Content marketing startups NewsCred and Sharethrough join forces with referral partnership

February 27, 2014: 10:13 AM ET

Why not just merge? "The opportunity is too big," say the companies' CEOs

Newscred CEO Shafqat Islam

Newscred CEO Shafqat Islam

FORTUNE -- In 2013, brands got really into content marketing. They bought Promoted Tweets on Twitter (TWTR), they experimented with sponsored stories on BuzzFeed, and they even commissioned freelancers to produce content in-house. They went "native," buying ads that were platform-specific on Facebook (FB), Twitter, StumbleUpon and Tumblr. At one point, the Washington Post's Chief Revenue Officer, Kevin Gentzel, declared that native advertisements were "a spiritual journey." Really.

To attach some numbers to the trend, a recent Content Marketing Institute study found that spending on the category rose 9% in 2013 to $43 billion. The Custom Content Council estimates that brands spent $14 billion distributing their content across all media, including print, digital, broadcast.

In 2014, brands are expected to pour more money into the category, because, why not? The other dominant form of online advertising - banner ads – is cheap as hell, and it's not particularly effective anyway. Publishers are expected to serve more native ads, for the same reason: Why not? They're already grasping for any new revenue stream they can find.

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So it follows that whenever there's a new trend in marketing, you can bet 20 new startups are attaching themselves to it. When Facebook emerged as an important platform for brands to be on, Buddy Media showed them the way and a whole new category of startups was created. Buddy Media successfully exited to Salesforce (CRM) for $689 million. Its competitors Vitrue and Wildfire promptly sold to Oracle (ORCL) and Google (GOOG).

The new class of startups competing to be the "Buddy Media of content marketing" includes NewsCred, Sharethrough, Contently, and Percolate. They've got momentum on their side. Yesterday, Percolate announced it had taken on a strategic investment from ad holding company WPP, which previously invested in Buddy Media. Last month, Contently announced it raised a $9 million Series B round of funding. And today, NewsCred and Sharethrough are announcing they're partnering up.

NewsCred helps brands find content, either by licensing it from news organizations like The New York Times and The Huffington Post, or by creating it through a freelancer marketplace. Sharethrough helps brands distribute that content across the web, providing a distribution alternative to Facebook and Twitter.

Each company says its clients were asking for service like the other one was offering. So they decided to formalize a referral plan with a contract. When a client buys content from NewsCred, Sharethrough can help them distribute it. When a client wants to distribute content via Sharethrough, NewsCred can help them find the right content to use.

No money will change hands in the partnership. NewsCred CEO Shafqat Islam says if all goes well, he hopes the two companies can integrate their platforms with each other to make the commissioning and distribution process seamless for clients.

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NewsCred didn't always do content marketing, and Sharethrough didn't always do native advertising. NewsCred started out licensing content from media organizations to brands. Six months ago, the company launched a content creation pilot. Since then, 15 brands have commissioned custom content from the 200 writers on NewsCred's platform, Islam says. NewsCred doesn't take a cut of any freelance fees paid (which have totaled just over six figures since the launch) because its focus is on selling workflow tools to clients, he says.

Likewise, Sharethrough started out as a video ad network that helped ads go viral. As the idea of native advertising began circulating in the marketing world, the company positioned itself alongside it. The majority of Sharethrough's revenue still comes from video distribution, i.e., placing sponsored videos in the main content stream of sites like Thought Catalog, Forbes and People.com.

Even as it has become synonymous with native advertising, Sharethrough CEO Dan Greenberg pointed out to Fortune that his company, which puts on Native Ad Summit events around the country, has moved away from that term. Now Sharethrough is positioning itself as a provider of "in-feed" advertising. (Feed refers to the main stream of content on a website or app.)

With $63 million in capital raised between them, the two companies are the largest startups pursing content marketing ad dollars.

So why not merge? "The market is pretty massive when it comes to content marketing," NewsCred's Islam says. He doesn't want NewsCred to lose its focus as a tool for helping brands create content. Likewise, Sharethrough plans to remain focused on the distribution part. "We felt like was a big enough opportunity that also allows us to work with brands on content that we don't create," says Sharethrough Chief Revenue Officer Mike Gaffney. "We felt like it was a big undertaking to do both at the time."

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