'We can fix the publisher problems everyone else ignored'

08 Mar 2019  |  Michaela Jefferson 
'We can fix the publisher problems everyone else ignored'

Michaela Jefferson meets the young coders behind Permutive - the start-up publishers are now queuing up to work with

The last few years have been hard on publishers, particularly in terms of declining advertising revenues. Although adspend on the digital inventory of newsbrands and magazines is forecast to rise in 2019, it will not be enough to offset declines in print.

Publishers have gone from a world of primarily direct sales to a world buying its advertising programmatically, with their inventory valued algorithmically using third-party data.

"For publishers, the pain in this is that all of a sudden, you are commoditised," Joe Root, co-founder of data platform Permutive, tells Mediatel.

"No longer is it the value of your brand which is respected. Instead, it is the advertiser's data that is valuing that ad."

Root, alongside Tim Spratt, founded Permutive in 2014 while in their mid-20s, working from Silicon Valley with US seed accelerator Y Combinator - the first investor in tech unicorns such as Airbnb and Stripe.

Founder profiles:

Joe Root:

Age: 29
Education: Masters in computer science from Oxford University
Early career: Interned as a software engineer at defense technology company QinetiQ and bank Morgan Stanley while at university.

In 2013 he spent six months in product at direct-to-consumer coffee delivery service Pact Coffee, followed by four months in sales at GoCardless - the fintech start-up co-founded by Tom Blomfield before he went on to co-found digital bank Monzo

Tim Spratt:

Education: Masters in computer science from Oxford University
Early career: In 2013 he spent a year in research for an undisclosed hedge fund

After a brief spell exploring personalisation for publishers (an "absolutely terrible idea"), the pair pivoted the company's focus towards solving publishers' revenue woes.

"What we found for publishers was that their CPMs, or the amount they were getting paid for each ad, was just massively in decline. And that meant the businesses they were running were no longer sustainable," Root says.

Publishers were offering data on their users to counteract this - hoping that by providing data to those programmatic algorithms, the algorithms might value their ads more highly - but it was having little effect.

According to Root, that was a result of three "enormous" problems for publishers sitting within the digital advertising ecosystem that nobody had yet confronted.

Problem number one: the emergence of the "hidden web". The digital advertising ecosystem has been built upon third-party cookies, but as data privacy laws have strengthened, browsers such as Safari and Firefox now block those cookies by default.

As a result, user data has been disappearing "very rapidly" for publishers, with their data platforms now only able to see 40-50% of their users.

Problem number two: publishers had been unable to personalise advertising in real-time.

"Consumption habits had massively changed, but the technology hadn't kept up," Root says. Whereas readers may have once visited a publisher once a week for 30 minutes, publishers now only have users for "fleeting moments" and need to be able to process their data and target those users within milliseconds.

Problem number three: publishers' sales teams were unable to differentiate their proposition as they lacked insight into their audiences.

Permutive believes the solution underpinning all three of these problems is a data management platform that allows publishers to use first-party instead of third-party data, allowing publishers to see up to 100% of their users, target in real-time, and differentiate their offering with audience insights.

Early success

In 2016, Root and Spratt returned to the UK to build their data management platform. At first they found it a hard sell to investors - raising an initial £850,000 from venture capitalist Octopus Ventures took the pair nine months.

However, after early successes with large UK publishers, including ESI Media, Dennis Publishing and Immediate Media, the company found funding much easier to acquire. During its Series A in January last year the company raised £7 million in six weeks.

Root says the publishers Permutive has worked with have gone from being able to target approximately 20% of their ads with data to 90%, and "by fixing that fundamental thing, we found that we were able to significantly increase value for publishers."

He credits Immediate Media, publisher of magazines including the Radio Times, Gardeners' World and BBC Top Gear, as one of the most important publishers he worked with for shaping how the platform developed - and according to Immediate's digital advertising strategy director, the partnership was also highly valuable for the publisher.

"We have audiences and insights that no one else can offer. However, prior to working with Permutive, upwards of 75% of our users were hidden from us," Dominic Perkins told Mediatel, adding that since using Permutive's cookie-less platform, Immediate has unlocked "unprecedented scale" for its clients on "highly custom" first party audiences.

"[We've] since seen significant and sustained increases in revenue, upwards of 200% growth," he said.

According to Permutive, the platform managed to grow the publisher's data-driven advertising revenue by 135% within one month. Within three months, it claims to also have increased Immediate's audience identification from 20% to 80%, leading to a 7x increase in targetable inventory.

The start-up has also begun working with Vogue publisher Condé Nast, "a real milestone for us as a company" and a "huge validation" as they are a "truly international" brand, Root says.

Now, Permutive is expanding its remit to look at how data underpins other revenue streams for publishers outside of advertising.

"Two years ago we were laser-focused on advertising. What we're finding now is that publishers have a much broader set of problems."

With the industry "in massive flux" and publishers having to diversify revenue streams "very quickly", Root believes that first-party data will be vital to ensure success across every opportunity publishers have available to them, from events to subscriptions to e-commerce.

An exciting time for publishers

"We've always been obsessed with publishers since day one," says Root. "That's really informed what we do as a company. Internally, we almost think as though we are a publisher ourselves."

Root and Spratt, now 29 and 30 years old, respectively, say they chose to start a company in the publishing industry because they wanted to attach themselves to something that felt like it had purpose.

"Publishing always felt like that - where you could really understand the importance of this industry."

Now is a "super exciting" time for publishers, he adds - particularly as data privacy laws evolve.

"Publishers have for a long time held this data, but other companies have taken it, packaged it up and sold it - and publishers have got a fraction of that money. Privacy forces you to have a direct relationship with the consumer if you want to monetise that data and only publishers have that."

Over the next year, Permutive will grow from 35 to 85 employees and will be releasing its underlying infrastructure - the data management platform - to the market in general.

It's also expanding rapidly in the US with a number of high profile publishers.

"Investors always told us you couldn't build a big company in publishing," Root says, but he's confident that the future of the industry is bright.

"Over the next few years, our real aim is to help publishers build sustainable and lasting businesses. We really do believe that is underpinned by data."


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