Journey into Tech 

Hi Matt, as the greater industry has continued to evolve, and you think about your particular journey with Technology, any new reflections on the role you have played? What inspires you most in your role at Pepperjam?

20+ years into my love affair with Digital Marketing, and yes it is still a love affair, whatever small role I may have played in its evolution is secondary to what the industry has achieved as measured by the inflow of investment dollars and the related results it has delivered to marketers over that time frame. In the 90’s we knew what the potential was, but it was still early days. The concept of using first-party data to improve relevancy and ad effectiveness was a concept we evangelized with few tangible examples to validate the story.

Fast forward two decades and that vision is now real and there are countless examples of our category playing primary roles in helping marketers build businesses at scale, efficiently, and with sustainable unit economics. That was always the goal, to deliver relevant messages at a scale that yield measurable results, which turns advertising into a profit center. I’m proud of how far we’ve come and inspired about where we are going.

In addition to the aforementioned pride, my daily inspiration continues to come from the passion I have for teaching and as importantly for learning. The Digital Marketing category, perhaps more than any other, is characterized by perpetual change. Standing still is simply not an option.

From my vantage point as an outsider, Affiliate Marketing hadn’t learned that lesson. With Pepperjam, I saw an opportunity to lead a change movement in a category that had become complacent and mired in the status quo. Marketers have desperately needed an alternative to primary channels like Facebook/Instagram and Google. The outlook is shifting. According to a Pepperjam-commissioned survey conducted in 2019, Forrester found that executive-level marketers rank affiliate and retail as tied frontrunners in the new Marketing mix, becoming equally responsible for driving consumer sales revenue — pulling ahead of search, a stride forward for those rightly putting their stock into the affiliate channel.

In the past, affiliate has had a reputation (well deserved in some cases) that has prevented it from being considered as strategic as paid search, paid social, and programmatic display. Adding to that challenge, the legacy incumbents built a wall around their practices in an attempt to protect its old model. That’s not the solution. The lessons of the other channels are very apparent to me because I lived them. With Pepperjam, as the outlook starts to shift, we are applying those key learnings through our commitment to transparency on pricing, brand safety, by delivering an open platform that allows data export and more, and through our approach to the category. The market is responding. That is both inspiring and gratifying to the entire team.

How has Pepperjam evolved its way of helping consumer-facing businesses – especially those in the Retail or DTC space – achieve greater success using online advertising technology solutions? 

This is a challenging time for many retailers. Many are encumbered by debt loads, overstored in the face of declining mall traffic and struggling to maintain margins in a highly competitive environment. To make matters more challenging, over that past several years there has been a discernible shift in the Retail Marketing landscape—a shift in power from marketer to consumer. If you’re a marketer who wants to thrive in this relationship dynamic, you will need to adapt sooner rather than later. With the consumer calling the shots, it has become incumbent upon you to meet them wherever they are, on their terms.

Even with an awareness of that imperative, with Y/Y increases in Facebook’s CPMs at 18% and Google’s 8% increase in CPCs, for retailers attempting to adapt to this dynamic, the price to maintain omnipresence throughout the buyer journey is further undermining the unit economics of already struggling businesses. With Facebook and Google maintaining their seemingly permanent residency as the cornerstones of the digital marketers’ playbook, and Amazon a persistent and credible threat, the desperate search for scaled subsidies that enable revenue to grow faster than expenses and the operating leverage this dynamic yield has reached a palpable level of urgency. For some, it has become a matter of survival.

Our focus at Pepperjam is to help these marketers overcome that existential threat and deliver that subsidy they need to scale and maintain profitable businesses. Our DTC clients, which include many of the leading disruptor brands, have adopted affiliate as a primary Marketing channel in their playbook and represent in my view, the “winners” in this go forward consumer-controlled paradigm where advertising must become a profit center. Our mission is to help create more winners.

