Interview with Ophir Tanz, GumGum

Online publishers often have difficulty paying for an locating the right photos for their sites, because of an industry which has been--so far--structured and priced mostly for the offline, "dead tree" magazine and newspaper world. Plus, photographers and their agencies often find sites are pirating photos, and that they don't have a way to get their photos to those publishers. To solve that problem, Santa Monica-based GumGum (www.gumgum.com) recently began offering entertainment and other photos to blog and other online publisher on a CPM basis. We spoke with Ophir Tanz, the firm's CEO and Founder, about what the company is up to, as well to get the details on a recent (unannounced) additional angel round of funding.

For those folks not familiar with GumGum, tell us how your service works?

Ophir Tanz: GumGum is a content licensing platform. The purpose of the company, is to solve the content licensing problem on the Internet. The major problem is effectively, in the offline world, media is licensed for a finite period of time, to a predictable audience. If you're Time Magazine, with four million readers, and are going to be on a newsstand for a week, offline publishers and content owners will use those parameters to come up with a license price. That is effectively how, in the offline world, license prices are estimated. On the Internet, the problem is those media licenses are forever, and the usage is unknown. For example, in five to ten years from now, you might Google "paris hilton katana" and you'll come across a Perez Hilton web page which is an archived post from five or ten years ago, with a picture of Paris Hilton walking out of Katana. That might be adding lots of value to your post and page, and what has happened is Perez Hilton has monetized that page view. The problem is, the photo's owner has received nothing for that page view. That's what's what we mean when we talk about Internet media usage being forever, and the usage unknown.

That media might be generating revenue from that content forever, but a content owner doesn't know what it's generating, and moreover can't monetize that. Our solution is to effectively bill publishers on a per-use basis. They can track, distribute, and monetize their content. By content, I mean photos, right now, and soon video, audio, articles, and text licensing as well. We can track every single view and monetize that on a per-use basis. We do that it in two ways. One, is we provide a way for content providers to upload a photograph, specify metadata, and also specify a CPM. That CPM is the rate which a publisher will come along and license the media based on. Every single time that given image is viewed, the publisher is paying a fractional amount out of their pocket for that view.

The other way we are able to license the media, is for free. We provide media free to publishers through an ad overlay. An ad tastefully appears at the bottom of an image, and with video its video ads with interaction--and content owners are compensated from third party advertisers. Publishers might also receive a cut of the revenues, too.

Why would someone want to use this, instead of something like Corbis or Getty?

Ophir Tanz: We launched about a month and a half ago, and already, we have about a million photos in our marketplace. We've gotten a tremendous reception from content owners, and we have been focusing all of our business development efforts on entertainment photos and the paparazzi market. That was for strategic reasons, because it's a market with really time sensitive, high value, and high demand photography. Our content partners include Splash News, Pacific News, and X17, the biggest entertainment agencies in the world. Splash News is our biggest partner.

We come with a big value proposition. At some level, everyone agrees that the one time fee model on the Internet makes no sense. At the end of the day, the publishers are not capturing any of the long tail value. We also protect media in a way that it's never been protected before. With our system, you can't right click on an object to save it--it will just tell you an image is copyright Splash News, for example, and give you the option to license the image. That effectively makes every single photo a viral marketing tool. We've also built state of the art authentication technology -- that's what enables us to actually have a pay-per-use model to begin with. When a given publisher goes to license media through GumGum, they specify which domain they will be using with that license. We authenticate at the time that the license is loaded. That means, you can't go to a publisher and steal some code or a hot link. Instead, you'll get an access denied. We do a lot around protecting photos. That shouldn't be confused with DRM, however--we're not affecting the user experience. A user is able to do exactly what they expect they're able to do--the photo is same as if it were a clean JPG, but it provides some protection against pirates.

