Never. You've never seen that story. That story has never been told. And it makes sense, right? Agency owners don't they don't need to go out and be like I made a bunch of money this year.
Right. They just they just have their business. I mean, when it works, it works. And when they have to reinvest, they reinvest, but they have no incentive to go blasting that story. Venture capitalists, on the other hand, have a huge incentive to try and get.
Hundreds of thousands, millions of potential entrepreneurs, people like you and I and many, many others, to start venture backed businesses, knowing that ninety five percent of us will fail and have crappy outcomes, three or four of us in the rest of those five will have maybe some good outcome. But it's not clear. Maybe we'll be kicked out of our own business and our stock will be taken away from us. Right? Well, we'll be the Eduardo Saverin of Facebook, right. And then one or two of us will do really, really well. I see, I see, so so what would be our because I want people to also have as many takeaways as possible from from the podcast. So what would be your kind of advice
at this point in your career and with your knowledge, your perspective, your experience to up and coming entrepreneurs are people who I kind of looking to start some sort of the business, like how would you advise them to look at what they're going to choose between a service product? I think like what? How what would be your advice to them? Yeah. So I think you should pursue things that are at the intersection of you have personal passion, interest, like you like doing it and you find it fun and rewarding. And if that's an agency like, gosh, I like, you know, building up a services business and helping other people with their business, I love the relatively low risk of sort of my costs never really increase unless I'm doing more work, in which case I'm making more money. I can scale up and down as maybe I run my own schedule.
And a lot of ways that's an awesome world. And if you're passionate about that and you have the skills to help people. Amazing, wonderful, you should invest in that if, on the other hand, your passion is, gosh, I, I really dislike consulting for whatever is so personally right. And I and I wrote about this in Lost and found a little bit. I liked consulting.
I like the work of it. I like talking to folks like yourself and helping you with your business and like, oh, yeah, let's talk about, like, your social media strategy. Let's talk about your email marketing setup. Let's talk about your content set up. Let's talk about yourbook. I like that stuff.
What I hated about consulting was the sales hated. I hated, like one to one convincing people to use my services. And I hated the retention selling as well. In fact, I think I hated retention selling even more than initial on board selling. What do you mean by retention, selling the process by which a consultant or an agency has to sort of convince their existing clients to stick with them and to rip up their contracts. So keep spending money with them. Yeah, right.
So like we're at the end of a six month contract and I show you, hey, we we've done some extraordinary things together and look to the promise of the horizon. Is even this much better? And you're like, Andrado? Yeah, I can probably do it myself at this point and. Right. And so and then it becomes a well if you if you stop doing work with us, then I have to go out and find two more clients to work with who will replace that money. So now I got to do more selling. Just gets it gets really challenging.
Right. Just a hard, hard, hard thing. And so I, I really dislike that process and therefore move to the product business because the product business was something where I didn't have to worry about selling or retention selling, especially self-service self-service software as a service, which is what Moze was.
It was one of the early pioneers. And so we actually have a lot of struggle in terms of getting investors on board with that idea. But now it is a very, very well understood field and spark. Tomorrow is also in self-service SaaS software as a service, which works really well for me.
Right. I don't I don't have to sell any any anyone on spectrum like you go to Spark tomorrow. You try the product, it's free. We have a forever free account. If you like it and you want more of it, you just upgrade.
You put in your credit card. Right now, it's 50 bucks a month. Great. OK, let me try that. Hey, I really like this. I'm going to go up to one hundred and fifty bucks a my level fantastic rate that I never have to sell you on it. The product sells you on it.
So I like that a lot. And that is why, that is why I pursued that field. But hey, that is not that does not make it right for everyone. And what would you say is the biggest downside of SAS model like now having experience? It's expensive. It is hard to scale, it's expensive and it's pretty risky. So I'll give I'll give you an exam.
So we we we raised money for Sparke tomorrow in a very unique fashion. We raised one point three million dollars in what was that, about two and a half years ago. Not quite two and a half years ago.
It took us about a year and a half to get our product built and launched. So we probably used up about thirty percent. Thirty five percent of that money just getting to a launch point. And then we launched it and we're just yeah, we're just over the line of profitability now. And that is very, very early for a business. Right? We launched in April of this year of twenty twenty, the worst time to launch in one hundred years.
