Sprout Social, Inc. (SPT) Earnings Call Transcript & Summary

I'm Katie Perry.

And I'm Austin Hankwitz, and this is After Earnings. The show from Morning Brew and Stakeholder Labs that brings investors up close and personal with the executives behind the world's most interesting companies.

And today, we're talking to Ryan Barretto, President of Sprout Social. Sprout offers a cloud-based platform or businesses can centralize social media management analytics and engagement across all the major platforms. Customers include Fortune 10 companies and not to mention Stanley, the breakout social media darling of 2024 so far.

Yes. And we covered a ton of ground, digging deep into their AI product, their $1 billion annual recurring revenue goal for 2028, their acquisition of the influencer management platform, Tagger, all the creator marketing they're working on and the role of social media in upholding democracy. Fun fact here, we're actually going to see 244 elections in 2024. We're going to have a hell of a year. All right, Katie. Let's jump into the interview. Ryan Barretto, thank you so much for hanging out with us on the After Earnings podcast.

Thank you so much for having me.

So I saw on your LinkedIn that you live in Nashville, Tennessee. I also live in Nashville, Tennessee. It's quite the place to live, oh my gosh, I think Garth Brooks is opening up another bar here in a couple of weeks, but dude, how long do you live in Nashville for?

We have been here 3 years, and we should have done this in-person. So next up, we go to Garth Brooks bar.

Can I also come to Garth Brooks' bar?

You are invited.

Okay. Perfect. well, let me give a stake.

Well, why don't we kick off this conversation a little bit more casually, talking about social media, right? Sprout Social is a social media management platform, social media is kind of new. It's been around for 12, 15-ish years. So one, Ryan, what was your first social media platform that you used? And two, do you remember, you're @ sign?

Oh God. I mean it would have been Facebook and it was probably Ryan Barretto. It's like probably it was super basic, nothing creative I was...

So but back then, you could get the handles like that...

No. No.

If you were an early adopter, you could grab your name on a social platform as wild how that's changed.

I feel like that was probably pretty hard for you, Katie Perry, wasn't it?

It was very -- well, yes. I felt a little differently. Yes, that's a whole other can of worms. But yes, Ryan, I -- it's so interesting, is Sprout launched in 2010, and that's kind of when I was starting my career in digital marketing, and I remember there was this like all of a sudden, all the big companies were like, well, we got to figure this out, perfect time to be in the space. Curious, do you have any favorite websites or perhaps now defunct social platforms from that era that you personally would want to see come back?

Wow, from that era. I mean I'm kind of like the tried-and-true Old Gs, I think is kind of Twitter and Facebook that have continued to kind of -- I spend a lot of time on those and have stuck with them. Yes. How about you?

Tumblr.

Tumblr.

I even got back into it when they got -- bought by somebody, and I was back in the mix and then, yes, no one's really there in my circle, but loved it.

Yes, a little hard to answer that question. I feel like on torn between like -- I feel like Myspace was cool because you could like publicly have like your top friends, right? It's like you can just tell everyone like -- these are my friends, and you're not on the list. But also, I mean, I don't know if you guys remember on Myspace, but and maybe this was just me trying to make my profile look cooler, but we have like songs, right? It's like a profile song. Could you imagine a profile song on Instagram or like Twitter right now, that'd be so cool?

The digital walk-up music?

Yes. I like that.

Yes. Yes.

Let's jump into some earnings information here, Ryan. In your recent earnings call, in a quote here, you said something very interesting that stood out to me. And so why don't you give you the opportunity to elaborate on it a little bit. You said, we've moved away from the inefficient growth anchor at the low end of our category accelerated our momentum into the fastest-growing tiers of our total addressable market, where the unit economics are strongest and where we believe our competitive [indiscernible] ends up. What does that mean? Talk to us about how you're expecting shift the company in 2023?

Yes. I think the biggest thing to highlight is -- and maybe it's helpful to get a little historical information. And...

Sure.

If we go back in time, I've been at the company now almost 8 years and when I joined in 2016, the business was very focused in on SMB. And can you use this for a while. We started in 2010. And back then, we didn't know that we were going to have salespeople. So the product was built to be the best salesperson, right? It was meant to be a product-led growth where anybody could come in and they could sign up for a trial and start using the product. And so you fast forward 6 years when I joined, it was very SMB focused, which was awesome. Customers to quickly get into the trial and start to use the product and start publishing campaigns and engaging with customers. What we started to see over the years as the product continues to get more and more sophisticated. And as -- we as consumers had different use cases for social and brands we're expecting more, was there is a lot of demand on what our customers wanted us to build. And as we added that sophistication into the platform, you think about like analytics and reporting and social listening, it started to be really clear that our biggest opportunity was in the sophisticated parts of the market, so mid-market and enterprise. And as we look at the dynamics within our business, starting to see a real divide between customers that were just starting on social and many of them were not born social or it wasn't a core part of their strategy and then the folks that were really investing that were social-first organizations. But from a customer success perspective, very different to try and serve those customers. On one side, you're literally trying to teach people how to do social. On the other side, you're helping them to ensure that they're finding all the key value points within your platform. And so for us, we realize that the inefficient parts were holding us back from the opportunity in front of us and who was our ideal customer profile and the sophisticated customers. So it's really just a focusing on saying, those customers that are social first in investing is the best place for us to be investing because that's where our product is perfectly aligned and we changed some of our pricing strategy, and we changed our coverage strategy to focusing on those customers.

