You've seen the company's work in the Superbowl, on television, and on the web, all for big brands--but you might not know it came out of the crowdsourcing efforts of Tongal (www.tongal.com). The Los Angeles company--which is backed by $15M from Insight Venture Partners--has come up with a way to utilize the web and its deep depth of creative talent to produce many viral videos and commercials for its clients. We caught up with James DeJulio, the company's President and one of its co-founders, to hear about how the crowdsourced video site works.
Explain how Tongal works?
James DeJulio: We're a social content development platform. We work with really big businesses and brands, everyone from P&G to Lego, Mattel to NASA, to develop mostly video content. We do that through a global community of creative people, and through challenges we post through our website. The really neat thing about how we've designed this, is it's a co-creative process for each video project. Say, if you're making a TV commercial or web video, each project unfolds over phases, so anyone, regardless of their skill, can participate.
There are three phases. Round one is for ideas, then there's a round for storyboarding, and a round for execution. The idea round revolves around 140 character ideas. Anyone with a good idea can participate. That's different than the old idea of video crowdsourcing, where people have to do everything. This is a much better way to tap into consumer insights in the creative process. This creates a big, diverse pool of ideas, and the client can then find the three, four, or five top ideas they want to see developed. Those five ideas can then further be developed by people with different skill sets, to the point of delivering the finished content. The quality of the work we're putting out is really exceptional. The work has been on every network, has been on during the Superbowl, and gone viral on the web. Brands are really excited.
There's a really big need in the marketing world to empower people to do this kind of work, and help solve the content crisis, so to speak. Brands, who are used to producing really expensive film for TV just don't know how to serve digital. But, the demand for video is really high. We're filling a need in the marketplace.
How did the company start?
James DeJulio: It's a really interesting, Southern California story. My background is at Paramount, in the film department, and I also ran my own production company. My two partners and I started our own productoin company, with the focus on developing content outside the studio system. We had some small successes, but nothing that really filled the vision of what we wanted to do. We had purchased some material, bought the rights to some books, but we just couldn't get big wins on the board. From that, we saw the frustration of how much talent there was out there, but how hard it was to put that talent to work, and saw the friction in the labor market for creative work. So, we started throwing out ideas on how we could sidestep that. We built the business originally on crowdsourcing screenplays, but we had the realization that that was a really, slow, boring process, and you ran into the same problems we had before at our other company. You had a great piece of material, but no means to bring it to life. We then saw the immediate pain with YouTube and Facebook, and brands who needed content, and figured out the only way to fulfill it is through the distributed work model. That's how we arrived at this. We've now refined the whole process and technology over a couple of years, and put the gas on it.
You've got some significant backing for your company. How did that happen?
James DeJulio: We were pretty quiet about that. We initially took a very different approach than most technology businesses do, which is we built the business first. It was a very intentional decision. We needed the market to mature a little bit, and we knew we had lots of wood to chop. It's an interesting space, as it's a client driven space, and we needed to develop relationships with clients in order to get a great outcome. We had paying customers from day one, which allowed us to bootstrap to the point where we were more valuable, and could bring on a partner as good as Insight. That allowed us to have a different kind of relationship, rather than when your business is losing money.
Where was the turning point where you saw what you had built was working?
James DeJulio: There were two things. The first thing was when we were working with ShurTech Brands, the maker of Duck Tape. We worked with them on an inexpensively priced project, and developed a video that naturally went viral. They were really excited, and we knew if they were other brands would also get excited about this, including higher profile brands. We were able to parlay that to a test with Pringles, when it was still part of P&G, and got a huge win there. We developed a really exciting program for them, and built sixteen really great videos around different Pringles flavors. We were able to double their traffic on YouTube, and add half a million people to their Facebok page. P&G was excited about that, and we started getting a steady stream of work from them. The same thing happened with LEGO. They were our foundational clients. We then started to really hit some hockey stick growth, and we knew it was time to go raise some money. They tell you to raise money not when you have to, but when you can.
This is a hits business, which is often a difficult thing to bottle up. How have you been able to consistently deliver viral and quality videos for clients?
James DeJulio: It's all about the math. When you're not relying on fixed, organizational resources, you're not going back to the same people for the same ideas all the time. The more people you have doing things, the higher likelihood of success. A client is able to explore many different ideas and find the ones that work for you. That's how we've been able to maintain consistency from this business. Eighty percent of our revenue is recurring, because our clients love what they've been getting, and there hasn't been any drop off in quality. Because we have more clients, more talented people are registered for our community, because our clients are willing to pay. That means, more people join in. That becomes a virtuous cycle of quality. I don't think it's a coincidence that this model is the right one. In life, there are some people who are good at coming up with ideas, and others who are good at executing. But, it's hard to find that in the same person. By giving clients 500 ideas to pick from, four to five different storyboards from each idea, there's so much more diversity. They're able to find stuff that they really like, and produce great work. It's all about the math. Thousands and thousands of creative people are better than just a couple.
What's the appeal of working with you for folks on the creative side?
James DeJulio: The first thing, is obvious. We're giving them access to work. Living around here, you see a lot of quarter million dollar film degrees which are collecting dust in coffee shops. There's quite a bit of friction in the labor market, whether that's for traditional film-making or advertising. Creative people are also pretty lousy business people. We're kind of acting as an agent, in a lot of ways, by bringing working to the community. There are people now making six figures doing this. We have a fifteen year old in Texas, who has made almost $30,000 on stop motion videos. We've had other people who've made $10,000 for their 140 character ideas. If they were to go out and find any other creative endeavor, they would have to find a day job, and sort of put those dreams aside. This gives them the option to do what they love and earn money. There are now lots of group of mini filmmakers--there's a group here in LA, which has literally had eight of their pitches greenlighted from brands, and are building their own mini studio. They've even hired two production coordinators and staffed up to do these eight projects. We're actually creating jobs and work, which is great.
What's your next big thing?
James DeJulio: I think in the short term, it's lots more projects, a lot more money, and lots of different opportunities. We've launched a program which is community bonus pool. If you do good work over time, we pay bonuses, which is paid out over quarters to filmmakers, $40,000 or $50,000 to filmmakers. We're taking the dynamics of a traditional or physical labor force, and applying it to a digital, decentralized workforce. We like to see consistent work over time from the community. We've got some exciting projects that may not feel like advertising coming up, as well, stuff that this town might be better known for.