We track the use of photos across the Internet, including views received. We also show--much like an advertising network--repeat versus unique views, which browsers, and other information. That enables content owners to get surgical with that data, and understand where their content is being consumed. Most importantly, we are offering a payment model that makes lots of sense. There are tons of inefficiencies in the market, which is blocking out 95 percent of the publishers who want to use their media. There are lots of publishers who are just too small--they don't have enough money to be paying $100, $200, or $300 for a license, and licensing 40 images a day. The market is smaller than it could be. People are either discouraged from starting a blog, or they will pirate media. Pay per use eliminates the capital intensive barrier to entry that publishers experience. Maybe you can't currently spend a thousand dollars a day on photography, but if you can only pay exactly what you are consuming, in such a way that the revenue you are generating vastly trumps the cost for licensing that media, you can eliminate the barrier to entry.

We have a self service system where content publishers can find media they can license, in a self service basis. Currently, what you see in the market is there are one-time fees paid, but also lots of behind-the-scene negotiations which take place--all of which is messy, and time consuming for everyone involved. Our value proposition to everyone is huge, because we're eliminating a huge amount of friction from the process.

So how did you start GumGum, and what's your background?

Ophir Tanz: It's interesting. I'm not from this industry, although my partner Ari has some experience--he ran an epicurean magazine called EATING Magazine, so he has more experience in the publishing industry. But, neither of us came from the industry. We joke with industry veterans that we are now friends with, and I don't think we'd have tried to solve this problem if we had.

The last company I started was Mojungle. I started that with Ari as well. It was a mobile media sharing platform that allowed you to effectively capture media with your cell phone, and use text messaging to take a photo or video, and send it to your personal widget on a blog or web page, in real time. It was sort of like Twitter with photos and videos. We sold that in February of last year, to Shozu.com.

After we sold the company, we became interested in the content licensing problem. What really alerted us to the problem, was Perez Hilton being sued by everybody. It was all across the news. We were interested in why this was happening, and tried to understand how content licensing works on the Internet. In this research process, we were baffled and surprised at how terrible and inefficient the process was. The original idea behind GumGum was how to protect photos and privacy, but we very quickly turned to how best to monetize this stuff. We became very philosophical, and you either have the belief or not. Our belief is everything will go pay-per-use. Web hosting will go pay-per-use, like Amazon Web Services; we believe things like content licensing will also go pay-per-use. It just makes sense. As you consume things, you pay for them. We also have a strong belief that everything will become effectively ad supported as well. There's a place for both of those models on the Internet. On one hand, the New York Times or the LA Times will never be too keen to display ads on their real estate, so they will use pay-per-use. On th eother hand, a medium sized blogger might not want people to see ads on their home page, but like Google Adwords, we can allow them to set a budget and use different licenses. For example, they can use pay-per-use for a specified period of time, and if they go over budget, switch to an ad overlay. It's really the combination of those two technologies that is the real power behind GumGum. It makes for a strong value proposition.

Let's talk a little about your funding--I understand you've just raised some more angel investment?

Ophir Tanz: We thought of the idea, and thought it was a good idea. Since we had just sold a company, we had some cash. Ari and I threw in $50,000 ourselves, to see where we could take it. Very soon after that, we raised two angel rounds. We've raised two rounds to date, and raised another angel round about 3 1/2 months ago. In total, we've raised $300,000 for the company. We're currently doing a Series A raise, have a term sheet on the table, and also have a strong advisory board. Michael Jones (Editor's note: Founder of Userplane and now at AOL) is on our advisory board. He's a very great advisor, and has been instrumental to our strategy and helpful with our growth from an operational perspective. Our other advisory board member is David Sacks, one of the PayPal guys. He's the CEO of Geni, and is good strategic firepower behind us. We've been meeting with, and are being tracked by a lot of VCs up North, and down here. We're going to do our next raise in the next two months, and are doing more meetings.

What's your next goal, beyond fundraising?

Ophir Tanz: We have a few big goals. We want to expand to video, and offer video licensing. We're also expanding to articles, and text licensing. We are working on developing an API, so that anyone can leverage our tracking, distribution, and monetization technology. For example, if a Getty or a big aggregator wanted to use GumGum, but didn't want to go through our interface, they can maintain their brand and maintain their own marketing and web site. We liken ourselves to the PayPal of content licensing. We have a checkout solution that people are able to seamlessly use to license content. Our other goal is to hit a billion page views in a month. I think we're on track to do that. We think we'll reach that goal by 2009, if not before. That affords us to become a lot of interesting things, from an advertising perspective, and will enable us to grow this thing.