And and we did reasonably well over the last, what has it been, almost seven months and have crossed that line of like, OK, we're now making a little bit more than we're spending so we can now afford to go grab some more data for our product and invest in some more things. Right. The good, good things. But I look at the Sarsfield and you can see that this the software as a service start ups.
Overwhelming majority fail. It is a very, very high percentage that don't make it past five years that never get to profitability. So, yeah, the downsides are that you're very likely to fail. The other downside is you need a lot more differentiation in software as a service than you do in a service based business. So there's a lot of mediocre mediocre there's a lot of competent but not massively differentiated consultants out there who can help you with your Facebook advertising strategy and your Google ads, or Google my business and your CEO and your content and your website faster and improving your WordPress, blah, blah, blah, blah, blah.
A lot of people who can do that competently and well and they don't really need a unique value proposition, right? They're basically like, hey, do you need help? You need my kind of help. Here I am good enough. For folks in the for folks in the software field, that is nowhere near good enough to stand out from your competitors. That's a great perspective, haven't haven't thought about it this way, but but that's actually yeah, that's that's very true. Like the service-based like you don't really need that much differentiation to still sell your services pretty darn well.
So let's dive into something that I think it's also very topic that that's covered by many people, many books. And I think you have a unique take on it. And I would love to hear more from you about it, which is the kind of idea versus execution, because you mentioned that execution, it's not everything.
But at the same time, you can read in many places like, oh, in my place you can read like, oh, I'd say the most important execution is what matters idea is just like a multiplier. Some other people, like, for example, direc Suvir say that it's like one times theater. So so maybe give your take on it, because I think yours is also quite unique and I think people will get some some value from your perspective on that. Yeah, sure.
So my my sense is that the broad startup field, especially over the last decade and a half, has focused far more on the execution is everything. The idea is nothing. And we need to move back to a world where the idea is respected and important in just as much capacity as the execution is. And the reason that I think that's true and that I would agree with Derek Sivers very, very much one is a multiplier of the other. So if you have mediocre execution but an outstanding idea.
You can still do quite well, right, and if you have, you know, amazing execution, but your idea is a bit shit, the progress is every every step of progress is just going to be incredibly, incredibly difficult. I think that I was reading a great piece in New York magazine where they had done a lot of interviews with the folks behind we work and and their competitors in the sort of whatever office space, remote work set up field. And, you know, it was basically it was just this game where we work had the most money. And so they would just undercut. Right. They said their real estate plan for where to launch what works was find places where another, a smaller competitor of theirs was doing well in a market. Build a location or take over a location very close to them and just undercut them until they went out of business and then raise your prices, and if you have more money than them, what are they going to do about it? Right. If you if you have all the venture
capitalists behind you, they can go raise their own money. They're not going to outraise. We work. And we were got billions of dollars. You might go raise one hundred million. Good luck.
We're going to. We can afford to be unprofitable longer than you. That's our winning strategy. You know that that means that your execution can be perfect, absolutely perfect, you could dial in everything and sorry, your idea was just too commodified. So this this, I think, is the is the fundamental challenge you need that idea that is differentiated, that is that gives you a true competitive advantage and you need to be in sort of a field.
I think not need to be, but if you are venture backed and you have to find that massive growth curve, you want to be in a field where it is possible to achieve escape velocity before anyone else catches up to you. I don't like that feeling at all. I don't have any interest in it. What I love to build, what I love to see, more people building is more independent technology, software, product agency services, businesses for a bunch of reasons. But one of them is because your idea can be differentiated at a much of for a very specific audience. And that's plenty big enough for you to have a growth ramp to millions or tens of millions of dollars of revenue.
And if you never get to hundreds of millions or billions, it doesn't matter. It's fine if we make it when we normalize, the only businesses that are doing hundreds of millions or billions of revenue are worthwhile. When we normalize that, we create a world where monopolies and duopolies dominate the landscape. And that means there is we are intentionally contributing to income inequality. We're essentially saying for every hundred entrepreneurs, which entrepreneur is already a privileged class. Right. But for every hundred entrepreneurs,
there's going to be one to three winners and a whole bunch of losers. Right. You're going to spend five to 15 years your career making Butkus and that person over there is going to spend a few years of their career becoming a billionaire. That's not that is not healthy for a macro economy. Right.