So as a quick follow-up there though, I'm curious like as a publicly traded company, you're essentially telling me right now you're slowing down to speed up, right? Like we could be a product that just brings everyone in and it's your product led, and that's part of the equation, sure. But we also realize that maybe that's not our long-term vision that we should really double down on the people who won't have the money; and two, really care about our product from an underlying business perspective. So how do you approach telling shareholders telling Wall Street guys. I mean, Palo Alto Networks just had to do that recently. I'm sure you saw as well. So how do you approach like, hey, guys, we're going to slow down, but it's an effort to speed up over time?

Yes. So in the end of '22 going into '23, we made a really concerted effort to forecast it to our investors and analysts, the strategy shift that we are making in the area of focus. We highlighted that they should expect to see a reduction in the number of customers. And in fact, in many places, we are -- in the ads are actually negative because the customers that are -- are those customers that were sort of trialing the product, they are month-to-month, they're trying to figure out social. They're no longer customers, and they're not coming in. That's not where we're fishing anymore. And so we really worked on highlighting to folks that there's going to be a big change there. And at the same time, highlighting for them the growth that we're going to see in ACVs, annual contract value and the size of the customers that we're working with. We shared a lot around how our ACVs are up 40%, how our 10,000 and 50,000 customers continue to grow -- 30% and 40% plus and really helping people to see also just the logos. We started to talk about companies that were in the Fortune 500 and Fortune 10 and tell more stories on our earnings calls around the size and scale that they're landing and growing with us. So that's been part of the journey. But I definitely think it's one of those things where you need to continually share the feedback to investors and share the strategy and help them understand that this journey isn't going to be one that immediately overnight, you get to the place that you want to go when you've been building a business for 14 years, but over time, and for us, it's in the short-term, getting to the place where the ideal customer profile of sophisticated customers is the vast majority of our base is pretty close to upon us now.

Absolutely, right? You mentioned ACV, average contract value being around $12,500, it's up 40% year-over-year. And something I want you to sort of double click on though is the premium customer spend, right? I mean, like you guys expanded from 6% to 7% quarter-over-quarter. Premium features annual recurring revenue increased 50%. How did you do that?

Yes. So a lot of kudos to our product team. Our product team has done an awesome job listening to customers, and then -- and really investing in places that we are getting great feedback about the opportunities that existed for our customers to do more on social. And so over time we've added, in addition to the core marketing functionality, we've added more customer care functionality. We've added analytics and social listening and employee advocacy. And then most recently with the acquisition last August, Tagger, our influencer marketing platform. And so I think it's a combination of making sure that you're listening to your customers that you're building against the opportunity that you're doing in company limits from a marketing perspective, and then doing a good job with sales enablement to make sure that your team understands the true value of these products and that were going to drive the customers and see how it can solve problems for them. So a lot of credit to a bunch of folks across the team. And you mentioned it, the 7% stat is actually the number of customers that have 2 or more products...

Wow, okay.

Well 30 -- and 30% of customers have one or more products. So -- sorry, let me rephrase that, 7% of customers are customers that have 2 products and then the 30% have attached at least one.

Got it. Very cool. Yes, that's awesome. And I saw on your Investor Presentation, right? You have this really cool sort of pie graph showing, only 7% of people have 2 premium products like that can leaves a lot of runway and then just open skies for opportunity in the future. So congrats.

Thank you.

In that same lane, Ryan, I'm curious, as you all have evolved and got moved up in terms of the organization and where social sits from marketing, maybe to perhaps a level up. Has the buyer/user personas for the product changed over time? In another way, how -- the core buyer of your product was, I assume, formerly marketing people. Is that still the case, and then you expand from there? Or do you now have a different persona you're going after?

