New Media Gather Takes Old Media Cash
By: David Utter
Boston-based social media website Gather.com picked up a $10 million infusion of cash from Hearst and McGraw-Hill, both very traditional media firms, to aid its partnership and international expansion plans.
Gather makes the promise that many socially-oriented websites do, in touting their capabilities that enable social networking and sharing information. Where Gather differs is in its business model.
Like many sites, Gather accepts advertising for revenue. Unlike many sites, Gather shares that revenue with its contributors. From their site:
It just seems fair that we share our advertising revenue with you based on the quality and popularity of the content you contribute on Gather. We will also share some of our revenue with you if you choose to use the site actively, exploring content that others write, searching on Gather and on the web, and inviting your friends, family, and colleagues to use the site.
GigaOM writer Liz Gannes tried to delve into the system to see how profitable it might be. Her verdict?:
I just spent some time trying to get a sense of how lucrative this could be, and the answer seems to be not very. One point is worth $0.02, but I wasnt able to earn any points by posting an article on my homepage, commenting on a piece by someone else, or getting someone to rate my article 10 out of 10 stars. You can only extract money from the system when youve earned at least $50 per month.
Founder & CEO Tom Gerace will have the chance to draw more users through 2007, thanks to the financing round arranged by VC firm Pilot House Ventures. Hearst and McGraw-Hill each have histories dating back to the late 19th Century, but their 21st Century bets will depend on how much adults want to engage through Gather.
"Socially created content is different from traditional media content," Gerace said in a statement. "Social content has relevance and street cred because people can meet and interact with the authors. With this investment, our investors capitalize on the rapid audience trend toward social content."
The old-line media companies ponying up the cash here must have been convinced. Gerace believes Gather has an adult audience that is highly educated and informed, in contrast to the younger demographics at places like MySpace or Facebook.
VentureBeat speculated the Hearst entry, coming from a firm with decades in newsprint, may use the investment as part of a strategy to get its audience more connected online.
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