
Klout acquired for $200 million by Lithium Technologies - mikegreenspan
http://tech.fortune.cnn.com/2014/03/26/klout-acquired-for-200-million-by-lithium-technologies/
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yid
I, too, have a random number generator that I am willing to part with on very
reasonable terms, cash/equity split negotiable.

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cpncrunch
LOL. Does anyone even use Klout any more? It always seemed a bit pointless.

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pyrocat
social media obsessed marketers, so, not really.

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prawn
My wife and a number of friends work in social media and marketing. Haven't
heard anyone mention Klout other than in a joke for a long time.

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dpcheng2003
As a startup founder, let me take the contrarian view on this because I can
see how it all went wrong. Klout, for the most part, had a very ambitious
goal.

Given all our activity (direct or indirect) that is being captured on social
networks and general internet activity, there was some inherent value (which
we'll call a "clout score") in just knowing who was the "most popular" on
these networks.

Now imagine you took in all the interest-graph related and search data, and
refined that "clout score" to the niches and groups where that individual was
most influential. In this hypothetical alternate universe, you can use clout
scores and deduce, for example, that "so-and-so" was a more influential voice
in the battery materials science community (i.e, cathodes) because her white
papers were being shared more often on social networks and getting more
backlinks.

But Klout didn't do that. Klout realized that to get to market quickly, they
applied an arbitrary algorithm to social activity, which would encourage
artificial activity on Klout to "game" the system. In another different
alternate universe, this would be applauded as a successful growth hack and
Klout would be filing their S-1 today. But in our universe, people saw the
algorithm as hackneyed, particularly when Justin Bieber had a higher Klout
score than the US president.

This go-to-market strategy was likely (I'm presuming) influenced by VC
investor dollars and the perceived need to be always growing, driven by
TechCrunch mentions and HackerNews front page posts. And to some extent, they
were successful. They raised a lot of venture dollars, cashed out a few early
employees (again, presuming) and convinced some really smart people to join
and grow Klout.

But now that they've sold out, they can never do what they wanted to do. And
in some ways, they've tainted that idea for others who may appreciate the
"clout score." So selling out for $200M--for recurring revenue from large
brands, patents associated with social activity scoring (didn't fact-check
this but guessing) and great employees--is not a bad outcome for Klout or for
Lithium.

But I'm sure once upon a time, Joe Fernandez (the founder), had a grander
vision. This is hardly a bad consolation prize, but what if...

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dotBen
Klout also realized it would never have the granular level of access to the
interest graphs on the networks it was - pardon the expression - leaching off
of.

I remember a senior Twitter staff member pointing out that if Klout really
proved a market, they could simply compute all of this information directly
rather than inefficiently via the API platform and firehose - with better
results from access to more data, and the ability to sell directly to
advertisers who they already had relationships with through their sales team.

Klout were never going to gain the level of access the needed to the graphs on
the various networks they utilized in order to realize their longer-term
goals. Which, btw, ultimately highlights yet another fallacy of the platform
economy.

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me_bx
> simply compute all of this information directly rather than inefficiently
> via the API platform and firehose

I'm not sure to understand what you mean here. By directly, I guess you mean
by crawling the web ? You're right about the fact that it would give access to
more data, but, as Klout measure is people-centric, a social graph API is a
more straightforward data source. Associating web pages to unique identity of
persons is a challenge of its own.

> Klout were never going to gain the level of access the needed to the graphs
> on the various networks they utilized

Given their scale, access to twitter graph data should not have been a problem
(they have enough users not to be bothered by the API's rate limits). Other
social networks are much more trickier indeed.

Full disclosure: I'm co-founding an social media analytics tool providing more
granular view of the interest graphs, using twitter as a data source.

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dotBen
No, I don't mean crawl the web. I mean Twitter could just compute the data and
calculate the graphs via their direct access to the data. Traversing the full
corpus of all data, across all dimensions, including time, including data
points not exposed via the platform.

> Given their scale, access to twitter graph data should not have been a
> problem

Yes, because Twitter could decide it doesn't want to provide the data or do so
at costs that make it unfeasible. Like I said, this is the fallacy of the
platform economy _(which I was quite involved with in its infancy)_.

If you are co-founding anything that uses twitter platform you should consider
what happens if Twitter's biz dev team decides they doesn't want you to exist.
This already happened once to the Twitter Dashboards etc.

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me_bx
Ok, now I get what you meant. You're totally right.

> If you are co-founding anything that uses twitter platform you should
> consider what happens if Twitter's biz dev team decides they doesn't want
> you to exist.

This is definitely a risk that must be mitigated in this type of projects,
indeed.

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cmis
This article and most folks are missing the point, Lithium hasn't raised
nearly enough to pay a meaningful amount in cash, maybe enough for investors
to get their money back. The $200m value was in funny-money private company
stock which at inflated valuations is like buying hotels with monopoly money.
Entrepreneurs deserve incredible respect for what they create but lets call
things what they are, this wasn't a $200m exit.

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hkmurakami
I wish this fact were more prominent, so that this news wouldn't dissuade
those who are interested in non-fluffy ideas as much.

