What's driving Say Media's 'build, buy and partner' strategy?

The shifting nature of digital revenue models creates plenty of strategic conflict for publishers. Do we chase page views or reader revenue? Do we scale or go niche? Do we aggregate or invest in original content? How far do we stray into ad networks and other marketing services?

Finding the right balance is tricky. Say Media, formed in the fall of 2010 through the merger of ad network Video Egg and blog platform Six Apart, is the first to admit it’s still figuring out the best path forward as the company evolves from its roots as an ad network into a premium publisher of vertical web properties.

“There’s a tension in our business regarding what we’ve done in the past vs. what we’re doing now,” David Richter, Say’s chief strategy officer, said in a phone interview. “And we don’t have the answer yet. It’s about execution and experimentation.”

There are signs that the execution is paying off. Say Media has grown to 400 employees and last month landed $27 million in funding led by New Enterprise Associates, Shea Ventures and Correlation Ventures.  

Say is not the only digital publisher looking to pair premium content with an ad network business. Increasingly, this diversified approach is shaping up as a best practice for publishers searching for digital media’s sweet spot.

Build, buy, partner

When Say Media was founded, almost all of its revenue was coming from its display ad network. In the two years since, its strategy has evolved into what Richter calls a “build, buy and partner” approach. Say’s strategic shift, which began to take shape last year, has been driven by three main factors:

• Audience engagement. Say did not want to be in the content farm business, whose model is built on serving up search-optimized, quickly digestible (and disposable), general-interest content. Instead, it set out to build highly engaging, narrowly focused destination sites. “We want people to come to our websites not knowing what they’re going to get, but knowing they’ll be pleasantly surprised when they get there,” said Richter. “That’s a significant differentiator.”
• Shifting advertiser demand. Advertisers want to get closer to audiences that are engaged with premium publisher brands. “People stay on our sites. They comment. They follow our writers’ tweets,” said Richter. “Advertisers are seeking to leverage that.”
• The commodization of display ad networks. “Display advertising is a good business, but it’s facing serious commoditization, which makes it less attractive than it used to be,” said Richter.

So Say has set out to build deep expertise and engagement across key vertical segments. First, it narrowed its areas of coverage from 13 verticals to four: style, living, food and technology. “With [13] verticals, it was hard to work collaboratively from a marketing and sales perspective,” said Richter. “Narrowing to four will help us execute properly on those.”

Say has spent the past several months building out those verticals. It acquired ReadWriteWeb (December 2011) and Remodelista and launched two new sites, Gardenista and xoJane UK. The company now owns and operates six properties and has 13 exclusive partnerships with niche sites such as Fashionista, Gear Patrol and Food52, for which Say handles all ad sales. Richter said the company is on pace to double its partnerships this year.

Its acquisition and partnership strategy focuses on sites that offer a strong point of view and a devoted following. “Having 4 million uniques doesn’t matter as much having 400,000 passionate, engaged readers who are embracing that blogger’s POV,” Richter explained. “Monetization is more robust with passionate, engaged readers, which is why advertisers are becoming more interested in more targeted offerings.” 

Say will use some of its new venture funding to explore expansion into other verticals beginning early next year, Richter said. The company is also beefing up its executive ranks.  Former Time magazine publisher Kim Kelleher was hired as president in July and starts Sept. 1, replacing Troy Young. Last week, the company made two more big hires: Anna Baird as CFO and Alex Schleifer as creative director. Baird has roots in Silicon Valley and Schleifer has an agency background.

Shifting revenues

The funding and new hires come as Say shifts toward premium publishing while lessening reliance on its ad network, which the company says reaches a global audience of 400 million. The percentage of revenue coming through its owned and operated sites rose from virtually nothing at the beginning of 2011 to 8% by the fourth quarter. This year, the company expects to “handily exceed” its target of 20%, Richter said.

The transition signals a potentially significant change to Say’s ad model. Ad networks are generally seen as a way to sell a lot of cheap inventory across a broad audience. Say is beginning to emphasize higher-quality, targeted creative over high-volume, low-CPM ads. In April, for example, Say announced it was moving to a cost-per-exposure pricing model for below-the-line ads, a first step in embracing the emerging viewable impression standard that the Interactive Advertising Bureau and other industry ad groups have been promoting.

Say has also been experimenting with a “Clean Campaign” vision involving new web designs that are less cluttered with ad units – in some cases, featuring a single display ad, supplemented by text-based content ads below the fold. It’s also emphasizing targeted advertising featuring more “authentic” content that’s consistent with the voice of the website on which it’s appearing.

“Some of the advertisers have been very happy, but it’s still early,” said Richter. “If consumers react the way we think they will, we expect to roll it out more broadly.”