VIDEO Elyse Southwell interviews Lewis Gersh, CEO of Pebble Post. Watch the video above or read the transcript below: Elyse Southwell: Live at the Nasdaq Market Site in Times Square, I'm Elyse Southwell and this is Nasdaq Disruptors. Today, we're talking about marketing technologies specifically programmatic mail technology and how marketers can use that to engage their most important customers. Lewis Gersh, CEO of Pebble Post is here with us today to talk about at how we can use online and offline technologies in this programmatic direct mail space. Lewis, thanks for being here today. Lewis Gersh: My pleasure, thanks for having me. Elyse Southwell: What is Pebble Post? Lewis Gersh: So, Pebble Post is a startup venture. We invented what we call programmatic direct mail, and we're able to transformed about 70% of site activity into a physical address and then it dynamically rendered and personalize piece of physical direct mail, zip sorted into a postal hub fully automatically within 24 hours every day per brands. Elyse Southwell: So, what is the programmatic direct mail? Is that a category, a new category? Lewis Gersh: It is. So, when we went to market with it, the marketers started telling us very early that we created a new channel of marketing. It was one-part digital, one-part direct mail and something totally new. And the reason is we take the best of digital which is the real time interest and intent data online and we take the best of direct mail, which is the physical media into home that somebody can save and follow up on when they want, wherever they want and we combine the two.
So, when we send the programmatic direct mail, it's relevant to the household level, consumer sorted, save it and what we call the short stack, right? Surviving the sort, you're in the game, and then you can bring it to any purchase channel where 90% of purchases happen in the physical world. You can't do that with a digital ad, so it's taking that great digital data, but taking away the limitations of a digital ad.
Elyse Southwell: A lot of marketers talk about Omni channel marketing; can you talk about or do you think that they’ve mastered online to offline marketing to date? Lewis Gersh: I think they've mastered how to miss it, to be honest. When we look at it we think of Omni channel as purchase channels, right? There's desktop web, mobile web and mail order, telephone order and physical location like a bank branch or retail store or car lot. When marketers think about it traditionally they think about where they're pushing ads at people, unfortunately when people receive the ads they decide where they're going to go spend their money, and if you don't do regression from the transaction channel backwards into what media you should serve for them, most we're seeing it's getting in front to remind the consumer in different places, but it's actually not relevant to where the consumer wants to spend their money, and that's why we say it's been missed a lot.
Like the idea of cross-channel media balancing is good, the idea of getting media that is relevant to where somebody is going to spend their money is complete missed, and it's something we've learned with what we were doing, how important it is.
Elyse Southwell: A lot of marketers would say oh, well I have a tracking pixel on the back end of the ad, so that will be able to let me know where the people are going, but you're saying there's still a big miss. Lewis Gersh: That lets them know when somebody clicked to purchase off a site which is what digital's great for, that's only 10% of consumers spend. So, all of those ads drive people to there and they can track that very well. If you want to go into a home or 90% where decisions are made and from home to where 90% of money is spent, in the physical world, that's a whole different game of how to make the media relevant and what we're building with a lot of our data on the back end, how to track it, that's really hard to do. Elyse Southwell: If you go to any of the trades or any of the major outlets they are saying the headlines are retail is deal, retail is dead, what are your thoughts on physical retail locations and that whole space? Lewis Gersh: Yeah. We saw great, we talk about a country, retail isn't dead, bad retailing is dead, over built, over leveraged were dead, many reasons why a lot of retailers are in trouble. What ecommerce has really taken away are what we call task and utility driven purchases. Generally moderate or to low considered purchases where it's about convenience, right and that's what ecommerce is great for. When you think about a moderate to high considered purchase and something where somebody wants an experienced that's where people do not spend online and that's 90% of spend that happens in the physical world where those transactions happen. Elyse Southwell: So online shopping not dead, but only 10%? Lewis Gersh: 10% of spend today. Elyse Southwell: Wow. Lewis Gersh: Yes, and growing quite well. In the task and utility, why would you buy a grocery, it's a task and utility that you want more convenience. You really don't need more experience, right? I mean go to a good, you just want the right foods, right? Elyse Southwell: Yeah. Lewis Gersh: You want the right product. Maybe in produce or meats or fish, but I mean most of it, right, it's just about convenience. Elyse Southwell: So, 90% of the spend is happening offline, Lewis Gersh: Yes. Elyse Southwell: What are some of the pain points that these retailers are facing? Lewis Gersh: One of the biggest, I think backing up to your prior question, it's the task and utility driven purchases that often drive the foot traffic. So one of things that ecommerce is eating up is the foot traffic, and if the brands don't figure out how to drive foot traffic especially in a cash flow positive way into the store, that's a battle for them, and something we see a lot of the brands using what we do for, they take the online interest and intent data, send the physical programmatic direct mail to the household and that often times has a call to action or a message calling them to store, and we've seen with coupon codes or barcode scans as well as matching transaction files because we mail to a household where you have a name and address on the transaction, we can match it, correlate it, we see that we're able to help them drive cash flow positive foot traffic to a physical retail location which is kind of matter from heaven for a lot of retailers today, right, especially because that's where 90% of their money is spent, right? They have to. Elyse Southwell: How did you come up with this idea, the programmatic direct mail? Lewis Gersh: So we were, myself and two co-founders we're working on the idea as programmatic was becoming very popular in digital media, digital mar tech and ad tech and we started thinking about how it's going between display to email to online video, everybody set into home next via IPTV and then maybe digital afterwards, digital radio and other stuff, and to me being on the venture capital side for 10 years funding these companies, IPTV is so far away in terms of liquidity and privacy, right, on what they are going to be able to display in home.