We know monopolies and duopolies are very unhealthy for civics and ethics. We know that they're unhealthy for political lobbying, especially in the United States, where that kind of stuff is legal. We know that they're very unhealthy for their very unhealthy for stress on an economy. So when you have a financial crisis, like in 2008, when you have just a few big players dominating the field instead of many, many smaller ones, you can't really have a purely capitalist independent system working. You need massive government intervention to sort of prop up these big players who've done dumb things. Otherwise, the entire field collapses.
There's lots of negatives, right? There's a ton of externalities that I don't think we want. And I would love to see more entrepreneurs feel like they don't need to build a billion dollar company, that they will be just as appreciated or more appreciated for building a company that is profitable, that lasts a long time, that employs them in there. It takes care of their employees and lets them do work that that makes them happy.
That sounds like how capitalism supposed to work, right? The bunch of small businesses all competing, tons of flexibility in the market. Lots of stress, lots of ability to absorb stress. Yeah, less and less for less businesses for showing off on the Instagram for actually like sustainability and then I think, yeah, and, you know, showing off on Instagram. The funny thing about showing off on Instagram is a lot of businesses where if you're showing off on Instagram, you're probably a small to medium business. So it's OK. But if you are helping billionaires become.
You know, three way, way richer because, you know, like a venture capital, so Mars is a decent example I think venture capital investors own. Sixty five percent of that company, 60 percent something something like that, right, so let's say that Mars has an extraordinary exit someday. That's awesome, right? It's exciting for me and my wife, it's exciting for probably a couple of early employees who executed their stock options and have stayed at the company a long time.
But mostly it's exciting for. Some extraordinarily, ludicrously wealthy people who will become even more ludicrously wealthy. That doesn't excite me, right, like, I don't I don't know what I was thinking, Conrade, what was I thinking when I was twenty eight and I was like, yeah, I want to make billionaires richer. Let me go spend the next 12 years of my life trying to make these super rich people even richer and figure help scale a figure, a businessman to nine figure. Yeah but it's just not you know that's doesn't that does not fill me with passion and an inspiration. And you know what's crazy? Like, I really like our venture investors.
I thought Brad and Michelle, I thought they were good people who supported good causes, who believed good things. I I don't have any problem with them personally, right, like they're good they're good people, but. I don't like the way they or their firms contribute to the world around them, right. And what they portend for the future and the sort of way they make an economy versus I'd much, much rather like the thing I feel proud of, admires the work that I'm glad I did is helping millions of small and medium businesses and agencies and consultants and all these types of folks to have more success in the work that they did.
That makes me feel good, right? That makes me feel like, OK, that's a positive contributor to the world and to society and to an economy. And that's what I want to get financially incentivized and rewarded for. They say, don't hate the player, hate the game. Exactly. You know what?
Don't hate the player. Hate the game is one of my favorite sayings. And I don't think it's properly understood. Right.
It's sort of a, look, give us irritated individuals. Yeah, individuals are. One person can be responsible for their actions, right? So, Conrad, you might say to me, Randy, you did this thing at Mor's or what sparked or whatever that I really don't like.
And I wish you would change it. But if we want to change things in the aggregate, we've got to work on systems and incentives, systems and incentives, governance, so much of behavior at scale, that's what has to change. If we want a better world. You know, you pick a bone with me, the tiny, tiny impact, you pick in a bone with the structure. You get in a whole bunch of other people to pick a bone with the structure you change in the structure. Now we're talking.
Yeah, we are incentive driven creatures now. Undoubtedly, undoubtedly. Yeah, now that's that's a great that's a great point. And speaking of actually duopolies and and I think what you said, proving people wrong, let's let's let's dive into Specter, because this is a tool I'm personally actually excited about.
