AdweekMedia's Agency of the Year 2010



The Insurgents

Shop’s software helps brands thrive on Facebook

By Brian Morrissey

Travelers arriving at John F. Kennedy Airport in New York are likely to see an ad reading “7 of the World’s Top 10 Brands Build Their Businesses on Facebook with Our Tools. What’s Your Plan?”

The placement, one of several purchased by 3-year-old Buddy Media in major airports countrywide, is proof that a small company can become a big player thanks to the social network phenomenon that is Facebook.

The company, which builds tools for brands to manage their pages, is one of the fastest growing in digital marketing. It has 115 employees (up from 15 a year ago), $33 million in venture capital funding and a seven-figure valuation. In its October $23 million funding round, WPP came on board.

Ad agencies are Buddy Media’s largest customer base. (The company has a total of 650 clients). That’s because ad holding companies saw the rise of Facebook and social media as an opportunity to add more services to sell clients. It turns out the big money is in building technology that helps brands connect with consumers on these platforms.

Like many good startup success stories, Buddy Media had a pivotal moment. It happened 18 months ago, when the New York company decided its original business as an outsourced Facebook app developer wasn’t working. It was seeing little growth and some apps, like FedEx’s Launch a Package, were merely short-term successes. A production services business, it was clear, did not elicit big multiples.

“We were a glorified agency,” says Buddy Media CEO Michael Lazerow. “Instead of building microsites, we were building microsite apps.”

But Buddy Media was at least playing in the right sandbox. Facebook use was exploding. When Buddy Media started, Facebook had 20 million members; it now has over 500 million. With most brand applications falling flat, the problem was the social network had yet to hit on the right way for brands to interact with users.

Lazerow, 36, didn’t waver from his core conviction that Facebook would “disintermediate the media business,” a business he knew intimately having launched two other companies. One, University Wire, was a news-sharing service for college newspapers; the other Golfserv, a content-and-commerce play that he started with his then-girlfriend, now wife, Kass Savarese (Buddy Media’s COO). Both were sold, Golfserv to Time Inc. for $ 29 million in 2006.

Facebook, he knew, was a new publishing paradigm that needed a common set of tools. “You’d never launch a blog and build the blog software yourself,” he says.

Buddy Media was helped when Facebook in March 2009 introduced Pages, a permanent place for brands. Lazerow shifted the company’s focus from providing tools for companies to managing their pages. Buddy Media built what’s in essence a hybrid of a content management system and Web analytics software geared specifically for Facebook. It solves problems in posting rights and scheduling for companies with dozens of marketers that interact with the page.

For example, Starwood uses Buddy Media to manage pages for its over 1,000 hotels. Hotel managers use Buddy Media’s drag-and-drop system to customize their pages, including shared features like a booking engine and add-ons like wish lists and virtual gifts applications. Clients typically pay about $5,000 per month for the software as a service.

“The value proposition is we can save [clients] 80 percent of those costs,” Lazerow says, since the system does away with the need to learn Facebook’s custom programming language

“What really attracted us is this was a company that was developing an innovative platform that solved a problem for big brands,” said Steve Harrick, general partner at Institutional Venture Partners, which led Buddy Media's recent funding round, “They recognized where the audience was going.”

Like other Facebook platform companies, Buddy Media faces the risk the social network will decide to compete with it. Lazerow’s not worried, noting that Facebook has more lucrative opportunities in ad sales and virtual currency.

While the company is looking to build its tools to interact with other large social platforms like YouTube and Twitter, Lazerow plans to maintain its focus on Facebook, claiming, “It will be one of the biggest businesses the world has ever seen.”

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