And I thought wait a minute, I was kind of mentored by a direct mailer or a direct marketer who had worked with Fidelity, at my first startup, and this guy Victor Kramer and I thought everybody forgot about direct mail.
Elyse Southwell: Yeah. Lewis Gersh: It's the largest ad spend next to TV, the highest response rate of any media you can buy, no new product really in 25 years, right? Since the Zip 4 and digital printing, for real, and a fragmented ecosystem of 3,000 point solution companies that generally don't talk to each other. Whoa, that's right for disruption. Let's figure out how to do it. 3 or 4 months later at the kitchen table, Yurika, like we figured out how to do it. Elyse Southwell: Are you telling us that the Sears catalog is coming back? Lewis Gersh: That's funny you say that. Because early on we talked to them and I was, while there in a world of hurt right now and we said we wanted to do our first programmatic catalog with them, so we could say we reinvented this Sears catalog as programmatic direct mail. Elyse Southwell: Yeah. Lewis Gersh: They love the idea, but they had their bigger fish to fry early on, yeah. Elyse Southwell: I mean you must remember the Sears of course J. C. Penney, remember those giant catalogues? Lewis Gersh: I do, I do, you can see the great hair, I remember it well. Elyse Southwell: So, you mentioned that a lot of your career was spent in the venture capital world, was that mostly spent on the ad tech side or media, what was that? Lewis Gersh: Combination of ad tech, mar tech and transaction processing. So, I took what I had started in a joint venture with A Wall and Omnicom in the 90's where we really pioneered a lot of what became retargeting behavioral targeting. We used email back then and then about 3 years we're up to delivering about a billion emails a year, which was a lot back then. We took that and then applied it. When I started this venture fund, () partners and became called Metamorphic as they added two partners. Now, their one remaining partner has it called Compound and we focused through ad tech and mar tech leveraging this transactional media theory, but also then trying to connect it to physical retail realizing at the time 95% of consumer spend was in physical retail.
So, a little myopic if you use all this great digital data only to retarget it in a digital world where people really only use it to shop in ecommerce. that's only 5% of spend, why wouldn't you focus where the other 95% is?
Elyse Southwell: Of course. Lewis Gersh: Right. Elyse Southwell: Go where the people are. Lewis Gersh: Yeah, about 65 companies later we did great and they're doing great and happy to just be back on the operating side. It's another stage of being a piñata. Elyse Southwell: That's my next question though, it’s like most people do the startup world and then they wanted to be on the venture capital side, so you're doing a little both, you're going to the VC side, now you're back. What's the most exciting thing about being back in the startup? Lewis Gersh: Well, first a lot of people ask what it's like, like you're doing, it is like being, everybody is a piñata in this game, right? Somebody is whacking you to product candy, candy is liquidity, right? Like the pension funds are whacking the GP's fund as LPs, the GPs are whacking the founders, the founders are whacking co-founders and staff, staff go home and have a spouse beat him up, where's the liquidity of our stock options, right?
It's a food chain where everybody is a piñata and you never know when it's going to break, right? Just like a kid's party. What's the most exciting thing? Honestly, its being part of something where you have to have the enthusiasm to will it into being and that's what we have here and that's what we’ve had since we started it, and I used to say like you have to be a sales driven organization, right?
Elyse Southwell: Of course. Lewis Gersh: Not only old phrase, not only sell ice to Eskimos, but some ethnic isolation and poverty in the same meeting, you got to be able to sell it, right? And to people that aren't even sure they want to buy it. Elyse Southwell: How long has Pebble Post been around? Lewis Gersh: 4 years since we incorporated it, 3 years since we went to market with a minimum viable product of Alpha, last year was our first year in Beta, this is our first full year out of Beta. Elyse Southwell: Congrats. Lewis Gersh: And we're just rolling out to our B2 platform about 400 brands, about 3 to 4 billion data events processed every month and tens of millions of pieces of programmatic direct mail that are proving really good performance and we're learning every day to creating something new. Elyse Southwell: Tell us a really good story from the early days of Pebble Post? Lewis Gersh: Early days at Pebble Post, this is pretty funny, we have an interior of 8 people plus our intern part time, Raven, who is my best friend’s niece. Raven went to check her PO box because we had return mail going there for the programmatic direct mail and we just get it, sort it, look at it, try and figure out what's going on, where is it accurate, where it is not, it's direct mail, and she called up one day and said you guys ever check this thing and we didn't, we forgot to do it.
