AdExchanger: What's the origin story for Percolate?
NOAH BRIER: My background is in the agency world, working with big brands. My co-founder [James Gross] came from Federated Media. He ran the publishing division, working with American Express Open Forum, Dell, HP, Intel, big companies. He was helping them become publishers. I was working on the other side, from the agency perspective, on how you help brands become content creators? The big challenge we both saw, from opposite sides, was how do you help brands create content in a sustainable way? Brands and agencies are used to creating content on 20-week cycles. That’s what it takes to make a television commercial and that doesn’t work today for lots of reasons, the cost and the timing and everything else.
I had been working on the initial versions of Percolate, which was an algorithmic filtering engine. We decided to really go for it. One of the big insights we had early on was that all of these brands were trying to figure out what to talk about on social. Part of the reason they struggle is they don’t pay attention to anything. You and I don’t wake up in the morning and ask, “What should I Tweet about today?” because we watched TV last night or we read a bunch of websites and paid attention to Twitter and Facebook. We have lots of stuff to say because we talk about what we’re consuming, but brands don’t consume anything, so it becomes a real challenge to figure out what to talk about. We all consume off this interest graph that we’ve built up for ourselves, so you have all the people you pay attention to and they help you filter down the world.
Brands don't have that. We needed to help brands build interest graphs. The first step in the process when we work with a brand is we help them build out an interest graph for the brand. That interest graph is a sub-segment of the 6 million or so sources that we scrape. Based on a bunch of inputs that they give us, we identify 300 to 500 sources that ultimately become an interest graph. That interest graph powers the Percolate system. We use that interest graph to identify stories, to identify topic areas, to identify content that they have in their archives that is relevant again.
We’re trying to solve for what we see is the most fundamental problem in social, which is, what do I say? It’s not, how do I get the content onto the platform? We do that too, and we help you publish, but the more fundamental challenge all these brands face is how to create the content in a sustainable and scalable way.
[Also] all brands are now thinking global. One of the big challenges they all have is, we might be really good at creating content for social in this one region, but how do we systemize that, how do we scale it out across multiple regions across multiple brands, across new platforms? They all assume there’s going to be another Pinterest, Instagram, or whatever in the next six months that they’re going to need to pay attention to.
Have brands institutionalized technology change?
They’re trying to. I remember talking to brands four years ago on Facebook and it was still a struggle - and then they jumped on. Then, three years ago, it was Twitter and it was a struggle, but it happened a little faster. Now, with Pinterest and Instagram, brands were almost there before people to some extent.
I don’t think they’ve completed it. They’re just hipper to it. More than anything else, they just believe it’s going to stick around. Social is here to stay. We’re at the point with social that we were at with websites in the early part of the decade, where brands were like, “Okay, websites are really going to be here for awhile and we should probably figure out how we’re going to maintain it over the next 20 years, not over the next two months.” They started to pull more stuff in house.
What’s your revenue model?
We charge a monthly license fee, mostly to Fortune 500 clients. We have around 35 of them now.
Who are the customers?
Customers are agencies and brands. Most of our clients are brands, but the users can be almost anywhere. It can be at an agency. The profile is a community manager. It’s a community manager signing in to Percolate. Percolate is making recommendations around content from the brand’s archives, from around the web, photos that we have. We recommend Creative Commons photos with everything so that they have right to manage photos. Then they create the content in Percolate and publish it out to Facebook, Twitter, or Tumblrr and their dot-com. We get all the measurement analytics back. We display those to users, but then we also use them to make other recommendations over time. That’s the model. Really, it’s entirely software.
Is there a managed services component at all?
No. We have account management, who are servicing clients. They’re in charge of answering questions and doing onboarding and stuff like that. The team is right now about two-thirds product, one-third on the business side, so sales and account management.
Is there any relevance to paid media here? Are you interested in getting certified for the Facebook Ads API?
Not quite yet. I think in time a lot of that stuff is going to make sense. Our bet is that brands are going to create content organically and then they’re going to pay to promote the content that’s best. That’s what we’re seeing with Facebook Promoted Posts and Reach Generator. That’s what we see with Twitter Promoted Tweets. That’s what we’re seeing with Tumblr Radar Posts.
The biggest challenge these platforms have is that brands are only going to promote really good content. You’re not going to pay to promote crap content. That’s where we want to help. In time, as the platforms continue to evolve, we’ll become more and more involved in [ads]. But for now brands will push content out through Percolate, and then they can pay to promote it with Twitter or Facebook.
What do you make of Salesforce.com buying Buddy Media? How does that deal reflect on your business?
I think it’s awesome. One, it is another big win for New York, but it also just proves there’s a big opportunity here. When I look at that deal, I think we’re just the beginning of this. We’re just at the beginning of the transition to marketing being a software discipline.
Do you see more centralized management of social coming? Will it make sense at a certain point for you to be unified or absorbed into a larger platform for managing Facebook, for managing social?
We are that. We manage social content. We can push to Facebook and Twitter and Tumblr.
What about tying into CRM systems?
There’s one piece of CRM which is customer support, which for most brands is what CRM has meant to this point. That’s actually pretty well handled. You’ve got a customer service team and you route things to that customer service team and they answer questions and they’re able to … I think there’s another CRM component which is about talking to customers in a meaningful way and that’s the part we’re more interested in in the long term. We’ll see. We’re in the early days on that stuff and I think Buddy Media has a long way to go in integrating that and finding what it really means in Salesforce.
There seems to be a wave of frustration from some brands about Facebook throttling their distribution, requiring them to pay to reach fans.
I think that conversation is a little bit overblown and I get it, it’s a problem. The people it affects the most are small businesses who are not necessarily prepared to pay the cost to make the contents right in the way they need to, but it would be a nasty place if [every status] from every single person you knew showed up in your news feed.
You came from the agency world. Do you think there’s a brain drain going on at agencies?
I need to see more evidence of it. I hear about it, I know people at agencies who talk about it, but I don’t know. I also think that on the other side, for young talent, agencies can be a good place to go to.
I don’t mind hiring people from there. We have a nice handful of ex-agency folks now and they’re very talented... One thing we noticed in our first six months to a year is that people’s appetite for risk is not that high. When we were an unfunded startup, there were a lot of people who were saying, “Oh yeah, I want to go work for a startup, but I want to get the same salary I was getting before.” We were an unfunded startup and we were profitable, but we can’t give you the salary you were making before.