Programmatic Hits Faster Than First Thought Says Perfect Market’s Schoenfeld

julie-schoenfeld-perfect-marketPasadena, California-based Perfect Market has had a ringside seat while its publisher clients have battled to keep revenues flowing as an important slice of ad spend has moved to audience-based, programmatic campaigns.

Consequently, in the past couple of years, Perfect Market CEO Julie Schoenfeld says her 60-person company has gone from helping publishers monetize content in their archive (“Found money for many publishers,” notes Schoenfeld) to monetizing content as it is created, since “60% of all traffic hits on the first day of the story.”

With the new strategies in place, Schoenfeld claims that things are going well. The company saw triple-digit growth last year and expects more of the same in 2013 with no need for additional funding, though Schoenfeld adds, “Sometimes when you’re in a good place and you’re expanding, money comes at you. And so we certainly wouldn’t turn it away.”

AdExchanger spoke to Schoenfeld about her company and industry trends last week.

AdExchanger: Is your client the editor, the ad ops team, or sales with the newer just-in-time yield management?

JULIE SCHOENFELD: We are more focused on the ad ops side of the business with our digital publishing suite. We do have an audience development capability, though, which we sell in conjunction with our product, where we help the editorial side of the house understand the levers that drive engagement and traffic on their site.

For example, one of the biggest changes in the past couple of years is something our chief revenue officer, Tim Ruder, often mentions. In the last 12 months, the Google algorithm has changed more than in the first 10 years of its existence. That’s because it is taking into account more social signals.

In the old days, you would read a story from the LA Times, but now to get into Google News, and to get into Google Search results and get the kinds of traffic boost possible, you have to be able to identify the author and know that that author has some credibility behind a particular topic. Creating author tags and social signals is a new approach to getting content discovered. We work with the editorial team to help them understand that.

So we have products geared towards more automated approaches around search, social and so on, as well as consulting services around the same channels.

How does that break out revenue-wise?  Is it half-and-half or tilted in a particular direction?

Our automated products make up the bulk of our revenue, well over 80%.

How has publishers’ paywall strategy impacted Perfect Market?

It was pretty clear to us, back when discussion of paywall began, that it was going to make sense for publishers, and some of the smartest minds in the publishing industry could see that as well.

What we have seen with these semi-porous paywalls is that they are driving action appropriately. For example, if somebody is reading a particular publication day in and day out, they are more likely to pay for that content because they value it highly. If someone randomly stumbles across a piece of content, they may never be in the market to consume that content again. So you don’t really want to miss out on the opportunity for having them consume that content. That’s the basis of what Perfect Market does. It’s something we refer to internally as “adaptive publishing,” which is driving the user experience based on the context of the user. A paywall is a perfect example of smart adaptive publishing.

There is a sense from a yield management perspective that you’re not only optimizing ads and making a paywall strategy but now commerce is a part of this. Is commerce something that has entered your toolkit somehow?

There’s a lot of money in commerce and all of our publisher partners have commerce sections to some degree in their publishing site. It’s an important opportunity that is only, I think, at the beginning stages of being realized. I don’t see them generating enormous revenue streams for our publishers yet. We haven’t released a product on commerce yet, either. It’s probably not the next thing on our roadmap, but certainly something we’re watching.

What are the major trends you’re seeing in publishing right now?

There are four big trends right now that publishers are grappling with. The first one is content as ads. I’m sure you’ve seen this whole notion of content marketing. That’s one of the big trends that seems to be emerging because there’s money behind it.

The major message we have there is that Google is paying attention, and they’re going to penalize publishers who don’t clearly mark the content that its sponsored. We help publishers adapt their pages for different kinds of users, making sure that they clearly delineate which content is being paid for.

The second major trend that we’re seeing with our publisher customers is the explosion of content being consumed on mobile devices. Many of our publishers last year were seeing around 30% of traffic coming from mobile devices, and this year it’s driving toward 50%.  The issue there is that it brings all kinds of opportunities – and all kinds of issues.

Monetization on mobile is difficult for a couple of reasons. One is it’s difficult to identify users. There are no cookies, and not all technologies are able to accurately pinpoint who this user is; therefore, some of this targeted advertising isn’t possible. The second thing is, because of the form factor of a cellphone, you can’t put as many ads on the device. The ECPM is much, much lower on the page. With regards to mobile and mobile monetization and mobile layout, it’s early days. Yet it also represents a huge opportunity to get subscriptions through mobile apps.

The third trend we’re seeing is that the time spent on traditional publishers’ sites coming from social sites like Facebook is very low. People are spending more time on social sites than they are on publisher sites. That’s a huge deal, particularly when you see sites like LinkedIn and Facebook using content to keep users in the social network. Publishers need to develop intelligent strategies about using social sites to drive more traffic to their content. We’ve seen that the publishers doing a good job of this are the ones finding communities of interest within the social sites, which have much higher engagement.

