News or Noise? Gather CEO Tom Gerace on New England’s Fastest Growing Web Property
For a while now I’ve been curious about Gather, a privately funded news and social networking site based in downtown Boston. I knew that Gather was founded by marketing pro Tom Gerace, that it is owned in part by the public radio operator American Public Media, that it has an unusual way of paying users for contributing content, and that its traffic has been rising through the roof—the company claims that the number of unique visitors it attracts each month is 7.2 million, a 400 percent increase just in the last five months.
But I didn’t really get Gather. I didn’t understand who reads its articles, who writes them, or how the company makes money. And I was a bit skeptical, to be honest, about whether there’s much value in Gather’s content, which is largely a blend of news, reviews, recipes, celebrity gossip, and how-to articles, much of it seemingly cribbed by users from more traditional journalistic publications. But it’s hard to argue with 7 million unique visitors. Gather claims that its “reach,” meaning the number of households exposed to the site every day, exceeds that of CBS.com, CNBC.com, iVillage.com, PBS.com and even USAToday.com.
I recently sat down with Gerace for a long conversation about the company, which is his second startup, and also his second venture in what he calls “pay-for-performance” marketing. The first was BeFree.com, an affiliate marketing network that he founded in 1996 with his brother Sam. That company’s business was to sign up online merchants to send business to e-retailers like Barnesandnoble.com, LendingTree, and Dell in return for sales commissions. Gerace (pronounced je-RACE) says he learned from BeFree—which was purchased by rival ValueClick in 2002 for $128 million in stock—that paying commissions creates an “ecology” with “directly aligned incentives” where the affiliates themselves figure out how to win more customers over time. “We got to realize the power of that as billions of dollars in commerce flowed over our platform without us doing any business development,” Gerace says.
So the first thing I came to understand about Gather is that it represents Gerace’s attempt to recreate an Internet business driven by a pay-for-performance marketing model, but in the realm of user-generated news and discussion rather than e-retailing. In fact, Gerace, who graduated from Harvard in 1993 and spent three years writing case studies at Harvard Business School before plunging into entrepreneurship, seems to have deliberately gone searching, after the BeFree experience, for an Internet niche where he could apply the same core concept—call it the Tom Sawyer maneuver—of getting your users to do a lot of the work for you.
He chose the online media business, where traditional notions of authority have been blown to smithereens and anyone who can achieve high search-engine rankings can draw in traffic—which can then be monetized through advertising and other forms of marketing. In Gerace’s eyes, it’s all a matter of casting a sufficiently wide net.
“If you go back to 1990, everything we knew we got from one newspaper, a couple of magazines, and likely a nightly news or morning radio show,” Gerace says. “In effect, we were handing off our information sourcing to three or four editorial groups who told us what we needed to know. Today it’s completely different. More than half of all traffic, even to the largest news sites, comes from search. There are 15.5 billion searches run a month, which means 15.5 billion opportunities to go out and find someone who wants to read what you have to say. So the questions that face the market are, how do you compete in a space where search is driving a majority of content discovery and consumption, and how do you create sufficient content to go across topics that are very broad? We believe that by creating a model that is pay-for-performance based and that leverages an ecosystem, we can spread out very cost-effectively and own a meaningful share of the market. And that’s exactly what we are doing.”
Everyone on Gather is encouraged to contribute content to the site, whether that means blog posts, recipes, photos, or videos. The material appears on users’ profiles, and Gather editors promote the best and most popular content on subject-area pages covering topics such as books, celebrities, entertainment, family, fashion, food, health, money, news, politics, spirituality, sports, and travel.
Gather rewards its contributors in two ways. Casual or infrequent contributors earn “Gather Points” each time they share, and can redeem the points for gift cards from companies like Home Depot, Starbucks, or Amazon, or for cash credits on Paypal. A second, much more exclusive group of members, called Socialwriters, must post at least 20 written articles per month, and are paid cash based on the number of page views they attract. (That’s the pay-for-performance part.)
Under the Socialwriter program, launched this spring, contributors earn $2.50 for a post if it draws at least 250 page views, $5.00 if they cross the 500-page-view threshold, and $10 for 750 page views or more. They also get monthly bonuses of $25 if their articles draw 25,000 page views in aggregate, $50 for 50,000 page views, $100 for 100,000 page views, and so forth. Gerace says that some of Gather’s socialwriters are earning more than $2,000 a month. “We fully expect that some will end up at $4,000 or $5,000 a month, earning a living Socialwriting,” he says.
Only 1 in 14 of the applicants for the Socialwriting program are admitted, Gerace says, and the company is careful to train Socialwriters how to “select topics and write content that will get maximum pickup on search engines, media sites, blogs, and social networks,” to quote from Gather’s own site. It’s through the Socialwriting and Gather Points systems that the startup, which has only 23 employees, has been able to surge past other Web publishers and grab an increasing percentage of search-generated traffic.