Technology and Partnerships

Clearly partnerships are integral to your model – both on the marketer and the publisher sides. Tell us more about how you define partnership, and how your footprint, roster or ecosystem have continued to evolve. How does it look different today than when you started? 

Partnership has become a complex word. It gets used frequently as a catch-all for many things and as such, I think its meaning has been diluted over time. For Pepperjam, we had “partnerships” in place like everyone else but when we stepped back upon my arrival in January of 2018 to develop our strategic plan, a key component of that process was a review of our partnership strategy and an evaluation of which relationships were true partnerships or had the attributes to achieve and sustain measurable mutual benefit, trust, that were constructed on a foundation of tangible commitment that extended beyond paperwork, press releases, and logo promotion.

A key outcome of that process was a “less is more” approach to our partnership strategy. I have found that in the affiliate category, in particular, many of the “partnerships” that exist look like the dynamics that have been exposed to other channels. Opacity on pricing, incentives that aren’t visible to the clients to enable more lucrative earning opportunities in the supply chain, and technology integrations that generated press releases but didn’t fundamentally fit in a product roadmap focused on solving for customer need.

Based on this reset, our partner ecosystem today is focused on three core categories, publishers, technology, and select digital agencies.

Our publisher partners rely on us to generate material revenue in the form of e-commerce referral payments. As Facebook has made changes to their newsfeed and Google adjusts its algorithm, publishers have lost meaningful sources of traffic and as a result, their revenue yield per thousand pages declined. Increasing ad loads is not a viable offset, as doing this risks undermining the user experience. Our responsibility to them is to present meaningful opportunities for monetization that drive revenue growth beyond paywalls and standard ad placements while allowing them to deliver high-quality content with balanced ad loads.

Our technology partnerships focus on eliminating friction in the channel. Integrations with e-commerce platforms that accelerate launch times and reduce resource requirements, API integrations with attribution measurement “sources of truth” that demonstrate our commitment to transparency and willingness to allow marketers to take their data out of what has been the walled garden of affiliate.

Our agency relationships are shifting more toward the independent multi-channel digital agencies and holding companies. We also are deepening our commitment to a select group of affiliate boutiques who are evolving along with the channel.

In my experience, legacy boutiques exhibit protectionist behaviors that do not put the customer first. This isn’t a universal indictment so much as a fact of life, dictated by their survival instincts and vulnerability as the channel becomes more strategic. Holding companies and the larger independent multi-channels are already paying greater attention to the category — and we also see more marketers in-housing. The boutiques who haven’t adjusted their behavior will struggle and we want to invest our resources in building for the future. We are as the Wall Street crowd would say “bullish and long on the category.”

At the highest level, and perhaps most importantly for us, facilitating partnerships is the core of what we do. Affiliate Marketing is predicated on facilitating commercial relationships that deliver business benefit to the participants and our core focus and expertise is combining service and technology to help marketers, publishers, and non-traditional affiliate partners, whose increasing presence enables the expansion of the value of Affiliate Marketing category overall, realize the benefits of an optimized commercial relationship.

When you look back into the outgoing decade, which Online Advertising platforms and tools do you really miss having or working with? 

My instinctive response to this question is actually less about platforms and tools and much more about diversification of opportunity. In many ways, the duopoly has been good for the industry (scale, automation, spend efficiency), but I miss the opportunities for diversification for the marketer and a more level playing field overall. In some small way, that is what we are delivering with our approach to Affiliate Marketing.

What do you feel drives the current competition in the ‘Digital Advertising Economy’? What lessons have you learned from your journey in Ad technology? What advice would you give to new players in the space, as far as building a healthy, sustainable business operation – and one that serves its clients and partners well for the short- and long-term? 

In large part, the current competitive dynamic is being driven by the rapid emergence of Amazon as a credible threat to Google’s nearly two-decade chokehold on purchase-related searches. With nearly 50% of all e-commerce searches originating on Amazon, marketers are moving spend there (and will continue to do so at an increasing rate). Given Amazon’s ability to close the loop through the conversion, and their wealth of first-party data from Prime members, they are a credible threat to Google (perhaps less to Facebook) and an ecosystem is being built around their ad platform accelerating their growth.

