This is the first in a series of conversations ReelSEO will have with C-level officers of emerging companies in the rapidly expanding digital video arena. 

We’ll want to know what makes these leaders tick, what makes their business models special, what keeps them up at night, how they make profits, and how they expect to “emerge” victorious on the digital video playing field.

Today’s conversation is with David M. Roberts, the CEO of The Filter, a technology service that uses “recommendations and relevance systems to help content owners, publishers and aggregators around the world maximize their content and services.” The Filter increases usage and engagement—which improves margins—making entertainment services more efficient and competitive.

ReelSEO’s C-Level Conversation with – The Filter

I met up with David at the Digital Hollywood conference last week.

Robert Sherry (RS): So, tell me, what does The Filter do?

David: The Filter’s main mission is to find ways to connect people to content thy love, at the right time, the right place, on the best device, in the best possible way…which is a nice, lofty ambition…but we’ve been at this for 5 or 6 years!

RS: I thought you were a new player on this stage?

David: We started as a consumer business by building music playlists and creating a stream or “feed of relevant content” of what you would most likely enjoy.  At the same time we started licensing what was under the hood to content services. Our first customer was Nokia for their music services.

So, back in January of 2009 we had to make a strategic decision because we were running out of cash. The B2B side of the company, (based on a licensed model) was bringing in more money from one or two customers than our consumer business (based on an ad model)…so we decided to focus entirely on the B2B business model. We started with inference functionality (i.e. if you listened to this, you may like that) for the likes of NBC, Sony Music, and DailyMotion.

RS: And your service would allow clients to gain access to hyper-targeted audiences that they could sell to at a premium?

David: That’s right. By using The Filter they would increase consumption of videos on their sites and increase the duration of sessions. And because they were selling out pre-roll ads, we immediately gave them another 15-20% inventory to sell.  So, the ROI as very, very easy for them to “get.”

RS: Do your clients use The Filter as a “prognosticator” of what works based on what they’re viewing by genres?

David: That’s a great question, but they don’t use it that way. But our service has that capability. It’s a matter of where we want to take it.

RS: So, tell me about your maturation process…what new products are in your pipeline?

David: We’re working on some data analytics products across all of the customers, either individually or as an aggregate. So, people who watch 30 Rock…what else do they do…what kind of music do they listen to… at what do they do at different times of days…on different days of the week.

RS: Sounds like you’ve gravitated more towards personalization tools and analytics?

David: Yes, So, we went from “Recommendations 1.0” to personalization…hyper-relevance …using the individual devise (mobile, TV, iPad, set top box, etc.) to provide to them a navigation to filter search which is much more relevant based on contacts, historic consumption, and what they’re actually watching or listening to.

RS: Do you provide the platform for your customers–that allows them to go into the control panel to manipulate the data?

David: That’s right. It’s an API-based service. They give their data feed… from which we build a “recommendation model.” They can then go into a control panel to change the rules, white label, black label, etc.

RS: Tell me how your business model is structured.

David: Our license model is a monthly SaaS—with typically a minimum of 12-18 months contracts. We haven’t lost any business in 3 years. We’re very much growing. With NBC we went from doing just their short form video clips—to now doing their long form. They’re now in the process of wanting to roll us out to other entities within NBC/Universal.

RS: Is your platform equally effective for video, audio, and text?

David: These digital assets can be used for anything. But we tend to focus on things that have a digital feedback loop (typically music, video, e-books, games, apps).

What I mean by that is…with music you can tell if someone listened to a song for 10 seconds and skipped the rest…or listened to the whole song. You can tell if the user skipped it or shared the link with a friend, put it on a playlist, etc.  All of a user’s “digital actions” have a value to the algorithm.  If we were to use it for a book on a site like we would never know if you read the whole book, stopped after the first chapter, or recommended it to a friend. Because its analogue, there’s no way of capturing that. We feel that the power of our algorithm is in the granularity of what we capture—so we’ve focused entirely on digital assets that can have a feedback loop.

RS: What’s in store for The Filter in the next 6-12 months?

David: We’re profitable now, so we’ve gone through our “survival year” where we had to re-focus entirely on the B2B business and make some big changes. But we came out of it…with November 2009 being our first profitable month. We got a lot of big deals in the works.

RS: Where are you getting the most traction from…the U.S., Europe?

David: Currently 70% of our business is non-U.S. (Nokia is in 38 countries). But NBC and Sony are here and we’ve got a couple of announcements with U.S. companies we’ve already signed. We see very good growth here in the U.S., clearly. There’s a lot more competition, but there’s also a lot more opportunity.

So, for the next 6-12 months we’ll need to increase our presence here in the U.S., focusing more on the personalization part of our content services…working with companies who either have consumers who pay something (subs on demand) or who sell-out of their inventory and need us to create more.

RS: So, for instance, with a content provider who is sold out, you can go in and increase consumption by say 20%… which correlates to an even higher percentage of increased revenue, based on your ability to hyper-target.

David: Exactly. Then we would take what is in effect a small part of that increase.

So, the next six months is all about building out the platform for international growth. We’ve already proven the technology and validated the business model.

RS: Good luck and thanks for your time.

David: Cheers.