On one end of the online revenue spectrum, there’s advertising, which runs the gamut from direct response (primarily) to traditional, branding-style “premium campaigns” (to a lesser extent). At the other end is e-commerce. Content companies have been playing catch up on both fronts, even as the two revenue streams require very different strategies. Former Google DoubleClick executives David Rosenblatt and Jonty Kelt think that they can bridge the gap. Sure, just about every ad tech company promises to do that, but the track record suggests some possibilities for their e-commerce services provider, Group Commerce, where Rosenblatt is chairman and Kelt is CEO.
The surprising thing about their pitch is that they believe they can approach e-commerce through ad sales teams of premium publishers like The New York Times, where Group Commerce powers the paper’s deals program, TimesLimited. In just two years of operation, Group Commerce has also attracted the likes of CBS’ Local Offers, EveryDay Health and Thrillist’s Rewards program. We spoke with Kelt about why publishers can compete against e-commerce players like Groupon and how the tension between ad sales and retail marketing is a benefit that can be leveraged by both.
Jonty Kelt: Let me rewind a few years when we came up with the idea for Group Commerce. In 2009, me and my co-founder, David Rosenblatt, were thinking about a couple of ideas that related to our lives selling online advertising technology and services to big media companies. One of the questions we posed was: Why don’t big media companies, who are struggling with a transition to the digital world, participate in that huge growing market called e-commerce? Why are they sitting on the sidelines and just focused on ad revenue?
They can do both we thought. We thought that if they did that well, their audience would love them even more. We also thought that they had great raw material, raw assets to participate in e-commerce, namely that they had brands which consumers trust. Plus, they have great content. These publishers have authority over certain topics. They have trust and they have large audiences. That is the foundation of doing both advertising and e-commerce.
Fair enough, but why did you make the leap from digital advertising with DoubleClick and Google to creating an e-commerce platform?
Late in 2009, we started talking to a few of our old customers from the DoubleClick days here in New York City. We got a pretty resounding yes, in terms of them being interested. Plus, we felt good about moving from advertising into e-commerce, which is going to be a $1.25 trillion industry by 2015, according to Internet Retailer.
We perceived that growth three years ago, when there were new e-commerce companies springing up like Gilt Groupe, Living Social and others. By end of 2010, we’d raised some capital and built out our technology platform. Shortly after, we launched with Daily Candy [the women’s lifestyle e-newsletter owned by Comcast]. We’ve now got 25 customers.
In terms of going from building and running an ad platform to an e-commerce platform, we’re an engineering company at heart. We’re building software as a service technology that enables e-commerce. It’s built from the ground up for the needs of media companies, which is different than the needs of merchants like The Gap, for example.
Do you see e-commerce the way you saw advertising at Google and DoubleClick? Is Group Commerce mainly a technology platform?
Our e-commerce strategy is not just about assembling algorithms. We have a team of merchandising strategists who think about what offers and offer mixes are going to work for a certain media company’s audience. In addition to our technology, we have a team of “sourcers” who talk to product sales merchants who have hard goods and also local merchants that provide services.
What are the special needs that content-focused companies have versus pure play retailers like The Gap?
Very simply, the key difference is that media companies have a content strategy. That’s what drives their business. Our charge is: How do we ensure that the commerce we support is aligned with the publisher’s content?
The other difference is that content companies generally have ad sales forces. Those ad sales teams have relationships with merchants. That’s an asset that online retailers alone don’t have. The publisher’s ad sales force can be leveraged to source e-commerce inventory, get local services or products that can be sent anywhere in the country.
What we’ve built overlaps with what companies like The Gap need as well. We need to be able to process a credit card. We need a company management system that holds all of the products and services we want to sell to the audience. We need analytics and measurement. That’s how we’ve built the technology. The workflow of managing an e-commerce business takes that into account.
How do you explain Groupon’s recent struggles with investors? Is there a cautionary tale for companies in the e-commerce space?
Groupon has created a wave of innovation in recent years. This year it’s going to generate $3 billion of revenue, which is kind of amazing. They’ve certainly been a lightning rod for criticism. They’ve done some stuff well, but they’ve also done some stuff badly. What does that mean?
If you look at Groupon’s core asset, it’s a brand that stands for discounts. Their core problem is that they haven’t targeted their huge audience very well. Anecdotally, you hear of people subscribing and then unsubscribing to Groupon. The most common reason I’ve heard is that they didn’t send the person the stuff that was most interesting to them as a shopper.
That’s what I think Groupon has struggled with. Can they turn it around and work it out, leverage the 100 million people that still have subscribed and sharpen the focus of their local sales force across the world? I don’t know, maybe, maybe not.
What I do know is that consumers will buy stuff if you offer them what they’re interested in. Our model has a built-in form of targeting. Our publishers already have a relationship with their audience and the local and national marketers who want to reach that audience. If we leverage that, give that audience what they want, those people will buy and we build a business on the back of it.