Yes. And Katie, you probably saw some of this just through your own journey in digital. When I started back in 2016, oftentimes, we'd be spending time with someone in the marketing department who tended to be the youngest person in the room that they've just handed the keys to social floor. I said, how about it. And you fast forward to where we are today, and its teams of social media managers. That are VPs of Social. I mean one of the folks, Marissa at Salesforce as the VP of Social. When we started working with Salesforce, she just shared part of her goal and her strategy is to make sure that executives were getting a seat at the table from a marketing strategy perspective. And so for us, it has evolved in that -- these teams have grown. The level of people getting involved has changed. We are incentives Chief Marketing Officers and Chief Digital Officers more than ever before. In many organizations, you're seeing CEOs demanding that they're getting data on social on a weekly basis. You're seeing them leverage social strategy and data in their own personal handles and how they're communicating, and you see this a lot from a public company perspective, right? And more and more of these public company executives have really big personas. And you've got investors that are following them and [indiscernible] are following them and their presence on social matters more than ever. So it has evolved in terms of the level of folks that we're getting a chance to engage with. And then the other piece that's been really, really fascinating is when I first started, social was considered a MarTech. It was a MarTech company. Sprout Social was a MarTech company. And what we've seen and so much of this is driven by consumer behavior, it now cuts across the organization, right? It's the first place we go when we need customer care. We don't pick up the 1800, we tweet out or we go to someone's Instagram page, we DM them. And so you're seeing it go into customer care. We've had sales organizations involved. There's folks from a strategy perspective, you are consuming the data. So it is -- it's gone up a level and it's gone across the organization.

Ryan, what do you see the transformation of social demand inside the organization, all of that, what types of organizations are you surprised to have not just doubled down and gone all in on social yet? It's looks like, what are these people waiting for? Like do you have any like examples of that.

The funny part is in almost every industry, you will see the [ lighter's ] that exist. And then by the same token, we've got folks that are in logistics and transportation and deep in manufacturing, who you shock are coming [ from your ] first organization. We were laughing last year, one of our reps closed like 2 or 3 logistics deals. We were joking that should be our next hot vertical. But I'm actually -- I'm really fascinated by how it's evolving so quickly. And that was something I was personally excited about when I joined Sprout was -- the total addressable market was so huge and you're hard-pressed to think of any organization that wasn't really going to need to figure out it now in the future. And so I would think it's actually more dependent on the organization than the industry. Certainly, anybody who has high B2C customer bases, if you think about retailers, you think about anybody who's in entertainment or travel hospitality tend very deeply on social because the consumers are all day long. But even in B2Bs, we see this more than ever. You see us leaning into TikTok. They're realizing that at the end of the day, their buyers are [indiscernible] time on all of these social networks. And so they're thinking about how do they evolve their own strategy to make sure [indiscernible] customers might be.

I think in 2010, a lot of people perceived Sprout as where you publish across. But always fascinated me that it's evolved over time was the social listening aspect. And what you can unlock, if you have a line of sight into all these conversations across different platforms, and that's why I was super excited to read about the Reddit integration. So we'd love to have you voice that over and talk about how that pulls in a new and different data type that these companies can use alongside everything else?

Yes. I'm like you, I'm just so excited about the listening data that exists. And I think it is one of the -- the most rich sources of data that a lot of companies are leveraging on a daily basis to drive their business, to transform their business, to make decisions based on these real informative insights. These are huge opportunity in our business is one where we want to democratize the access to this data, and we want to help organizations more easily surface these insights so they can make better business decisions. And so Reddit fits in there. Clearly, they have an incredible amount of data there is -- oftentimes, we refer to it as a voice culture that exists in places like Reddit. There's these unfiltered unbiased, real-time conversations that are happening and there's so much rich data that sits behind these conversations in the sub-Reddit's. And so we're really excited about it. It's an important part of the data that exists within our listening solution ,one thing organizations businesses realizing [indiscernible]. A lot of brands don't personally get involved in those conversations today. But listening provides so many unique insights they can leverage that might tell them about ways that they need to evolve their customer success strategy. It might give them really good indications on the ways that they need to evolve their product strategy, innovate on the products. So we tell them a lot about who their competitors are and what people are saying about their competitors. So that data source is just one that we're continuing to be like [indiscernible] in your world, we see this a lot, right? There's a lot of sub-Reddit's that are specific to fins and financial information. We're seeing a lot more public companies when you do Reddit trying to pay attention, obviously, at the Wall Street that's trying to pay attention to [indiscernible] conversations that are happening on Reddit. We've even seen folks that [indiscernible] Reddit in way get a chance to engage with retail investors. So there's just a lot of lot of rich interaction happening that I think is a huge opportunity for us.

Real quick, let's clarify for people how the data is used because [indiscernible] we use data in terms of ad targeting. When we're talking about social listing, we're talking about aggregate and anonymous to some degree, collected insights that are being used to drive action, whether it's an idea for a new marketing campaign, a Super Bowl ad, something like that. Can -- is that sort of how people should think about how data is positioned in [indiscernible] the standard sort of social media platform?

