IZEA: The Art of 'Content Marketing'

The internet has spawned a universe of self-anointed experts pontificating on an array of topics as diverse as our universe itself. The "blogosphere" has become a ubiquitous arm of the internet and social media as this horde of the content creators blog, Tweet and share photos and video on Instagram, Flickr or YouTube. Some create blogs simply as a passion and are satisfied with attendant psychic gratification. As with any revolution, change is rapid and iterative. Known by various names "social sponsorships," "content marketing," "sponsored content" is a way the ordinary content provider can monetize their content be it blogs, video, pictures or tweets. The jargon is fluid, and it may also be called "marketing through the social media stream."

IZEA Inc., through their website, has created the world's largest network to match content providers and advertisers. Particular sponsors or advertisers, often giant multinational corporations pay content providers, to create target advertising for their products or services via a blog, picture, tweet or video. An example might be a woman being paid to post an Instagram picture of her in a particular brand of sunglasses or a blogger being paid by Verizon to extol the virtues of their 4G wireless service performance. Keep in mind, this is very distinct from display ads or "banner advertising" in the form of pictures and ad copy that appear on a website next to a blog article. Those promotions are mainly the purview of Google AdWords or Google AdSense.

I had a chance to talk with CEO and IZEA founder Mr. Ted Murphy about some of the recent developments at this rapidly-growing company. In January of this year, in a cash and stock deal for $8.9 million, IZEA purchased Los Angeles based Ebyline. This company matches their vetted proprietary database of freelance writers, photographers and other content creators with businesses who are, for example, marketing products or expanding brand awareness. It is complementary to the existing IZEA business model and now allows for them to do a fully managed "concierge" advertising campaign. For example, Pepsi might now come to IZEA and like to buy 2,000 blog posts over the next six months. Now, with an in-house staff of writers IZEA can manage the content and efficiently control the placement of the articles.

On March 25, a press release announced IZEA has partnered with ad agency Allison+Partners, recently named PRWeek's "2015 Midsize Agency of the Year". Allison+Partners will adopt the IZEAx platform and bring their stable of clients to the IZEA catalog of content creators. It should be a win-win for both outfits.

IZEA currently boasts a list of over 250,000 discrete registered content creators or "influencers" as they are so-called. Any "influencer" with desire to monetize their social media stream can simply sign up for free on the website. IZEA can connect them with their over 50,000 registered advertisers and agencies including many of world's top brand names: Audi, Volvo, Michelin, Unilever, Pepsi, Revlon, Kleenex, Kraft, Citibank and Allstate.

What can a blogger or tweeter or Instagram-er expect to get paid by posting a picture blowing your nose with a Kleenex tissue? How long is a string? Celebrity Kim Kardashian, with her millions of Twitter followers, may get paid many thousands for a single tweet. A mommy blogger talking about the local PTA may never be picked up by any advertisers. How much is your influence or clout? While the vast majority can expect less, there are many IZEA "influencers" who make $3,000 or $5,000 monthly. Maybe they have 30,000 or 40,000 page views per month... or maybe they have a smaller audience but write about a specific topic that targets an advertisers product. For example, perhaps a blogger writes explicitly about chainsaws and so a chainsaw manufacturer may be willing to pay significant dollars for that blogger to create content about their brand. It is the proprietary IZEA algorithm that helps advertisers determine what an Instagram photo of an attractive woman with a distinct brand of nail polish is worth.

Full disclosure is made for all "sponsored content" per Federal Trade Commission regulations. The FTC guidelines are explicit:

When there exists a connection between the endorser and the seller of the advertised product, which might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.

IZEA is in complete compliance with FTC rules.

IZEA is a publicly traded company. It is listed on the over the counter market that is primarily reserved for micro-cap stocks. It currently has a market capitalization of around $21 million and on an operating basis is not quite in a positive cash flow position. There is no debt on the balance sheet, but there might be another secondary stock offering to fund both operations and installment payments coming due on the Ebyline purchase. Venture capital-based companies are focused on scale or size, rather than profitability. If the company should become profitable in the near term, different financing options will become available.

The 2014 total revenues for IZEA were around $8.3 million and for 2015 CEO Murphy expressed optimism that internal growth combined with the ebyline acquisition, that year 2015 will generate $23 million in sales. When I touched on the issue of profitability Mr. Murphy expressed the following thoughts. He quickly focused on the importance of achieving scale. Though they are, by a large measure, number one operator in the space, he thinks it is critical to put so much more distance between IZEA and its competitors. I think the plan is to become analogous to Amazon. -- the 800-pound gorilla. Therefore, at this stage in the company's evolution, there is no definitive metric to discern whether this company is either overvalued or undervalued. Currently, a lot of money is being spent marketing to attract as many bloggers, Tweeters and Instagram-ers to their platform. Significant funds are also funneled to engineering to perfect the already industry leading proprietary IZEAx platform agnostic software. Content providers can link social media accounts from any of the following networks: Google+, Facebook, Twitter, Tumblr, YouTube, Instagram, LinkedIn, Pinterest, Flickr. You name it; the connectivity is likely available.

Ending 2014 with $6 million in cash on their balance sheet and no long term debt the company is in a healthy financial position. By financing growth with equity offerings rather than debt, IZEA exhibits a conservative management style that suggests they are in for the long haul and will be able to weather any unforeseen exogenous economic events. The market is exploding in size. According to statista dollars spent on "content marketing" is expected to increase from $5 billion in 2013 to $15 billion by 2018. By capturing just a few percentage points of those numbers, IZEA Inc. might just be a real winner.