The $4 Million ARR Business of Privacy Analytics Tools

It took me a while to come up with this edition of the SaaS strategy newsletter as I took a pause and overhauled the approach of this newsletter, focusing on categories instead of specific tools.

Since most readers are researching new opportunities, I thought it would be valuable to provide a bird's-eye view of categories in each issue.

In the end of this newsletter I’ve added sections to evaluate opportunities and ideas to explore for building products in this category.

New approach: analyzing product categories

We often don't get the chance to look at multiple successful products together and put their success into perspective. So, from now on, this newsletter will focus on a group of tools that serve similar customers and offer similar features but are unique in their own ways.

Privacy analytics market

In today’s edition, I'll use that lens to examine a bunch of privacy analytics products that have gained popularity over the past two to three years and have captured market share from industry giants like Google Analytics and Adobe Analytics in the process.

Let’s first begin with the Total Addressable Market (TAM) analysis for the privacy analytics market before diving into the details.

Privacy analytics- TAM

The total addressable market (or TAM) for privacy analytics can be calculated by the following method:

Approximately, 1% of the websites ranked in top 1 million (in terms of traffic) use a simplified, privacy analytics tool and 0.5% of those ranked between 1-3 million use a privacy analytics tool. So we have a total of 20,000 licenses of such tools.

If we assume an average spend/ARPU of $50/month or $500/year for 5,000 licenses in top 1 million, and $10/month or $100/year for the other 15,000 licenses, it amounts to a total of $4 million ARR for this category of SaaS.

Targeting a niche

As I often say, building a micro saas is not so much about ‘what you are building’ as it’s about ‘for whom you are building’.

You can build the exact same task management software that’s used by doctors and sell it to plumbers, if it can be tailored to the plumber’s needs, jargons, lifestyle etc.

With that said, for analytics tools, the target market comprised people who

1. Ran small businesses with few employees and had no dedicated analytics person

2. Had to be compliant with the new laws around data and privacy for visitors

Poor/complicated UX of Google Analytics (and later introduction of Google Analytics 4) had already created a demand for self-serve tools in the above market.

In addition, introduction of GDPR laws had opened a large European market to such products.

For all these reasons leading and emerging players in privacy analytics market have focused their attention to the above 2 niches.

Positioning your product

There are 3 things that you should clearly communicate to position yourself as a micro saas for any niche:

1. You need to make it crystal clear and easy to understand what you do

2. If you’ve a stand on a controversial topic concerning the audience, clarify what you stand for

3. How do you compare with whoever is the biggest name in your market

The communication channel can be blogs, social media, ads etc. but these 3 points should come out in overall messaging.

For privacy analytics SaaS these 3 things are:

1. Offering- lightweight and simple to use analytics

2. Stand on privacy- no cookies

3. Advantage over Google analytics- simple to operate and fully compliant with GDPR, CCPA, PECR etc.

The Players in this Market

The key and emerging players in this market are:

1. Plausible analytics - estimated 1.5 M ARR

2. Fathom analytics - estimated 1M ARR

3. Friendly - estimated 100K ARR

4. Umami analytics - estimated 200K ARR

5. Simple analytics

6. Pirsch analytics - estimated 50K ARR

7. Splitbee- acquired by Vercel

Product-market fit

If we take a deep look at their market and user base, the product-market fit was already present because most of these websites were using Google Analytics, Hotjar etc. and then switched to these new players for the reasons mentioned above.

If you take a look at builtwith report for market share movement (the snapshot is for Plausible Analytics), you’d see that most of the market share came from leading players like Google Analytics, Matomo or Hotjar who lost 5x to 10x more users to these tools than what they gained.

Key Features

Privacy analytics tools market their features around the following key selling points:

• No browser cookies

• No banners required for cookie consent

• No advertising networks

• 100% GDPR/CCPA compliant

• Privacy by default

• Lightweight

• Compliance with privacy laws in various countries

• Ethical reasons

Sign up to upgrade ratio

Based on Plausible analytics open data we’ve found the signup and upgrade rate as below:

Total yearly unique visitors- 1,400,000

Created account- 36,700 (~2.5%)

Activated account- 24,300 (~1.7%)

Total upgrades -5,987 (~0.4%)

1 of 4 people who sign up for a trial, upgrades to the paid version.

If we look into the conversion data, it shows us that 90% users who upgraded were direct visitors.

There is one important note here:

Privacy tools have very poor attribution tracking as they can’t identify users based on their first source of visit, thus making them not of great use for companies with marketing departments.

Distributing to the niche

Since most privacy analytics tools publish their stats, it’s relatively easy to understand their traffic sources. The following snapshot is from Plausible.

Traffic sources (for non-direct traffic):

1. Plausible gets most traffic from search like any other established SaaS. 50% of its traffic come from search

2. It gets 5% of traffic from Github as it offers an open source version

3. 6% of the traffic is from social media and communities out of which 4% is from Twitter

The traffic distribution tells us that their primary marketing channel is to publish new content.

If we take a look at other privacy analytics tools we’ll notice a similar pattern where content drives most of their traffic.

For a new analytics platform like Pirsch, 33% of non-direct traffic come from Google, 50% from social media and communities and the rest from referrals.

It substantiates the idea that to arrive as a SaaS you need to build a strong foundation of SEO.

Pricing (and competing with a free solution)

The pricing for these tools get tricky as its difficult to price it with market based pricing as Google Analytics is already offering a free solution. Hence we see a variety of price range like Pirsch offering its service for $5/mo in an annual plan vs plausible charging $7.5 and simple analytics charging $9.

It also shows that these tools enjoy a loyal customer base and very low attrition due to competitive pricing as it’s difficult to carry forward historical data from one tool to another when you’re making a switch.

Overall Scoring from an opportunity perspective

1. Complexity of build- privacy tools are not very complex to build if you’re using standard dashboards and offering standard data sources. I’ll give it 7/10

2. Competitiveness- it’s a highly competitive market due to prevalence of many players. Differentiation is difficult and there is a huge first-mover advantage for established tools. All this makes it challenging to find untapped niches. I’ll give this a 4/10.

3. Marketing- it’s relatively easy to market if you already have an audience or you own a tool where analytics can be an additional functionality. Most tools spend close to $0 in acquisition cost. Thus it gets a 9/10.

4. Support and maintenance- support needs are low but there’ll be occasional upgrades required if privacy laws change as the core value prop is based on privacy. I’ll give this a 7/10.

5. Revenue potential- as discussed earlier, established tools are making over $1 million in ARR making it one of the most attractive businesses for solopreneurs or small teams. I’ll give it a score of 8/10.

6. User churn potential- the use case is repetitive and data migration from one tool to another is nearly impossible. That makes it a great business in terms of churn. I’ll give it 9/10 for churn.

Overall score becomes 7.3/10 for this category which makes it a pretty attractive business to be in.

Opportunities and trends

1. Niching down into a market where governments are introducing new data privacy laws can be a great opportunity for this market. Tailormade solutions for specific privacy laws other than GDPR, CCPA, PECR are still rare to find.

2. Another opportunity would be to partner up with established websites builders like Cards or unicorn platform and offer a tailormade solution for these platforms that users can subscribe to along with those subscriptions. That’ll make it easy to market while you might have to pay a certain % to these platforms as commission.

3. If you can build a tool where people can bring their exported data from other tools and view the same metrics offered by other tools while pricing it slightly lower than established players that can be a huge opportunity as differentiation is very low.

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