From my own point of view as an online journalist, there’s just one catch: paying for performance is not the same as paying for quality. As any blogger knows, it’s all too easy to win page views and gin up “Google juice” simply by penning provocative headlines. Gerace and I spent more time engaging on this subject than anything else—largely, I admit, because most of Gather’s content ruffles my own (elitist) sensibilities about good writing and newsworthiness, and I wanted to know how Gerace thinks about the issue.
I put it to Gerace that most Gather posts are rehashes of information already published elsewhere, and that even the original information is of questionable value to Internet surfers. To cite some examples, the April 27 “News” page on Gather featured a piece about David Letterman calling Jay Leno “a complete boob,” a reposted YouTube video about a missing Utah woman whose body may or may not have been discovered in Idaho, a report about a porn video starring a Tiger Woods look-alike, and an article about a group of evangelical Christians from China and Turkey who are “99.9 percent” sure that they have found pieces of Noah’s Ark.
Overall, I can’t imagine that this sort of thing is what American Public Media had in mind when it invested in Gather back in 2005. But Gerace’s reply to my criticism was articulate and unusually transparent, so I’ll quote it at length. “Our goal is not to be the capital-J Journalism site in the market,” he says. “The New York Times starts a million conversations a day by breaking the news; our goal is to be the place where those million conversations happen. We are providing the secondary conversation cycle where people share their take on the news, where moms talk about how they view the H1N1 vaccine, where parents talk about how they should tell their kids about Tiger Woods’ affairs. That’s what we’re good at. We look to that space because the content creation costs are far lower, and the ability to monetize far greater, because the conversations go on much longer than just the expiration of the breaking news.”
But how many more Tiger Woods stories does America really need? “There are definitely articles on the site that create a lot of value and articles that don’t create a lot of value,” Gerace acknowledges. “Let me differentiate between ‘good’ and ‘edifying.’ Gather is a for-profit company and our goal is to meet the market demand for content. There is far greater demand, like it or not, for content that is edgy, that has some sexiness, raciness, or celebrity attached to it, than there is for content that you and I might see as having gravitas. People would rather read about Tiger Woods’ affairs, by a 10 to 1 margin, than about healthcare in America. As a media company, we should be supplying content about both. I’m not going to apologize for the fact that we have exceptionally good celebrity and gossip content on the site, because Americans want to read it.”
But while I’m as sensitive to audience desires as the next writer, I couldn’t let the quality argument go. I pointed out to Gerace that one of the lead items in the “Spirituality” section on the day we were talking (April 15) was a post stating that President Obama had canceled the National Day of Prayer. In point of fact, the president had canceled a White House ceremony observing the day—a ceremony that had been instituted by George W. Bush only a few years before. In Gather’s defense, the author of the post was simply transmitting misrepresentations spawned earlier in that day’s news cycle by conservative pundits like Glenn Beck and Rush Limbaugh. But in doing so, he or she surely subtracted from the sum total of human wisdom.
“I’m a believer that the way you counteract inaccurate speech is with more speech,” Gerace replies. “Let me say again, our goal is not to be a journalism site. Our goal is to be a site where people talk about what’s happening in the world. When members of the U.S. Senate get up on the Senate floor and talk about death panels, these are the leaders of our nation sharing spin that I think in their heart of hearts they know not to be true, and that’s also freedom of speech at work. Will you find inaccurate stuff on our site? Oh yeah, absolutely. But do we believe that people will counteract that over time and that the truth will win out? Absolutely. I do not want to create an editorially verified, top-down, fact-checked media enterprise. The Times and the Post and CBS are doing well at that.”
But surely, I told Gerace, he must think about how to nudge writers to post articles that are more accurate, with more original reporting, or at least with clearer sourcing?
“I understand the challenge—it’s happening all across the media, even at the most reputable brands, that we take information we get second-hand without validation and we put it on the marketplace,” says Gerace. He says Gather is dealing with the challenge in several ways. One is to encourage, and eventually to enforce, stricter standards around citation, both for Gather Points contributors and for Socialwriters. Another is to crowdsource the filtering problem. “We need to go in and ask for, or demand, original sources, but we also need to begin to provide some method of credibility ranking,” says Gerace. “We have a patent-pending technology called PeopleRank where we look at how people read an author, and that helps establish the prominence of an author in the community, which will help to distinguish between respected and non-respected writers. That’s a first step.”
Eventually, Gerace adds, Gather will start to churn the Socialwriters, dropping the worst performers from the program and replacing them with better ones. “Gather will be, without fail, a top-100 media property by December 2010, but what might surprise you is that 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.”