So, it's like you have a lot of notices from the state, you have actual checks that came back from invoice, we were forgetting to check her mail as a programmatic direct mail company. Raven had to actually have somebody help her put like piles of mail into a taxi cab to bring it back to our office because we were so busy on trying to build the startup, we just forgot to even
Elyse Southwell: Well, like the old lady in the shoe. Lewis Gersh: Yeah, totally. It was hilarious, it was great. Elyse Southwell: What are some of the challenges, successes, anything you could share behind the scenes? Lewis Gersh: Oh gosh. Elyse Southwell: Maybe your top 1 challenge, top 1 big success. Lewis Gersh: Yeah, the top 1 challenge we've said from early on, I remember when Stewart at RRE Ventures ask me this in a partner meeting. Growing this without breaking it, it's different when you're what's called the point solution or you're a feature in an existing market. It's very easy to figure out where you price, how you do it and make everything work relatively. When you're building an entirely new market and think about some of the financial markets and products that created a whole new market, it's really hard, and figuring out how fast to go without breaking it and what data and what reporting, what analytics, what proof points you need along the way, so different parts of the business don't get too far ahead of itself, it's much more so than a typical venture and that's been the biggest Elyse Southwell: You're selling the idea of the new market? Lewis Gersh: Yes. Elyse Southwell: That is needed. Lewis Gersh: It is needed and it solves so many more problems than even we imagine and the marketers love it from the idea, and it's really then taking their feedback to what else do we need to do to prove it, what else do we need to do to show you more or solve the next bit and how much do we do or not do without breaking it, because we did grow too quickly for a period and it was really difficult. Elyse Southwell: Big success? Lewis Gersh: Yeah, it is the right problem to have, right? Elyse Southwell: Yeah, of course. Lewis Gersh: Better than the sound of crickets. Elyse Southwell: Yes, yes. Lewis Gersh: Right? Elyse Southwell: Yes, of course. Lewis Gersh: For sure. Elyse Southwell: What makes you excited to go to work every day at Pebble Post? Lewis Gersh: The enthusiasm of the team. I mean that's it. Like we are doing something that seems so contrarian, people when we first started pitching the idea, I used to joke it was a 7 syllable pitch for a billion dollar opportunity, programmatic direct mail, and the best response we got was just what the world needs, automated junked mail and it was like no, like we really have to explain it and that part took a lot to really to get together, but seeing the people gravitating, starting to understand it now, and then everybody digging in and saying we're creating something new that never existed, what do we have to do to keep proving this, right? Because we know it's right. Elyse Southwell: I mean I think it's fabulous. If you go to your mailbox these days sometimes you just get a few odd bills and then its baron. Lewis Gersh: Right. Elyse Southwell: If all of a sudden you were getting something you really engaged in and you liked, it's a home run. Lewis Gersh: It's irrelevant now. People would say junk mail. I would say no, it's relevant mail. Elyse Southwell: Relevant and it sits on your calendar for days, I mean it really is important. Lewis Gersh: We would say nobody ever taped a banner ad to the fridge and said honey, is that the right one. Elyse Southwell: Agreed. Lewis Gersh: With us you put in the purse, you take it to work, you can stop at a store on the way home, make an appointment, we do cards, multifolds, catalogs, all kinds, they've been running for years, box.com, if you know the big sandwich club online. Elyse Southwell: Yeah, of course. Lewis Gersh: They've phenomenal and they did the first catalogues and they did it with COOP dollars with Hershey’s as a Halloween promotion with an 8 page, automated personalized catalogs, so cool. Elyse Southwell: Awesome. Lewis Gersh: Yeah. Elyse Southwell: So, Nasdaq is all about innovation and tech. Lewis Gersh: Yes, Elyse Southwell: What advise do you have for all the entrepreneurs watching? Lewis Gersh: Oh boy, you got to have a vision to see something that doesn't exist. You got to be able to will it in to being with your enthusiasm, and you got to risk failing in front of everybody, not just the people you know, but everybody and ideas are cheap getting through all three of those and making it actually work is really hard even with 20 years in the space on both sides of the table, not without enormous challenges for us, so probably the best thing I would say to early entrepreneurs, find people who have been at it, who can give you some input and advise just figuring out how to avoid the potholes can make the whole difference and you got to stick to it, you got to risk, you got to risk everything doing it. Elyse Southwell: Risk everything. Lewis Gersh: Yeah, everything.
Elyse Southwell: Lewis, thank you so much for being here and thank you all for watching. I'm Elyse Southwell and this is Nasdaq Disruptors.