For most of Imgur’s history, the bootstrapped company sold ads programmatically. And with 150 million unique visitors and 6 billion page views globally, the media company had enough scale to do well, even if CPMs skewed lower than direct.
But that approach left money on the table. Imgur’s millennial male, geek culture-focused community is highly valuable to advertisers. It dubbed the group the “lost boys” because of the difficulty finding them in any one place in large numbers. But those lost boys hate ads, cutting into Imgur’s programmatic revenue and making it an early victim in the rise of ad blocking.
To better monetize Imgur’s massive audience, the company raised $40 million from Andreessen Horowitz in 2014. Pinterest and LinkedIn vet Steve Patrizi joined Imgur soon after to head advertising and marketing.
Last year, Imgur introduced sponsored posts, a native ad format. Brands tell stories in the same tone as Imgurians – the internal name for community members – and the posts receive comments, upvotes and downvotes. The ads cannot be blocked, solving a critical problem.
Next, Imgur will expand sponsored posts to mobile, ramp up its launch of video posts and add more advertisers.
Patrizi talked to AdExchanger about how he helped launch the native ad platform and what’s next for the company, which employs just 60 people.
AdExchanger: How did the idea for Imgur’s sponsored posts come about?
STEVE PATRIZI: In one of my first conversations with [founder] Alan [Schaaf], we talked about the advertising business model. We had this idea: Wouldn’t it be great if the advertising on Imgur was just as good – if not better – than organic content on the site? It’s hard to find a place where it actually works like that.
You wouldn’t take a marketing execution that works well in the US and just put it in Brazil, because there is a different culture. Online communities have their own cultures, and the marketing should feel native to the community.
Did you or marketers have concerns about the audience being hostile to the visible ads?
There has always been a segment of the audience that seeks to tune out advertising or feels that its presence is unwelcome. We try to make the advertising something that they enjoy seeing. I’m blown away that there are comments on these posts, where people say, “I can’t believe I’m saying this, but I think it’s better than other content,” or “I can’t believe I just favorited an ad.” We only launched promoted posts on desktop. People have said, “I think my mobile experience is broken, because I don’t have [promoted posts] on mobile.” We think those are some good points with a user base that is difficult to market to.
How are you looking at ad blocking given that your millennial male audience uses ad blockers in high numbers?
While it is a new and growing problem for a lot of publications, we’ve already felt the brunt of it. We’ve had an ad-blocking dynamic for the past 3 years. There is a big percentage of our inventory that is affected by ad blocking. But we don’t see it growing [beyond that]. We’d like to address ad blocking not by gating content and not by trying to engage in a tech arms race to thwart the ad blockers. We don’t think that’s a viable solution.
It would be great if people felt they were missing out by not viewing the ads. We know that happens once a year at the Super Bowl, where people want to see the ads. We just haven’t applied that to display.
How far along are you with sponsored posts?
Twelve months ago we launched the first promoted post, and over the course of those 12 months we’ve worked with 30 advertisers in retail, media, personal care, movies, restaurants. Because it’s a new advertising format and advertising to audience that has high standards, we knew there would be a lot of learning to do.
What’s the next goalpost for you?
We are ready to start opening up the gates and working with even more advertisers. We are expanding our sales organizations. We’ve had two people in San Francisco, and now we are going to hire people in New York, Chicago and LA. Then, we will be working on bringing promoted posts to new platforms like mobile. About a month ago we started running video in promoted posts, which is a user-initiated YouTube embed. We think there is even more to do with video.
How are advertisers able to measure success?
There are a number of ways. They are bought and sold based on unique views. There is the classic [click-through] if they are trying to drive traffic. There are other engagement metrics we can provide, like the number of people who can favorite the post or comment on a post, upvote or downvote it.
How are you thinking about Imgur’s programmatic display business versus its sponsored post business? Are banners on their way out, or are they still an important part of your business?
I think our industry is notorious for calling out the upcoming death of something. I’ve been working in digital advertising since 1999, and since 1999 we’ve been calling for the death of banners. We don’t feel strongly that this format will survive. Right now we are optimizing for advertiser flexibility. There are a lot of advertisers that want that native connection with the audience. Others feel they have invested in display assets they think are very good for the audience. We’ve made some decent investments on the programmatic side. We implemented header bidding and we are talking with partners about private marketplaces.
What’s changing in how Imgur’s audience is consuming content?
Mobile is huge for us. We were relatively late in getting mobile apps to the market. It wasn’t until last fall that we created fully featured apps for the iPhone and Android. Since shipping those apps, we’ve been seeing far more engagement in native apps than we do on desktop.
Imgur was created to host images for Reddit, but Reddit recently launched its own image hosting service. What does that mean for Imgur?
We recognize that it makes a lot of sense for them to have their own image hosting service, and we are really proud that we have been able to provide an image hosting service for a really long time. [Image hosting] is not our primary focus [anymore]. We noticed over three years ago that users didn’t want to just use Imgur to upload videos, they wanted a place to see all the content uploaded in one place and talk about it in comments. Our focus is on the Imgur community, serving the people that come to Imgur to participate, discover and share those images.
Many marketers avoid user-generated content because it’s not brand safe, for example. How is Imgur feeling that resistance? Are marketers moving past those reservations?
In 1999, I worked for the online Wall Street Journal. We bumped into a lot of skepticism that CEOs were using the internet. There were whole coalitions providing research convincing people to address audiences online. The same thing happened with social networks. Only very forward-looking and risk-taking advertisers were on social platforms. The cycle repeats itself: Advertisers get apprehensive, but when they realize that’s where their audience base is and that these are the [young] people they want to advertise to for the next 30 years, they tend to move quickly past that initial point of resistance.
What’s an example of this?
If you talked about Old Spice’s marketing 10 years ago, they were more relevant to a previous generation. They realized they needed to modernize their marketing, and their creative has really leaned in. So it’s not too surprising when a brand like Old Spice jumps in [to Imgur]. What might be more surprising are brands like eBay leaning really aggressively into Imgur. They have a post every 10 days. They’ve realized this is an audience they need to build a strong relationship with, and on their terms.
Why did Imgur go from being bootstrapped to raising money?
The company has been running profitably. Raising capital allowed us to move faster in areas the company knew they need to invest in, like mobile apps and a native ad platform. There are a lot of companies that raise a lot more in a smaller amount of time. We have been focused on building a sustainable business versus having to constantly raise more capital. That’s not to say that in the future there might be a really good reason to raise more capital.
Since Imgur now has investors, does that mean you guys are thinking about an exit as well as building a sustainable business?
If you build a sustainable business, you have a lot of options. We don’t think about an exit today. If you think about building a business and if you build that right, that means that if for some reason an acquisition is best for you, you do that because it’s a choice. Not because you have to. Or, if an IPO is best for you, it’s not because you’ve raised too much and it’s your only option.
This is part of an interview series with media leaders about the future of digital advertising. Check out previous interviews with The Atlantic, Bloomberg Media, Brit + Co, Evolve Media,E.W. Scripps, Forbes, Mic, The New York Times, Purch, Refinery29, Thought Catalog, Time Inc.,The Washington Post and Ziff Davis – and more to come.
This interview has been condensed and edited.