Yes. I think that's a really good framing of it. At the highest level, we do think about the data on the macro in giving really interesting insights about things that might be trending that are interesting to you. And so what that often means is for a lot of our customers, for example, it's -- actually, I'll give you a great example. I was speaking to a President of a tools company a few weeks ago. And they're leveraging the social listening data because they really want to understand the voice of the customer, both their own customers and the competitors' customers in the way that they talk about their tools. And they're specifically looking at new products that they've released and they're trying to figure out from the conversation that's happening, what is the sentiment behind it? Is it positive? Is it negative? When folks are implementing the tool, what are they saying specifically? What features of that tool stand out? When they're criticizing it, what are the things that they dislike about or they're having a challenge with and they're leveraging all this macro data to inform a point of view around the things that they want to do. So you're right, that is how we use the listening data compared to some of the networks, if I think about Facebook or an Instagram or YouTube or some of these other places where there might be places where you're marketing and you're pushing campaigns and customers might be commenting or engaging on those posts. Oftentimes, that's more of a one-to-one direct engagement versus the macro data behind it that might give you some really interesting insights that might change your behavior and your area of focus.

And it goes back to that saying a brand is what people say about you when you're not in the room and a lot of time on social, unless that you're an airline and somebody is going in, it is kind of that moment where you're overhearing in aggregate, and it could be very interesting. So thanks for clarifying that for us. Next, we do that. So shifting back to sort of company goals. In terms of goals, you all note a $1 billion annual revenue target in your latest earnings report. What do you think it's going to take to get there, both within the walls of your company as well as in the industry at large?

Yes. We're really excited. For us, we're just under $400 million in annual recurring revenue now. And that milestone of $1 billion is the one that we put out there for 2028. There's a few things that we're thinking a lot about, and we've been working on executing against right now. The first thing that I'd highlight, and we talked about it a little bit earlier is just product leadership. We are a product-led company. And we take great pride in G2 naming us as the #1 software product. For us, we want to lead with the product and continuing to develop the product matters a lot. Having something even as we add sophistication that's incredibly approachable and well-designed and elegant intuitive matters a ton to us. So we continue to think about how do we do that in the areas that we're choosing to invest in. So you've seen us with the marketing side and now adding customer care and analytics and social listening and influencer advocacy. It's continuing to make sure we're going deep enough in those products, so that we're really solving all the problems that customers need us to solve, and looking for opportunities that might be on the fringe of the things that we do. So that's one piece from a product strategy perspective. The second one that we care deeply about is just a winning culture. And so for us, we've been very fortunate that over time, what's differentiated, our company has been that we've been an employer of choice. So we're a values-driven organization. We continue to have incredible scores in places like Glassdoor. And I think our employees will tell you that the culture that we have at Sprout enables them to do their best work. And if you think about it, if you take great care of your employees, they're going to take great care of your customers. Those are the folks that are building the products every day. The third piece that I'd highlight is the partner ecosystem opportunity for us. For the longest time as we get started, especially as you're a small business, a small company, your insular, right? You build your products and you're trying to get to a stage where you've got product market fit and that you're driving a lot of success with customers. And over time, if you do a good job, you start to be in a place where you become interesting as a partner. And so for us today, with 30,000 customers where we are very focused in on being the social platform for businesses, it's really clear what our goals are. And so we end up being a great partner for organizations that are thinking about how they get the full 360-degree view of their customer. So you think about places like CRM or marketing automation or HelpDesk or BI tools, Sprout and social media management fits so nicely within that whole equation. And so for us, leaning into the ecosystem is going to be really important. We have a partnership that's well known in the industry with Salesforce that we've been working on for the last couple of years, and that's a great example of the partnership at play where we've got deep product integrations that are really enabling our customers to get more value as they think about their CRM and their social media management.

You mentioned sort of the product leading a lot of that. You also mentioned your culture, right? It seems like you guys have quite the culture of speed. I mean you mentioned 150 product updates in 2023, which was up 25% year-over-year. How are you balancing sort of quality and speed and -- I mean, how does all this come together with a long-term vision of $1 billion by 2028?

The -- one thing that's really important is we have a belief that you can move fast and have great quality. And 2 things can be true. We definitely believe that. Now what does that mean? It means that you have to have really great focus and you need to be very clear on your priorities. If you do that, you can route yourself with some of the noise that distracts, and you can really deliver excellent products. So I think it'd be big part of it for us is this idea that velocity matters, moving with a bias for action matters and delivering high quality really matters. And I'll give a lot of credit to the way that the product is being architected. It's a -- the majority of what we do is a single code base. We'd be mostly organic through our 14 years in terms of building and when you think about what we do, we are stitching together data from dozens of other platforms and we are putting it in a place that is one UI, one UX for our customer base, and the speed in which we're able to do that because of the architecture allows us to update in one place for all 30,000 of our customers. So when we released something, we did with TikTok and probably -- that's probably 1.5 years ago, we did it for all of our customers, the moment that TikTok gave us the green light to go live with that. And that's just so powerful. And that's not necessarily the case everywhere. So that's one of the things that's enabled us to move fast and deliver really high-quality products.