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seivan
“Lithium Technologies, a provider of social customer experience solutions for
the enterprise.”

I feel like it doesn't matter if you build something amazing. Without the
pedigree, you wouldn't be acquired for 200M by a social customer experience
enterprise solution.

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orthecreedence
Their mission might seem generic to _you_ , but I hear they actually have
synergistic agile processes with a laser focus on industry standard value-add
technologies.

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jpatokal
And by acquiring Klout, they now have Big Data in The Cloud!

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dude_abides
200 million wow! When I think of Klout, I can only think of this brilliant
XKCD: [https://xkcd.com/1057/](https://xkcd.com/1057/)

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27182818284
Klout's score leave a bad taste in my mouth. Like people actively trying to
separate the cool kids by designer clothes or something. Also PG's thoughts
([https://news.ycombinator.com/item?id=3887779](https://news.ycombinator.com/item?id=3887779))
on it from two years ago still come to my mind because I too see powerful
people skipped over completely by it. Eh.

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petercooper
Finally, an acquisition whose numbers make Whatsapp and Instagram look sane in
comparison.

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mulligan
I was pretty sure this happened a month or two ago, but I guess it is now
official: [http://www.businessinsider.com/klout-
acquired-2014-2](http://www.businessinsider.com/klout-acquired-2014-2)

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chadrs
This makes me feel like my similar site, Klout Penis should be worth at least
$1M, right?

[http://kloutpenis.com/](http://kloutpenis.com/)

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jdh
Stock for stock deal. Price is arbitrarily set... All that matters is the
percentage. If klout got ten percent, lithium just said they're value is $2B.

Klout did have a cool looking office for sure. Hard to find that in SF today.

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redmaverick
Hard to believe that someone is willing to pay $200 million for Klout. Maybe,
I am missing something?

Just for fun, a year back, I made a simple Klout clone which was dependent on
just Google search results, twitter followers, retweets and total number of
tweets. I used a few known Klout scores as the seed data and generated a
simple Heuristic to calculate Klout scores. I then tested it with around 100
celebs and regular people. The scores were remarkably similar to Klout's
actual scores.

What were the (Lithium Technologies) VC's thinking?

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Crito
Hopefully this was purely an acquihire and the product is being shitcanned.

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amorphid
Klout's Klout score just went up. They'd have gotten an even higher valuation
if they'd authorized access to their to Klout's Facebook page.

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skeletonjelly
They've created a feedback Klout.

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ThomPete
Ok trying to make sense of this,

So Lithium I understand. They make social media monitoring, analytics,
management tools make sense.

Klout on the other hand? Besides it being a joke for most of us it's also I
guess a huge database of potential customers and some smart engineers.

So Lithium paid $200M for a primarily some talent and a giant online rolodex?

Hmmm

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thrownaway2424
The numbers are just made up. The article says "mix of cash and private
shares" but let's face it, that could mean $10 in cash. Lithium acquires Klout
by giving Klout shareholders some fraction of the combined Lithium+Klout
entity. Then they value the combined entity with an arbitrarily high number
until everyone seems happy. This inflation factor is written down on the
balance sheet as "goodwill" which is later reduced in value from billion of to
zero dollars. Nobody is really harmed in this process.

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boomzilla
And everyone involved gets a huge clout inflater in their resumes :)

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gobengo
Klout couldn't make money doing their score thing. Their investors told them
to focus on b2c after instagram sold big. It didn't work. Lithium is quite
successful in enterprise forum and support software, which is a broader market
than you'd think. Enterprise companies interested in social are really into
'trending' stuff and 'brand affinity' of their audience across all channels.
Lithium will book 200mm in additional revenue from Klout's tech in the next 5
years, because each of their deals are like 6 figures per year.

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cordie
I really can't understand this. Do I just not understand how the "game" is
played. OR am I just missing something? Someone please enlighten me!

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brk
Honestly, yeah, you probably don't understand how the game is played if that
is a legitimate question.

There seems to be a wave a social-related acquisitions going around. If you
have a product that can be virally shared, or produces rankings or scores that
people get caught up in competing for, you could be a potential acquisition
target.

I think a lot of people on HN focus on solving real problems and making the
world "better", which is certainly a wonderful endeavor. But that's not the
path to mind-numbingly high acquisitions most of the time.

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thkim
With this acquisition I have to say that there is a technology bubble right
now. Someone may make some smart arguments to justify the deal, but even with
all the reasonable factors considered it is extremely unlikely that Klout is
worth $200MM.

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thescrewdriver
Glad to see another successful startup which uses Scala :)
[http://engineering.klout.com/](http://engineering.klout.com/)

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dexcs
$200M for ~150M Users. Bad deal if you compare it with for example,
whatsapp... But hey, at least they landed a exit.

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AznHisoka
150M users? Where did u come up with that? That's like saying Google owns 10
billion sites because they crawl 10 billion sites.

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kartman
is this that trick of a "headed soon to IPO company" acquiring something
largely in stock to give itself a big baseline and market justified valuation
ahead of IPO. both companies are happy and the sucker is the first guy in line
for IPO stock.

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Aloha
I'm somewhat amazed at a 200m valuation.

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rabino
Some investor got his klout score up today

