Friday, March 27, 2009

Social network site Gather.com grabs funds and new money model

By Galen Moore

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Gather Inc. has pulled together $587,000 of a new $750,000 round of financing, the company reported last month in a federal regulatory filing.

Downtown Boston-based Gather Inc. runs gather.com, which it dubs “the premier social network for the over-30 crowd.” Launched in 2005, the site is based around topical discussion groups with titles like “Money,” “Movies,” “Public Radio” and “Celebrity Dirt.” The company reports 500,000 registered users.

Founded in the fall of 2004, Gather has received about $24 million in venture investment to date. CFO Tyler Hoffman said the company is not yet profitable and the new funds will be used for working capital. He declined to provide details about Gather’s runway to the break-even point.

Institutional backers include Hearst Corp., The McGraw-Hill Companies, American Public Media Group of Minnesota and lead investor Pilot House Ventures in Boston. Private investors include Waltham-based Thermo Fisher Scientific Inc. (NYSE: TMO) chairman Jim Manzi and Jack Connors, chairman of Boston-based advertising agency Hill, Holliday, Connors, Cosmopulos Inc.

Gather is developing a new revenue stream to add to its established business model of selling display advertising, said Hoffman. The new revenue plan will allow companies to set up custom social spaces and distribute free samples of consumer packaged goods to users for review on the site.

Hoffman said the company believes the new revenue model, which he called “engagement marketing,” has greater growth potential than display ads.

“Straight display advertising on a social site is not very effective,” Hoffman said. “In order for advertising to be truly effective in a social sense, there needs to be some deeper involvement into the fabric of what’s on the site.”

Hoffman said Gather attracts users from outside its own community of members, with 1.2 million unique visitors per month. “Our content does extremely well in Google search,” he said. “We get a lot of people coming into the site because they’ve entered a search term into Google and have found related content.”