We'll stay on this sort of topic of this long-term goal here for 2028. I'm sure you're doing all you can right now to lay the groundwork so that you can continue to build upon your momentum. I saw that you hired a new CMO and a new CTO. Is there any sort of like what happened there? Like can you tell us a little bit more about the new leader change?

Yes. Yes. So our new CMO is Scott, we are incredibly excited to have Scott join us. Scott is coming in, and he's taken over for Jamie. Jamie had been with us for 5 years. She's been my partner in growth for many years, and she retired to spend more time with the family. And I feel very, very lucky that as we are going through this, she worked with me for the last year to go find her successor. And so we have this awesome...

Oh, wow.

Opportunity to have her lead the CMO search and then to actually have a transition where she onboarded Scott for us. So that has just been an amazing opportunity for us. Scott's wonderful. He gets to build on the foundation that Jamie created. He was previously at Zendesk for 5 years. It was an Interim CMO before he joined us. And then before that, I think it was 13 years at Adobe. So just really, really great SaaS and tech experience and...

Sure.

He's selling to his peers, right? He's spending a lot of time serving the folks that have the exact same job as him. So he's been just a great addition to the team. And then our CTO was Alan Boyce. And Alan was actually one of the first engineers at Sprout. So he's just a really, really close story, 14 years later. Some of the...

Helen.

Yes. Alan's man. Alan is a man. So he's just been a wonderful leader for us throughout the journey. So much of what we have built has been driven by Alan and his teams. So it's just awesome to see him getting a chance to have even more impact to the company now.

That is very cool.

Yes. And also that ramp up, ramp down on the CMO side, just for folks like Alan, that is very rare. I would say, and to have that coordinated of a handoff. So really interesting insight just on the logistics of how that happened. And because sometimes it's not that that new coordinated and it's that's challenging as well.

Yes. Very grateful for Jamie's leadership and for her -- and then I think this also speaks to certainly to Jamie, but also the Sprout culture. It was critically important for her to make sure that the team is in a fantastic place and that she left Sprout better than she found it. And that she got a leader that was going to come on and help us go to the next level. So that was just a real blasting for us.

That's awesome. Well, you dig into some client testimonials in your recent earnings report. You've got a bunch of awesome logos, Fortune 10, Fortune 100, Fortune 500 companies here. I'm curious, right? AI kind of took us all by surprise -- at least it took me by surprise in 2023. I didn't know we were that close to a ChatGPT as sort of humanity here. You guys acted quickly. I think it was just in April of '23, you announced the AI sort of product integration and launch that you guys have done and from the listening side perspective and just everything else you guys are crushing it. How has AI transformed your relationships with some of your clients, right? I'm sure that there are some client success stories around like, yes, we were able to leverage artificial intelligence in such a way that got us a massive win or avoided a crisis. I just -- I feel like your AI tools are very sophisticated.

Thank you. So it is funny because -- and I'm in the same boat as you, in that it just it came like a storm and AI is everywhere...

Right. Oh my gosh.

The funny part about it, especially actually, we were talking about Alan. If you talk to Alan at this, Alan will sticker about this because we've been doing AI and machine learning for years in the background. It just wasn't fancy. You talked about it wasn't sexy to talk about it. But if I go back to something that's been really important for us, is we have a ton of data and our ability to be able to leverage that data to make our customers better is a super power. And so even going back in time, we had something -- it was our ViralPost technology, and it was proprietary built off of machine learning. Essentially, what it did is it allowed a brand to know exactly when the right time was to post for them and that was based on their followers. It was based on their audience. And it's funny, like if you go on to social right now and you search best times to post on Instagram or TikTok or whatever, it's one of the most popular pieces of content. But the reality is anybody who's close enough to this knows, there isn't a generalized answer even for a vertical, it's all very specific to who your audience is for the actual best time to post. And so we built in through machine learning, this proprietary technology that allowed each brand to be able to select that for themselves. A great example of getting way more value and getting better engagement when you're leveraging the AI built within the platform. We've added on to that our AI assist products. And there's 3 areas that are probably really the most interesting for customers today. Number one, from a content creation perspective, and we're probably all feeling this a little bit ourselves, right? It instead of taking the blank canvas, you have the ability to leverage the AI to help you in crafting and it's going to get smarter over time from a brand perspective, more and more as you're creating content. It will be helping you write in your own voice. And then from a customer care perspective, responding to customers. We know, especially in high-volume call centers, there's so much that's coming in. And a lot of the answers are pretty close. And so if AI can help you in getting an answer faster and making sure that it's aligned to the right answer, you can really speed up your time to serve your customer base. And then the last one I'll give you is the amount of data that we have, the idea of summarizing data for folks is it really, really valuable. If you think about the idea, especially in social listening, of having all this data, if the AI can actually give you some of the headlines, some of the bullet's points of the things that you should be looking out for instead of rely just on an analyst, you're so much faster to being able to actually take action on that data. So those are all things that are either live in the product right now or on the road map, but we're getting great feedback from customers because they're able to create content faster, they're able to respond to customers faster and they're able to act faster with the data that they have.