And we are using right now to to to figure out like points of influence. But maybe let's start with, like, can you give might be a little bit of intro for folks like what's like what's the what's the idea behind sparked and where is it now and where are you hoping it's it's going to develop into like what. Yeah,sure. So the fundamental concept behind Sparke tomorrow is that. Right now, it is incredibly difficult for marketers and customer researchers and product builders and entrepreneurs of all sorts of people to understand what their audiences pay attention to. If you want to reach chemical engineers in the U.K. with your new product, or if you want to reach
people who are really into the Dungeons and Dragons board game role, role playing game, or you want to reach people who sing professionally in choirs, or you want to reach people who are architects in Los Angeles or whatever. The group of people you're trying to reach with your product is just figuring out what do they read, what do they watch, what do they listen to, what do they follow? Who are they engaging with online? Where can I go do marketing that is not just throwing dollars at Facebook and Google and reach the audience I want to reach right now. Figuring that out is insanely hard, just just ludicrously hard. So the concept that Casey and I had was sparked tomorrow is we saw a few really smart market research agencies, in-house firms, I'm sorry, actually build crawlers to go crawl their customers is public social profiles and aggregate all the data from the public social profiles on like Instagram and LinkedIn and Twitter and Reddit, Facebook, yada, yada, yada. You can get a ton of data by getting all your customers email addresses, sending it through like a clear bid or full contact. And then you get a list of, OK, here's whatever, here's my ten thousand customers or ten thousand people who've signed up for my email list and all their social profiles.
I'm going to go crawl all of that. I'm going to see everything they following and see everything they read, watch, subscribe to our YouTube channel and then I'm going to aggregate it. I'm going to go ha. Now I got now I know where to reach more people like the people who will buy from me. And I don't just have to throw money at Google and Facebook to do it. I can go sponsor this podcast.
I can go pitch this event, I can go run this webinar. I can go reach out to this website and see if I can do a guest piece for them. I can go build a relationship directly with this social media source that that is very influential. And and you can do that intelligently, because you know that, oh, well, 16 percent of our whatever email database interacted with this social account and they have a podcast, boom, boom, boom. Right like that.
That might be the best marketing investment you make all year. But how are you going to know that unless you have that data? And so basically we're like, oh, that's really smart. We should just build that for the entire Internet so that you can go type in. My audience uses these words in their profile architect and are located in Los Angeles, California.
Boom. All right. There's seven hundred and twenty two architects in Los Angeles, California, that are in our database. And they follow these two hundred and fifty accounts and they read these three hundred websites and they visit these 60 YouTube channels and listen to these 12 podcasts. Marketing plan done. That's what sparked all of us and one of your one of my favorite features that we've uncovered thus far, and I'm pretty sure you are also quite proud of it, and I would love you to kind of give us maybe your take on it. Is that the Hidden Gems, Hidden Gems feature, which basically, from my point of view, it basically allows you to find those points of influence, but not the obvious ones, which are like always when you search for something, there's going to be, oh, it's like Forbes magazine people read.
But that's what are you going to do, like buy there an article? You can, but it costs a lot. But then the hidden feature, at least from my perspective, it allows you to find those people that still are like they are very well. They are not maybe as popular, but they are very closely filed by a small group. And then they are like highly engaged, right? Yeah, yeah. So the hidden gems filter inside tomorrow
essentially does looks for accounts and websites. It doesn't work on YouTube and podcasts yet, but it looks for social accounts and websites that have high engagement relative to their size. So essentially it would it would find those accounts that are often not in the mainstream or not extremely well known in the field, but still have a lot of engagement from the audience you're trying to reach. So maybe you whatever if its architects in Los Angeles, you could see like. Oh yeah, up at the top is like Architect magazine and then dwell magazine in their, their public social profile and their website or whatever.
And then you add sunset and you're like you scroll down and you get to like result number ninety five, you're like oh who's that. I've never heard of that. They reach nine percent of architects in Los Angeles and you have maybe we could do something together with them.
Hidden gems will tend to surface those right up at the top of the list. Hmm. Yeah, I mean, the hardest thing is that because what we are doing right now is very similar to that, just like we deliver now, the full results are like getting people to get to the top of their field for influence. But the influence is very irrational, as you probably know.
And my question there for you is, do you think with smart, thorough. Is it now or will that will it be possible to somehow, because the hardest thing with with influence to kind of explain that to people is that it's really hard to map it out because it doesn't make logical sense when you say, OK, we will you will get on this podcast. And then when you hear you will create this panel and with this guy and then suddenly you're gone this far places you meet this guy, this guy interests you to this guy and you suddenly like the most important person. But do you see any way where you can live or not or like some of your ideas for, like, mapping out the kind of path to influence? So I think what is going to be difficult, if not impossible for the long term is proving down to the last visitor and sale the impact of more serendipitous, hard to measure channels like social media, marketing and podcasting and content marketing and digital PR right, which sparked what was essentially a digital PR tool that helps you go do all these pitches and find these sources of influence and reach out to them. I think that will always be a very difficult to measure process.