Finally, the fourth major trend that we’re seeing is programmatic buying. It is hitting faster than people thought it would. The RPMs of programmatic are still low, even with programmatic “premium.”

How do you think that programmatic is going to shake out for publishers?

Many of the publishers that we deal with have a lot of unsold inventory, so it’s important for them to back-fill it with programmatic buying.  The most important thing though is to keep it from driving the price to zero. Finding ways to improve the RPMs is the key there.  The smart RTB [markets] or the smart data providers that can teach publishers how to set the floors intelligently will be the winners. I do think that RTB-based buying is all about size. Right now the biggest player is Google. You’ve got to keep an eye on what Google’s doing if you want to see how the market is going.

One of the most interesting intersections of technology is that most RTB-based buying was not designed for mobile monetization. I’m still seeing is a clash of technologies between mobile and desktop.

Let’s go back to Perfect Market’s product set. Of that 80% revenue associated with your SaaS products, what’s the big one there? Is it associated with optimizing search? And how do you see that changing in 12 to 18 months?

The products that are the most mature in the digital publishing suite are something we call Perfect Links and Perfect Ads. Perfect Links determines where the user is in their life in terms of context and audience cloud, and then tries to serve up related content based on the context. For example, if you’re coming into the front door of a large publisher site, you’re in a browsing mode, and so we want to give you the most interesting content to keep you going horizontally across the site.

If you’re coming in through search, we want to give you the most intelligent related content to your search that will keep you looking at content from that publisher. If you’re coming in through social, we want to make sure that the content looks very shareable and can start a social dialogue. Those are the kinds of things that our link products try to do.

Our second product, Perfect Ad, helps our publisher partners improve the yield of the page. It does that in a number of different ways. One is AB testing the layout of the page. Another is figuring out the best type of advertising to put on the page based on the context of the page, delivering the advertising there, mostly from ad networks.

What we’ve done is we’ve used our semantic technology to figure out the commercial terms of the page and go find the advertising that’s appropriate. Consistently, the product has been able to improve on the performance of ad networks dramatically.

Finally, we just released a product called Perfect Social, which we think 12 months from now and will have a significant impact on our revenue mix. Perfect Social helps solve the problem that I described before, where traffic and time spent from social users is still stubbornly low.

What we’re trying to do is give our partners interesting ways of sharing content and bringing users back to their site from social sites. Also, we help partners in the communities of social networks like Facebook find groups interested in their topics and then deliver related content.

I’ve heard from other data companies that significant Facebook traffic actually helps Google Search listings and can boost traffic up to 20% from Google Search. True?

It’s 100% true and goes back to what I said before about the Google algorithm change in the last year. What we have seen is that the publisher partners that are doing a good job of tending to their Facebook profiles, making sure they have author tags for the articles, and have really strong profiles in Google Plus are seeing their content rising to the top of the search engine results pages.

It’s a fundamental shift in the Google algorithms. They are incorporating social signals.

Does this mean that publishers may want to think about a paid media strategy for themselves in social, since it will come back in a good way such as search?

I don’t know that you need to have a paid media strategy. You just need a social strategy. In many cases, I’ve seen that the social strategy in publishing companies is a bunch of interns sitting in the corner, tweeting and Facebooking about content itself as opposed to stepping back and creating an overall social strategy that includes how you present the various journalists or writers, their content, and what your Facebook fan page looks like. It’s so early days that just a little bit of optimization feels like it has a huge impact on traffic.

At some point, wouldn’t a marketer want to contract with a company like Perfect Market rather than publishers only?

In our DNA as a company, we set out to work with publishers. But if you look at that whole ad technology food chain, you realize the money flows from the marketer to the publisher, not the other way around. On days when we’re brainstorming, we’d say, “Wouldn’t it be nicer to take advantage of that and get closer to those marketing dollars which are far more plentiful?”  Having said that, we’re very committed to the publishing community. We believe in a strong independent voice for content out there. There’s an emotional tie to making sure that publishers have the economics to continue what they do.

Finally, what’s a key insight for you about running a company like Perfect Market?

This is my third company that I’ve run – venture-backed company.  Along the way I’ve met great people who’ve given me great advice. If you hire the best people, that’s all you need, because the marketplace is so confusing that no matter how smart you are, how good you are at designing products, you will be wrong, and the best people can help you fix what’s wrong. I owe everything about Perfect Market to our team and our customers, and just trying to keep them focused, and trying to keep them from burning out.

Follow Perfect Market (@perfectmarket) and AdExchanger (@adexchanger) on Twitter.

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