Sprout Social Just Went Public. What Does Their Online Advertising Look Like?
Disclaimer: I don’t work for Sprout Social, or have access to their ad accounts. I’m just an experienced B2B marketer using public information to make educated guesses about Sprout Social’s marketing. With that said, let’s start the analysis.
First: The Broad Marketing Summary
Source: Sprout Social Prospectus (No Advertising Spend Breakout Available)
Source: Sprout Social Prospectus
From digging into their whole data, this is what I can gather:
The data above tells the main story: Revenue is growing faster than M&S spend, but is slowing down in 2019. This is great performance and the Sprout team should be proud of themselves.
There’s an interesting secondary story about their advertising. Advertising spend went way down in 2018 compared to 2017. They don’t break it out, but it looks like they increased advertising spend again significantly in 2019. I think this is because they had a trough of slow organic search growth that they had to make up for.
There’s probably room for them to make more use of Facebook Ads to drive their content-sales pipeline further.
What Drives Sprout’s Growth
Sprout attributes their growth to two things — their content driving leads to their site, and their sales team closing those leads (there’s probaby also a good amount of pure outbound sales).
On sales: “The increase in new customers was primarily driven by our growing sales force capacity to meet market demand.”
On content: “We utilize various unpaid content marketing strategies, including webinars, blogs, thought leadership and social media engagement, as well as paid advertising, to attract visitors to our web properties and free trials.”
It’s safe to say then that most of their current marketing spend is spent on creating content and paying sales reps.
Digging Into Their Content Strategy Performance
There’s two ways that customers find their content — word of mouth and organic search (them ranking for Google search results without paying for ads). We can’t really measure word of mouth externally, but we can look at their organic search performance.
Below’s a chart of how many organic search terms they rank well for. As you can see, its growing pretty steadily.
Source: SEMRUSH Sprout Social Organic Search Position Data
And here’s their estimated organic search traffic over time. You’ll notice a dip in 2019 after pretty steady growth.
Source: SEMRUSH Sprout Social Organic Search Traffic Data
It’s safe to say their content strategy worked for them really well from 2017–2018 in driving organic leads. It looks like it still worked for them in 2019 but didn’t drive as much growth as they wanted until the end of the year.
Another piece of evidence of the importance of Google search rankings for them — their growth in non-brand organic traffic from 2017 to 2018 was just about 75% — the same as their overall revenue growth!
Digging Into Their Ad Strategy
On their advertising, Sprout says, “Advertising costs primarily include online advertising on search engines. Advertising costs are expensed as incurred and included as a component of sales and marketing expenses.”
According to their prospectus, Sprout decreased their paid ad spend significantly in 2018 for 2017, and SEMRUSH data agrees with this. See their paid search spend over time below:
Source: SEMRUSH Sprout Social Paid Ad Data
However, the data also shows that they boosted spend again in 2019-probably due to the drop-off in organic growth we saw above. We’ll see if their annual report this year shows their advertising spend bouncing back up for the full year.
A Recommendation For Growth
According to Facebook’s Ad Archive, Sprout Social is running a variety of Facebook ads, which is great. My professional recommendation, as the founder of an agency that specializes in B2B marketing for fast growing tech companies, is to keep testing there — there’s no reason it can’t be more effective for Sprout than AdWords at higher spends.
55% of all American use Facebook or Instagram every single day of their lives, and that includes 55% of Sprout’s target B2B audience.
Sprout has great content and appears to have a great sales team. B2B content served with Facebook Native Lead Ads can get cost-effective, qualified leads at scale. A skilled sales team can then call the leads to convert them over time.
I hope the Sprout Social 2020 annual report adds paid social as a main channel, instead of just paid search advertising. Mastering the channel will help smooth over the variation in organic search performance.