And Conrad, I believe that because it is difficult to measure, because it is serendipitous and hard to prove beyond a shadow of a doubt in your analytics that while it was this podcast that we sponsored, it was this webinar where we were a guest. It was this guest post that we did for so and so. It was this media mention that we got in this online magazine or this blog because that's so hard to measure. Very few of your competitors will put the amount of dollars into it that the ahli actually proves out, right. When when the channel is easy to measure, it essentially becomes ROIC neutral over time.
So Facebook ads, you might go, yeah, you know, we're bidding whatever. We're spending three dollars per lead and we're making a little bit of a profit on each one. Maybe we're making, whatever, 60 bucks per lead that we get from Facebook. We get a few of them every day, but we're spending a ton. We're making a little bit more than we're spending.
But over time, competition in the market and other people bidding will even that out, such that it's really difficult to get any kind of competitive marketing advantage by spending dollars on provable channels like Facebook ads, Instagram ads, Twitter ads, LinkedIn ads, Google search advertising, Google display network, all of those measurable, all of those networks have an incentive to deliver to you and to the CMAs and to all the businesses that work with them, the agencies perfectly attributable results. We can prove to you that blah, blah, blah, blah. And they have an incentive to lobby for things like PR and cookie privacy and browsers that don't track so that it's impossible for us to prove the lie of any other channel. Pretty smart, right? Right, Google, Google and Facebook basically are like, well, we hate each other, but you know what? We hate even worse, the ability to track things that are in our ads.
All right. Let's lobby the E.U., let's lobby the US government. Let's lobby Firefox. Let's make sure Chrome doesn't track anything except our stuff.
Yeah, yeah, that's Haridwar off of Obsidian or like Rome research, like the tool for like notetaking and kind of linking things. Yeah, I've heard of it. I haven't used it because that's my my idea would be if it's trying to explore, if it's possible to map this out using something like this or in a similar fashion, you know, you kind of link I mean, there are ways to get some attribution. Right. So one of the things that's very possible
that I like to be able to do is for as an example, when a podcast that I'm on is produced and launched, I can see in Google Trends, if I go to Google Trends and I look by day by day or even hourly for Sparke tomorrow, I can see that when a podcast comes out and as it reaches its audience, there's a spike in Google trends of people who search for Sparke tomorrow. Right, which makes sense, you're listening to this podcast right now, maybe you're like, huh, I wonder what that tool of Ran's does. He said there was a free version. I'm going to go to spark True.com. I'm going to whatever try out the free version, random searches. And that happens almost inevitably with with a mention, a media mention, a podcast mention and an event, a webinar or a blog post, whatever, blah, blah, blah, all these different channels and sources that that you might invest in in digital PR.
And you can see that spike. But when you look in your analytics, right, when I go to Google Analytics and I look at, hey, where did our visitors come from? What does it say? Says Google, Google got the credit, even though this was a branded search that happened because I was on a podcast. So your analytics can mislead you unless you're looking for those signals that show where traffic is actually coming from.
Right. And if I didn't have the time series data to prove it, it'd be very, very difficult to prove to. I don't have a CMO, but if I had to prove to a CMO of Pakta like me, going on podcasts is a great use of my time and here's why. Blah, blah, blah. You look at me and Alex, you're like,
I don't see anybody visiting from this podcast website. You're looking in the wrong place, right? Go to Google, go to go to your branded search traffic, where's that branded search traffic coming from? Where's that spike coming from? That's where it's coming from. I see, I see, yeah, that's that's a that's a great point, that's a great point. I see that, like, some people will probably never get it because there's a lot of incentive to never get it. And it's always kind of like that.
You know, there's some things that are more obvious, but there's less upside and then more kind of not so obvious thing can potentially have huge upside, but also potentially huge downside, maybe not a huge downside, but maybe not such an obvious upside. I mean, one of the reasons so I'll be totally frank. Right. I, I do a lot of podcasts. I do a lot of webinars and events.
I do a healthy number of blog contributions. I do a lot of social posting and social interaction and engagement and relationship building and all these kinds of things. And the reality is 90 percent of all those activities does not return a huge ahli, but 10 percent does.
I just don't know which one it's going to be. So it could be you know, it could be that next month your podcast just goes crazy. Huge. And a ton of people listen to this episode and me going on. It is the best thing I've done all year.