And it seems like a lot of what you're building towards is not only aggregating all of these work streams, the data, but how to make it actionable. And I've -- as AI started as there was an AI Drake song. And now to your point, we're all talking about operational efficiencies and the more serious stuff. But it seems like it is all about at the end of the day, how do you drill into what data matters separating the signal from the noise and how you can play a role in that for customers so that they can actually use it to make tangible business decisions?

Yes. I totally agree with you. The way that we think about this is AI should operate in the background if everything that you do, so that it just becomes part of your workflow. So if you're in content creation and you're a marketer, it's just this tool that Turbo-Boosts your ability to be productive and create great content that's going to resonate with your audience. If you're a customer care agent, you now all of a sudden, you can double the amount of customers that you're able to touch in a helpful way because the AI is supporting you. If you're responsible for analyzing all this data, how do these insights jump off the page, so you can move quicker to, okay, great. Actually, what I'm seeing here is we have to change this on our product, and it's clear from the feedback we're getting from social listening, I need to get that over to the product team to make sure that they're really clear on this feature that needs to be added. So -- and you're right, it's a little about how do we do this. But in the context of the workflow that people have today.

Well speaking of a new products and all that fun stuff. Let's talk about Tagger, right? I'm a content creator. I have a profile, I think, on Tagger somewhere out to that. What it might say about -- I mean, what I think I'm on there somewhere. You guys mentioned that your goal is $100 million a year in ARR for Tagger as a business segment here. Can you talk more about this and what you're doing now to help catalyze some of that growth?

Yes. We had been looking at this space for a little while. And what we had seen as brands were really intrigued by the opportunities here. And you've always got the folks that move faster here and they're testing and I'm sure the 2 of you have had to chase work with some of those brands in the past. And it's really smart, they have these awesome opportunities in front of them where there's really credible people who have incredible knowledge that can help a brand. And so what we saw from these brands that we were talking to is the idea of influencer and creator was a massive opportunity, but it was so manual, right? How do I figure out who the right creators are for my brand that actually have overlap with my audience? How do I -- if I can even find them, how do I actually connect with them? How do I actually figure out...

Right.

[indiscernible] to work with them? How do I pay them? How do I -- if I've been able to do any of those things, how do we actually measure and see if this is working? And so when we looked at all those and we started to look at the software that was in the market, Tagger, just jumped off the page is one where they were similar to us, product-led, software first, and we saw great feedback from creators and brands on the platform. And so a lot of it for us right now is we got 30,000 customers and we want to make sure that we're bringing this solution to them, and we're enabling them to be able to actually go out and build a creator strategy and then execute against it. We're seeing a couple of things in the market. We're seeing the early adopters are doing this in a very manual way. Literally, we're trying to get spreadsheets. They've got spreadsheets of creators; they're trying to keep tracking them and they're sharing them on Google. They're trying to keep track of the posts and the campaigns and they're trying to measure performance, but it's all very manual...

Yes. Yes.

And so clearly, it can help them. And then we get a bunch of folks who really want to do more with creator, and they didn't know how to get started. And so our platform can help them build out the strategy and then execute against it. And so it's a combination of enabling the marketplace and our customer base and then making sure that our team is excellent at being able to help customers see where this product can fit into their strategy.

And just as a quick follow-up to that $100 million goal, where are you on that? I mean I don't know if this is public information or not, I didn't read it. But where are you guys on that sort of trajectory around now?

Yes. It's not disclosed information today. I'd say we're -- they were a small business when we bought them. We're early stages right now. But when we look at the 30,000 customers, when we look at the 30% attach rate, when we look at their ACVs, are 3 to 4x our average ACV, there's a tremendous opportunity...

Oh, wow.

[indiscernible] last year.

In this thesis is also somewhat similar to the core product in that. This is a space that's maturing. Therefore, measurement is needing to evolve and better measurement seems to benefit both the creators who can then use the data and insights to make sure that they're getting the best rates, the Austins of the World. But also on the brand side, being able to justify this kind of spend moving away some sort of lives-based decision into something where you're like this person did this, hence forth, XYZ business impact. And that seems to be kind of like how the core product evolved. Is that how you see Tagger evolving as well?