I think the single largest piece of advice I would give any new player in the space is: above all operate with integrity, accountability and always put your customer first. These are easy words to speak but often more difficult to prioritize if under pressure from a competitor or investor. Don’t sacrifice these core tenets, ever.

Always remember that the windows aren’t open long. The pace of change is the only constant and you have to be willing to reflect honestly and apply key learnings quickly. Agility and flawless execution matter much more than just “shiny” technology. Finally, the underlying platforms have changed but the business models are largely portable and have been brought forward and optimized for the new platform.

Organization Building

Tell us how you work with technology. What Marketing, Sales and Messaging tools do you use for your business? How are these reflected in your solutions for your clients and partners? 

We rely heavily on our HubSpot, Salesforce integration to drive our Demand Generation and Sales forecasting. We are a very data-driven organization and though the team certainly relies on instincts and experience often, anchoring our overall operating approach in data allows us to optimize quickly and run a profitable and growing business.

That same “art and science” approach is woven into the fabric of our market-facing solutions. Our Cloud-based Ascend Affiliate Marketing platform was engineered leveraging our 20-year history in the category, to deliver actionable insights in real-time through clean interfaces and to automate processes that deliver real competitive advantage at scale.

Tell us something that fascinates you about the workplace and what you and the leadership team have cultivated at Pepperjam. What are your specific thoughts about embracing inclusion and diversity?

Leading a team comprised of GenX, Millennial, and GenZ is fascinating to me. As a child of boomers and the great-grandchild of immigrants, I am having to learn in real-time that my approach to work, balance, and priorities is very different than the generations that I roll up my sleeves with every day. It is at times frustrating, at times invigorating, and consistently eye-opening.

In terms of inclusion and diversity, I am encouraged by our progress but when acknowledged broadly, there is much more to be done. At Pepperjam, I am proud of that fact that our Senior leadership team has significant female representation and I think that has been a critical contributor to helping us acquire and retain the type of talent we aspire to have in our organization and to building a culture that has put us in a position to earn a market leadership position in just a few short years since I joined the team.

How are diverse and inclusive workplaces perceived by your clients and partners?

I think this is increasingly and appropriately important to all clients and partners and to businesses overall. In evaluating a potential partner or vendor, I always consider the integrity, accountability, and values of the organization. I would expect Pepperjam to be evaluated in the same way. A diverse and inclusive workplace should be a component of that overall evaluation, but I would also say that diversity and inclusion in the absence of qualifications and competence is equally unacceptable.

Insights and Predictions

Can you pinpoint one epic moment from the decade (2011-2019) that changed your outlook on the tech landscape? 

September of 2012. Facebook launched Custom Audiences enabling marketers to import first-party data and target Facebook users. This was the manifestation of the dream many us had over a decade prior when used the phrase “the right ad, to the right person, at the right time.” Facebook delivered that reality and people-based marketing moved to the forefront of digital marketing.

What are your predictions for your industry and technology markets for 2020-2024?

– The demise of the third-party cookie will lead to brands increasingly focusing on methods to acquire and leverage first-party data.

– As brands become more adept at leveraging first-party data, they will migrate away from channel sales and marketplaces (including Amazon) and increase their efforts on direct to consumer sales models to counter margin erosion and reclaim control of their business.

– Contextual targeting will regain the prominence it sacrificed to the third-party cookies and identity graphs in the programmatic auction.

– With the consumer dictating the purchase journey, brand and performance marketing will increasingly be treated as a single discipline as marketers use every touchpoint to achieve their dual goals of awareness and conversion.

What startups in the technology industry are you watching keenly right now?

Amperity and BounceX.

Tag the one person in the industry whose answers to these questions you would love to read:

Tomasz Tunguz, Managing Director at Redpoint

Thank you, Matt! That was fun and hope to see you back on MarTech Series soon.