That is completely possible. Absolutely could happen. And so my job in doing digital PR is to basically say, I know I'm going to make whatever one hundred investments every quarter in digital PR and sources of all kinds.
And I know that 10 of those are going to have shocking returns. I'm going to be like, whoa, that is great. I never knew that this channel was going to reach so many people are like this.
Whatever. I was on a podcast on podcasts, which I tend not to do stuff anymore because I was not in that world. Right. And and I'm trying to move out of it a little bit.
But there was like a couple tweets about it. It went hugely viral. It had like a bunch of thousands of listeners and then a bunch of people came over to start tomorrow and registered accounts. And we have a decent conversion rate from free to pay.
So, like, it really worked out. Right. But I didn't know going in, you know, my my bias generally is to say no to those who worked. Right. I'm glad I did it. It's like with investing are like, let's say sports betting, you're not really if you are smart, like you don't you are not trying to, like, win every bet.
You're all you're just trying in the long run to have the advantage, right? You bet. Enough on the kind of the odds on your side, like the chances are higher than than than the odds. And then the individual doesn't matter.
But in the long run, they are you are you profitable? And I think that's that's kind of what you're doing and what you're saying basically, like just bet on the right, like on the leverage where the odds are on your side and then eventually something will win huge. And you will be kind of at the advantage anyway. Yeah. And Conrad, I think the beautiful thing about investing in these more serendipitous sort of digital PR channels compared to something like sports betting is, you know, when you place your thousand sports bet, maybe you're a slightly smarter, better right.
But the bet the bet itself hasn't created a flywheel for you. It's not generating inertia, however, your thousandth mention. Right. If your brand gets mentioned on a thousand different webinars, podcast, blog posts, whatever, Google starts to rank you higher because they see all these links and all these brand mentions and all these associations, more and more people have heard of your brand. Right. And so that flywheel starts to build itself up.
You get that like organic. Yeah, digital PR meets meets content meets word of mouth marketing, flywheel really going. And as that spinning each of those even the really, really small investments have a measurable impact on your ability for your website to rank well for keywords and your ability for people who have heard of you three times versus five times versus ten times to have a higher conversion rate. And now your ads perform better, too, because you've got more people visiting your website. And if you've heard of you and so you can read, you can cook them and you can do retargeting and remarketing to them.
More people have liked you on your social channels, so you can now do retargeting to essentially people who already liked your social of the flywheel gets going and building, even from the little ones that didn't look like they had an impact at all. But you got to read that right. Like, that's, I think the whole point that we are getting to.
You need to reach that critical mass in a way like before that is kind of under water. You don't see it. It's happening, but they don't see it until this, like when it finally hit some some certain point and then you see something that results.
Right. This this is exactly how digital marketing inertia works. The flywheel is very difficult to get spinning those those first few revolutions, you know, your first ten pitches to get on a podcast, your first ten pitches to do a guest piece, an editorial for a publication, your first ten sponsorships, whatever it is.
Right. Like everything. It's like pulling teeth, man. It's just so difficult. And then people have heard of you a little more and they start inviting you to contribute to their.
Hey, would you want to contribute this thing to this guest piece I'm writing? Hey, would you want to be a contributor? Would you want to run this column? Would you want to be on this podcast? Would you like to do this webinar event for us right now? It starts spinning and it starts spinning and starts again. And once that inertia is going, it's a beautiful thing. But many people don't have the patience. They don't have the strategic foresight to be able to make that investment.
They don't believe in the power of long term investing in these marketing channels. They need the provable ROIC of I invested one hundred dollars. I got one hundred and two dollars back.
And so Facebook and Google dominate the online marketing space with their advertising products. I think if you're looking to build a competitive advantage, you can often win by being more creative. Oh, wow, that's a great sentence. That's a good sign. So let's just get to a quick, like, futuristic question. So it's like, what's the cause? I think you haven'tmentioned that. Like, what's what's the short, mid and long term vision we've sparked on now? Like, what's what are you now kind of working on there? There's some key features, key of to say not to tools, but maybe some additional tools in there.
And then like in the in the short term and maybe what's also like the big vision is or is there even a big vision. Yeah. I mean, look, our our data set right now has excellent coverage of Twitter, decent coverage of Instagram, some Facebook, some LinkedIn, some Reddit, pretty good YouTube.
But what we'd like to do, we have