Buddy Media CEO Mike Lazerow on the Future of Paid Social, F-Commerce and the Company's Second Acquisition

By Erin Griffith , written on February 27, 2012

From The News Desk

This morning Buddy Media announced its second acquisition--ad management software company Brighter Option. The deal comes fully integrated: Buddy Media clients can start using Brighter Option functionality as of today, just like launch partner 24/7 Real Media (a WPP marketing tech company) already is.

Buddy Media is the dominant (or at least best-funded) platform that helps brands navigate the world of social media. Thus far, the company has been focused on just that, providing tools for talking, listening, and engaging. All that social share-y stuff that brands don't really have to pay to publish. Brighter Option is a platform for the other kind of advertising on Facebook and Twitter--the kind you pay for.

I talked to CEO and founder Michael Lazerow about the acquisition, and while we were at it, the failures of F-commerce, his company's big pile of money and international expansion, too.

PandoDaily: Thus far, you've only focused on the owned part of social media, meaning the content that brands produce and manage. This will be your first foray into the paid part, which seems like old school digital advertising compared to social. Why go that direction? Mike Lazerow: We have a very healthy owned and earned business with a lot of clients. That business is growing like crazy and has no signs of slowing down. Having said that, social advertising (ie, Facebook display ads) is currently a $5 billion market. It's expected to be at least $10 billion to $13 billion in the next year, and 30% of all display impressions are actually on Facebook.

So it made sense from a business perspective to go there. If you look at Promoted Tweets and Facebook page post units, those basically signal to the market that how you publish to your connections through the owned and earned channels will become fully integrated with your paid advertising.

Clients just want to distribute content across the world. Some of it will be distributed in places they own. Some will be distributed via paid media and these platforms. It's just all coming together.

This morning Wildfire, a competitor of yours, announced an integration with Adaptly, a paid ad platform. Is this a trend? This is a space we've looked at for over a year and very seriously over 6 months. It became apparent to me that the content you publish to these social network sites and the data associated with it is the front end of the ad system. You publish content, and whatever gets the most engagement, you end up paying to distribute that further.

For us it was impossible to manage this from a partnership because you still have two different siloed technologies. Content people--the community managers--and ad people were separate. Soon, Community managers are going to control some of the ad budget. We couldn't break down those barriers through loose partnerships without acquiring a company.

Are there other kinds of regular non-social advertising that you want to get into? Other than search, not much has really worked at scale. Email works. Video is early days and banner ads have mixed results. I think the main reason is the idea that companies, whether it's online or TV, are spending so much time trying to get people do stuff they don't want to do in places they don't want to do it. Facebook says, "Publish content and whatever people vote up, whatever they engage with, take that and amplify it through an ad." I can't imagine a world where we proactively acquire a way into more traditional advertising areas.

So you bought this company and you bought Spinback. You're not announcing the deal values, but as of last year you had around $70 million in the bank. Let's say now you have, say, $65 million. Where will you invest it next? We're not sharing the deal valuation, but I will say we don't take these lightly. We're not just trying to buy everything or hire through acquisitions. We look at acquisitions as getting us into new product areas, like we did with Conversion Buddy (the result of Spinback). We'll look at a lot of areas, but this is the year we fully align paid owned and earned media under one umbrella. We do three product releases a year, so we're building a lot internally. We have an 80-person+ product development and tech team.

You mentioned video as one area. Search it sounds like you won't touch.  With things like our recent Bazaarvoice and comCcore partnerships, we're focused on building bridges around the social media ecosystem. We're not trying to recreate the ecosystem. A lot of companies doing video advertising are recreating the ecosystem, and more than anything we'll integrate with them rather than acquire.

What about international expansion? In London we have 30 people and in Singapore we're up to 10. We have clients in 90 countries. We're not in 90 countries but we will continue to open up presences where we need to. Asia is very important to us and we're committed to Europe.

It's a very important part of our revenue right now. Unlike email and ad serving and a lot of the industries that the US dominated when starting out, social media is everywhere at the same time. We have to be everywhere in order to serve the largest companies in the world.

What are your thoughts on F-commerce? Last week there was a lot of talk about its shortcomings We're bullish on the idea that Facebook will play a huge role in commerce and e-commerce. We're not convinced that is the ideal location to buy.

The social graph and sharing and the personalization of experiences makes your e-commerce site better and distributed more virally through Facebook. If you look at it that way, versus lets build on Facebook, it makes sense.

Unfortunately we would be one of the biggest beneficiaries of F-commerce. We have 60 social applications and integrations where you can pull in your store from Amazon, as well as a lot of other e-commerce functionally. But all the data shows that Facebook users are on Facebook to connect, to be loved and to portray an image of themselves. They're not there to buy.

If you want to buy, Amazon is a great site. You don't turn to Facebook first when you want to buy something. Facebook may provide the social context and payment layer and address book to make social commerce happen, but it's not a shopping destination today.

Whether Facebook changes that and has a Facebook mall and there's a benefit to shopping with virtual credits has yet to be seen, but right now it's kind of early days. No one has figured it out, but once they do we'll be involved.