1Mby1M Deal Radar 2011: VigLink, San Francisco, CA

VigLink is a content monetization company that helps publishers of all kinds earn money from content on their sites. The company’s core product provides automated link affiliation that secures commissions from existing outbound links on the publishers’ sites. The site experiences no visible changes or interference with its monetization efforts; however, when someone clicks through to a commercial site and buys something, the content publisher receives a commission. The company is currently testing link insertion, which would add links to a site’s existing content. It would also be automatically affiliated.

VigLink’s founder, Oliver Roup, earned his bachelor’s and master’s degrees in computer science at MIT. Early in his career, he worked at Internet radio pioneer, Echo Networks, and then for Vulcan co-founder Paul Allen. More recently, he’s worked for iPlayer at the BBC and, later, the Founders Fund. From 2003 to 2007, he worked for Microsoft as a director of product for media properties such as Xbox Live Video Marketplace, Zune Marketplace and MSN Entertainment. He has more than a dozen issued and pending patents.

Roup came up with the idea for VigLink while attending Harvard Business School. He conducted a Web crawl and discovered that fewer than 50% of eligible links to merchant sites collected commissions. Publishers received no monetary compensation for creating content that drove traffic to retail sites where visitors ultimately made purchases. Roup says that his experiment also revealed an opportunity not only for a sustainable business, but also to empower publishers financially. As he puts it, “publishers deliver enormous value to their readers and the businesses they talk about, but often struggle to sustain their own businesses. Although affiliate marketing contains seeds of a solution, complexity remains high and publisher adoption is very low.

He pitched VigLink at the Harvard Business School’s business plan competition. Not long after Roup finished Q&A, Rich Miner of Google Ventures called and made plans to meet with Roup that afternoon. By June 2009, he had raised $800,000 in first round funding from Google Ventures, First Round Capital, and several angel investors. In August 2010, he received $1.1 million Series A funding from Google Ventures, First Round Capital, and Soft Tech VC . In March 2011, they received an impressive $5.4 million in Series B funding from Emergence Capital Partners, Google Ventures, and First Round Capital.

Web-based affiliate marketing got its start in 1994 when CDNow launched the first affiliate program. In 1996, Amazon launched the Amazon Associates program and other online retailers quickly followed.  In the more than 17 years that affiliate marketing has been around, the mechanics behind affiliating links has remained more or less the same. Affiliate marketing can be tedious, time consuming, and error prone. An affiliate marketer must sign up with multiple affiliate programs and affiliate networks (networks aggregate groups of programs together), manage multiple link affiliation schemes, and manually modify the code behind a site’s links, and track revenue, payments, and successes across multiple accounts on a daily, weekly, or monthly basis.

As a result, affiliate marketing programs get little use. Roup’s goal was to create a service that entirely automates the process of affiliate marketing, making participation accessible to publishers of all skill sets and schedules. It aggregates more than 12,500 online merchants under a single sign-up. Customers activate the service by adding a short snippet of code to the footer of their sites. They pay no fee for signing up or ongoing time or maintenance requirements: VigLink earns its money by charging participating publishers 25% of the revenue they earn.

Until now, content monetization has largely meant double-underline rollover pop ups, most notably by Vibrant Media and Kontera, both of which have great businesses; however, their implementations focus more on display ad units and introducing pop-ups to a publisher’s site. While a number of companies offer content monetization options, VigLink sets itself apart by focusing on publishers who demand a product with minimal effect on the user experience. It gained early traction when it acquired one of its competitors, Driving Revenue, in August 2010.

“Doing an acquisition at such an early stage is unusual,” said Roup. “Fusing the technology, culture and finances of the two companies has made the VigLink team stronger.” In fact, all, but one, of Driving Revenue’s employees continue to work at VigLink.

Affiliate marketing currently pays out $2 billion per year. Analysis shows that VigLink’s target customers collect $1.2 billion of that. VigLink research shows that half of eligible links do not participate, and link insertion and price optimization further increases the market size. The company sees its most successful segments as blogs, forums, and content sites that focus on products such as automotive, technology, entertainment, and fashion. VigLink gained traction by working with forums thanks to the abundance of purchasing intent within forums and the large number of outbound hyperlinks being shared. Since affiliating their links through traditional affiliate marketing challenged them, many found that VigLink was an ideal fit.

VigLink’s revenues are over $1 million. It has thousands of revenue-generating customers and processes more than 2.5 billion page views per month. Customers include Internet Brands, Huddler, and VW Vortex, to name a few.

Roup and his team hope to monetize site-to-site clicks Internet wide, an opportunity that can hold their interest for at least the next decade. A very interesting premise, and in line with some of the trend pieces I have written lately, notably, Making Money With Blogs.

Recommended Readings
Monetizing Free Traffic That Refuses To Convert To Premium: SocialVibe CEO Jay Samit, Los Angeles
Flipboard’s Valuation Without Monetization Strategy

This segment is a part in the series : 1Mby1M Deal Radar 2011