News or Noise? Gather CEO Tom Gerace on New England’s Fastest Growing Web Property
(Page 4 of 4)
we could be there in August or even July simply by bringing in more writers,” he says. “But we want to get our process right and move up the quality threshold.”
I eventually let go of the quality issue and asked Gerace to talk about Gather’s business model, which also includes elements that are unfamiliar to observers more steeped in traditional media. There’s classic display advertising on the site, of course, but Gather actually collects about half of its revenue through something Gerace calls “engagement marketing.”
In short, advertisers send products to Gather, and Gather gives them out to readers, who write about them on the site. On the day I visited, for example, there was a huge pallet of Triscuits in a storage area. The company has been mailing the salty snacks out to moms and other readers. (Full disclosure: Gerace gave me a box, which I ate.)
“A Nielsen study last year showed that consumer trust in advertising is falling,” Gerace explains. “What really influences consumers is information from people they know. So brands are suddenly realizing the importance of creating real conversations around their products. Ten years ago if you did that, one mom trying a box of Triscuits might tell another couple of moms, so you might get an amplification rate of 2x or 3x. But on Gather, if you have 40 moms trying Triscuits, we’ll notify 8,000 other moms, and if they each notify 10 friends, that’s 320,000 people exposed to the conversation.”
Gather doesn’t pay members to write product reviews (Socialwriters are barred from receiving them) and it requires reviewers to disclose up front that they got something for free. That’s not just because Gather is upholding ethical standards; the Federal Trade Commission updated its advertising guidelines last fall to require that bloggers disclose “material connections,” such as free products, between endorsers and advertisers. But the disclaimers are also the key to the transparency that makes engagement marketing work, Gerace says. “We’ve had promotions for movies where 80 percent of the reviews came back negative,” he says. In those cases, telling readers that the movie tickets were free “adds value, adds credibility,” he says.
Gerace says Gather’s engagement marketing campaigns with big brands cost $50,000 per month at the low end and several hundred thousand dollars per month at the high end. Most campaigns last three months to year. But figuring out exactly what price tag to put on this kind of advertising has been tricky, he says. That’s why Gerace helped to start a new trade association called the Social Media Advertising Consortium (SMAC). The consortium has been holding conferences focused on the best practices for designing, deploying, measuring, and charging for engagement-marketing campaigns and other types of social media marketing.
“In a socially connected world, the way you go to market is fundamentally different,” Gerace says. “Our first step [at SMAC] is to map the landscape and figure out where there are identifiable benefits and how you are measure and charge for this. We won’t say that [an engagement marketing campaign] is worth exactly X dollars, but we will say ‘This should be the billing mechanism.’”
With Gather’s content model attracting more readers every month, and with advertisers cottoning quickly to the engagement marketing model, Gather seems positioned to grow into one of New England’s biggest media properties. Gerace says the company is on track to double its staff this year. In audience-reach terms, Gather is “10x ahead of where we were a year ago,” and bookings have tripled over that same period, Gerace says. “So yeah, we are hitting our stride very quickly.”
But to expand as fast as Gerace would like, the startup will need to raise a “healthy” capital round soon—which might mean turning to venture funders for the first time. So far, all of Gather’s backing has come from Gerace’s family, strategic investors such as Hearst Publications, McGraw-Hill, American Public Media, and the McClatchy family, and individuals such as Jim Manzi, the founder of Lotus Software, and Jack Connors, one of the founders of Boston advertising giant Hill, Holliday.
But don’t expect to see Gerace making the rounds of the Waltham venture firms. “I think there is a lot of work to do to developing the capital infrastructure needed for media company successes in Boston,” he says. “When you mix technology capital and new-media vision together, you get some very, very large-cap companies being built, to the massive benefit of the regions they’re in. But I think a tiny fraction of the capital here is focused on that, and a tiny fraction of the investor base knows how to do that. There is a reason Facebook moved from Boston to Palo Alto.”
But that’s not a threat—Gerace says he’s happy to be based on Boston. “We’ve got great talent here,” he says. “But I do fly a lot, and I sure wish I could be doing more business with more companies in Boston.”