Yes, you nailed it. We see it being both sides of the equation. But I think this is an amazing opportunity clearly for brands to be able to find work with creators and then actually see what's working. And we're seeing, in many cases, they're supplementing this with the traditional paid spend that they had, and it's been a huge opportunity. We're seeing a lot of actually similar to the comment that you made, where they were hiring celebrity influencers or endorsers and it was sort of a gut vibe feel of this person has a really big following. If we just get them to talk about our products or services, this will be good for our brand, but the ROI on those sort of tended to be not very good. And oftentimes, the folks that you're hiring -- they have an amazing brand, but it has nothing to do with what you do. And so there's no authenticity behind it. And so we're seeing that those folks are looking at it and saying, hey, this is a great opportunity. I was actually at an event last year in Atlanta and there was an organization just sharing with me that their CEO decided to hire someone from e-gaming as a celebrity influencer for them. And the social team are sitting there going, this make -- we were spending 7 figures on this and is literally making no impact on our business right now. It was like a vibe gut feeling...

Yes.

This person not aligned to their business model.

Yes.

And so we get this amazing opportunity now with data and analytics to help those teams actually get better returns and be really efficient with their spends. And then on the other side, we do think that a huge part of our success is making creators more successful. Look, we want to create tools that allow them to clearly see the value and impact of their work to have them -- have a better understanding of what they can be asking for within the marketplace from a compensation perspective and to help them see what are the right brands, given the brand affinity that they have and the topics that they talk about, what are the brands that make the most sense for them to be connected with. So having those sites in the marketplace and helping both brand creators is going to be a big part of our story.

By the way, Austins campaigns always have great ROI. I've been on the other side of them. Just got to plugged that.

Oh, great. Katie let's go. You know, we're going to talk more about that, I'm sure, over beer sometimes here in Nashville. But no, my follow-up question here for you was around the data, right? You guys are sitting on a lot of data. Do you have any like weird insights that you've seen over the last several months or quarters now as it relates to some of these creator integrations or just any interesting data points that you're like, "Oh, my god, that really surprised me considering this industry or it really surprised me considering the product?"

I think the biggest thing that we have seen, and we've spent time with brands on is oftentimes, there's creators that offer a huge opportunity that they would never think about. And so we've seen organizations where there's -- you think about straight down the middle of folks that could be really interesting for you. For example, we are working with a sporting goods company. And in that sporting goods company, like they're thinking a lot about just really big athletes. But then when they start to dig in and they start to look at from a geography perspective and they start to think about beyond just the professional leagues, there's folks that are perhaps is really big in the community, and they could be coaches in the community. There's just a lot of brand affinities that exist that aren't what you would normally think about that had an overlap with your audience. And so seeing more of that, I think that part is the part that's probably the most exciting is when you spend time with the brand and you highlight different influencers or creators that they would never have looked for on their own, but have perfect overlap for their audience. And by the way, oftentimes, what happens there is the cost to go work with those creators is much less than the cost to your...

Oh, yes.

Your traditional path where all of your competitors are going down the same road trying to do the same thing.

I think the athletes is such a good example for helping people think about this, and I think about if you took a list of the most popular NBA players, without a layer of data onto the personalities of these athletes and you really see their personalities in the league, I think of Iluka. And then I think the social layer adds this piece where you -- it's almost a very unique insight to see the nuances and how people interact and experience the athlete just based on what's going on in social. And I think for everyone, that's probably a good way to frame up to think about that next layer and what it kind of uncover?

Yes. I totally agree. You may be also just think about Stanley -- like the Stanley MuG's as an example. So they're a customer of ours. And I just didn't think of it [indiscernible].

Wow.

Yes. My daughter Ilo would be very proud of you. She walks around with a mug that's bigger than her.

[ It sounds ] bigger than my head, for sure.

But I think about them and I think about the fact that they leaned into these bonds groups that were really into their products and they started leaning into feedback happening within their community and in social, and understanding the different color pallets and the things that people are looking for and obviously, there's so much signal that exists there that you might not normally think about as a venue, but oftentimes, there's just so much untapped opportunity when you can lean in there.

So cool.

Couldn't agree more. So let's wrap up this interview with 2 more questions, one for myself and one from Katie. My question is, did anything change for your company after Elon bought Twitter? Like did you have to like scramble and find some new APIs or like just figure -- like have a new contact at Twitter after they got fired from Elon like what happened?

Yes. I mean the thing for most people in the industry, there was a lot of watching and seeing, what was going to transpire. For us, we were definitely on high alert to make sure that we understood everything that was evolving. Certainly, our work with the social networks is the lifeblood of our organization, and our customers count on us. They have deep relationships and deep integrations. So we're paying very, very close attention. For us, it's -- we consider it a competitive advantage. One of the things that Elon and x really did is they got very focused in on the key partners that they were going to be working with that they were going to be investing in, and that -- they really wanted to reduce the long tail of partners that were not productive for them. And so Sprouts sitting at 30,000 customers, where -- those are the brands that advertise, right? Those are the organizations that spend a lot of time on the platform. Those are our customers. And so for us, it's -- it was definitely one of the things we're paying close attention. We're grateful that the partnerships continue to grow and evolve, and we shared more about just our new partnership with them this past summer. So that has been a place that we continue to see as a competitive advantage for us.

