Does Perfect Market Inc. have the perfect product to fix the ailing newspaper industry?
By turning old, forgotten articles into a moneymaking resource, Perfect Market claims it can potentially boost a paper’s annual revenue by millions of dollars.
In simplest terms, Perfect Market has found a way to place relevant ads on articles that people find when they’re using a search engine to dig around the Internet.
For example, someone will type “how to build a rock garden,” into Google, Bing or Yahoo. They’ll find old newspaper articles on that subject, and Perfect Market will have placed ads for stores and products that would be of interest to someone building a rock garden.
“That user has a lot of value for advertisers,” said Julie Schoenfeld, Perfect Market’s chief executive. “But newspapers are putting all their attention on the home page and section fronts. When you get to old pages and articles, the attention isn’t there.”
The Altadena startup’s strategy marks a change in the way most newspapers – and other Web publishers, for that matter – aim the majority of their advertising. As a rule, papers place the splashiest – and priciest – ads on their home pages and most current stories, knowing most regular readers of their sites click on those pages.
But newspapers have largely ignored another type of reader: the casual person who visits the site. These readers usually come to a newspaper’s Web site through a search engine. They make up 80 percent of traffic, according to Perfect Market, but newspapers make little effort to target ads to them.
The articles that readers stumble across through a search engine are usually old, and are populated with generic ads for products such as teeth whiteners and weight loss pills.
That’s what Perfect Market is trying to fix. It uses a sophisticated algorithm to categorize every article stored on a publisher’s site. It then automatically places ads customized to subject matter on each story.
The reasoning is a reader who’s interested in a specific subject will be more likely to click on an ad aimed at their interests – and every time they click on an ad, the publisher will make money.
The company, which spun off from Pasadena tech incubator Idealab in 2007 and now has 21 employees, is young and its technology is still being tweaked. But it’s already found a big believer: Chicago-based Tribune Co., the country’s second largest newspaper publisher, and owner of Los Angeles Times and Chicago Tribune.
Tribune has been testing Perfect Market’s technology at its papers since the middle of 2009. It also was the lead investor in a $6 million fundraising round that was announced in March. Tribune executives declined to say how much the company invested. But a lead investor typically puts in at least half the total money in a round.
“There’s a lot of promise with what they’re doing,” said Dan Kazan, Tribune’s senior vice president of corporate development. “Our thesis is that other large online publishers are going to want to work with Perfect Market.”
Kazan declined to say how much additional revenue Tribune has made since installing Perfect Market’s technology, but said it was “smallish” so far because the technology was still being deployed.
Test runs
Schoenfeld said Perfect Market is being tested by other publishers besides Tribune, though she declined to name them. The company makes money by taking a slice of the ad revenue it generates. The firm’s revenue has doubled each month for the past four months, and the company expects to hit profitability at the end of this year.
Perfect Market is not the only company to use targeted ads. Internet giants Google Inc., Yahoo Inc. and Microsoft Corp. all have algorithms that help them place ads based on content.
In addition to targeted ads, Perfect Market’s technology helps draw more searches to its customers’ articles. It also can automatically provide links between similar stories: An article about the local food scene could have links to restaurant reviews, for example.
The goal, Schoenfeld said, is to make every article in a publisher’s archives attractive to readers and advertisers.
“The conventional wisdom is that news doesn’t monetize well,” she said. “We feel that we are making some incredible strides to address that problem.”
If Perfect Market can prove its technology works, there are likely dozens of publishers that would be interested in using it, said David Hallerman, a senior analyst specializing in online advertising at eMarketer Inc. in New York.
But it’s too early to tell whether Perfect Market will be an industry game-changer.
“It’s useful, and it’s a good idea,” Hallermann said. “But right now, any increase in revenue they can generate is incremental. They have to prove they can get to scale, and build up a huge inventory of publishers and advertisers, before they can create big movement.”
