For a while now I’ve been curious about Gather, a privately funded news and social networking site based in downtown Boston. I knew that Gather was founded by marketing pro Tom Gerace, that it is owned in part by the public radio operator American Public Media, that it has an unusual way of paying users for contributing content, and that its traffic has been rising through the roof—the company claims that the number of unique visitors it attracts each month is 7.2 million, a 400 percent increase just in the last five months.
But I didn’t really get Gather. I didn’t understand who reads its articles, who writes them, or how the company makes money. And I was a bit skeptical, to be honest, about whether there’s much value in Gather’s content, which is largely a blend of news, reviews, recipes, celebrity gossip, and how-to articles, much of it seemingly cribbed by users from more traditional journalistic publications. But it’s hard to argue with 7 million unique visitors. Gather claims that its “reach,” meaning the number of households exposed to the site every day, exceeds that of CBS.com, CNBC.com, iVillage.com, PBS.com and even USAToday.com.
I recently sat down with Gerace for a long conversation about the company, which is his second startup, and also his second venture in what he calls “pay-for-performance” marketing. The first was BeFree.com, an affiliate marketing network that he founded in 1996 with his brother Sam. That company’s business was to sign up online merchants to send business to e-retailers like Barnesandnoble.com, LendingTree, and Dell in return for sales commissions. Gerace (pronounced je-RACE) says he learned from BeFree—which was purchased by rival ValueClick in 2002 for $128 million in stock—that paying commissions creates an “ecology” with “directly aligned incentives” where the affiliates themselves figure out how to win more customers over time. “We got to realize the power of that as billions of dollars in commerce flowed over our platform without us doing any business development,” Gerace says.
So the first thing I came to understand about Gather is that it represents Gerace’s attempt to recreate an Internet business driven by a pay-for-performance marketing model, but in the realm of user-generated news and discussion rather than e-retailing. In fact, Gerace, who graduated from Harvard in 1993 and spent three years writing case studies at Harvard Business School before plunging into entrepreneurship, seems to have deliberately gone searching, after the BeFree experience, for an Internet niche where he could apply the same core concept—call it the Tom Sawyer maneuver—of getting your users to do a lot of the work for you.
He chose the online media business, where traditional notions of authority have been blown to smithereens and anyone who can achieve high search-engine rankings can draw in traffic—which can then be monetized through advertising and other forms of marketing. In Gerace’s eyes, it’s all a matter of casting a sufficiently wide net.
“If you go back to 1990, everything we knew we got from one newspaper, a couple of magazines, and likely a nightly news or morning radio show,” Gerace says. “In effect, we were handing off our information sourcing to three or four editorial groups who told us what we needed to know. Today it’s completely different. More than half of all traffic, even to the largest news sites, comes from search. There are 15.5 billion searches run a month, which means 15.5 billion opportunities to