Very cool man. Very cool.

My question for you, Ryan, is the societal conversation around social media, similar to AI. Is it good? Is it bad? Is it the end of the world? Is it the start of something beautiful and amazing? As someone who's operating deeply in this space, when you hear concern like election interference and things of that nature, what are you most concerned about as someone who's building in this space? And also, what are you most optimistic about?

Yes. I mean, I think for us, the way that we view our responsibility is, one, we're working with brands and for us, we really believe that having the networks well led, and having strong safety protocols built into the platforms and having these be a healthy place for conversation is all really positive. And our work is really focusing on that. Our work is focused in on helping brands connect with their customers, right? And that might be in marketing to them. It might be a lot of times now. And just taking care of them from a customer service perspective. And so we think about those elements of how do we ensure that as we're partnering with folks that we're seeing those things and that the work that they're doing, their cascades down through the work that we do with our brands, and that we're bringing those point of views back to our customers is we're learning how the social networks are addressing some of these things, what can we share with our customer base. Certainly, with the elections, that is something that I think everyone is paying close attention to, certainly, governments are going to need to pay close attention to, social networks are going to need to continue to really invest to make sure that their strategies are up to speed to protect democracies. I think Reddit status, we're going to have 244 elections worldwide this year, which is going to be the most we ever had in the next 24 years.

Wow.

[ Well, it's a master ].

I mean yes, right? Even outside of the U.S., right? It's happening everywhere. And I've been reading a little bit about what the networks are working on and they're building in protocols like removing the ability to do ads close to the election. They're tagging things that have been created by AI. So there's work that's going in. And I think that you continue to need to make sure that the investments are really there and that you're continuing to find ways to limit this information. So I think those parts are going to be really important. From a healthy and productive side of the equation, and I think about this personally as well, I definitely feel from folk [indiscernible] on social, I mean obviously, you do provide a lot of amazing advice and information for folks that want to understand about investing in finance. From my standpoint, [ Aline and Madley ] I'm parent of my daughters, and one of my daughters has ADHD, and I get so much information. My wife and I are always sharing stories about things that we've picked up on social that allow us to be better parents. And so I think so much of this is also dictated by what you're doing on social and what you're trying to get. And we're seeing audiences going to social now for news and information and education. And I think that is a really positive part of the work that we're doing.

Love that.

Ryan, what an awesome conversation and we really appreciate you joining us here on the After Earnings podcast. I really, really appreciated you walking through the road map, the products, the AI. I mean, there's so much that I learned during this conversation. So hopefully, we'll have you back again very soon, definitely when you guys hit that $1 billion mark in 2028, but hopefully before that, right?

I would love to be there and maybe we'll do it at the Garth Brooks bar.

Yes.

That is right. We will record our next episode together at the Garth Brooks bar on Broadway. Thank you so much, Ryan.

All right. Thanks so much.

What a guy? I mean, that guy was an absolute killer, seemed like he knew all his numbers, all his figures. What was your standout moment for that interview?

Very cool background, I must just get that out of the way. He had a very sick background on his zoom. So if you're not able to see that head over to YouTube and check that out. I really loved how he articulated the culture of the company. We talked about the speed of shipping product and how integral that is to their business. And also people first point of view. In fact, Sprout has been the Best Place to Work on Glassdoor for several years. And if you've ever seen Glassdoor, you know how difficult that can be. So I thought that was super fascinating and exciting to hear that layer of the business on top of the financials.

Yes, I totally agree. I've never started a company that ended up on Glassdoor but seems pretty hard to keep employees, especially the disgruntled ones from writing bad things on there. So yes, shout out to Sprout. From my perspective, I can really appreciate how they sort of transformed as a business over the years, right? This was started back in 2010, 2011, I think and they started to rock and roll and things were going great. They were very much focused on product-led marketing, small businesses where they're bread and butter. And then they said, "Wait a second, like -- we might not make as much money as we thought if we only focus on these customers, there are customers like large enterprises that really want to double down and focus entirely on social, let's take a year [ 8-k ] a 2023, have that's going to be like a transformation year for us and kind of move away from like catering the product to be every single thing for a small business, but instead really build the product for the enterprises that are investing in social." I thought the way he articulate that especially on how he sort of walk through that transformation to Wall Street other shareholders are very interesting. What a great guy and a great interview.

Land and expand over at Sprout. I'm Katie Perry.

And I'm Austin Hankwitz.

And this was the After Earnings podcast brought to you by Stakeholder Labs and Morning Brew.