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Lithium Technologies Acquires Scout Labs
The deal, reportedly for more than $20 million, allows Lithium to add social media monitoring to its extensive list of capabilities.
Posted May 13, 2010
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Lithium Technologies recently confirmed its plans to acquire Scout Labs, news of which broke May 6 with a TechCrunch.com report. Though the TechCrunch report pegs the purchase price in the vicinity of $20 million, neither Lithium nor Scout Labs has disclosed the terms of the deal. Regardless of the price tag, industry observers say, the move solidifies Lithium's standing at the forefront of brand marketing and market research. With the addition of Scout's social media monitoring tools, Lithium extends the ability for its clients to engage with consumers wherever they happen to be on the social Web.

According to its Web site, Lithium provides on-demand social CRM solutions required for building successful enterprise communities such as forums, blogs, and tribal knowledge bases. The company, which was named a Rising Star in CRM's 2009 Market Awards Issue, was spun-out of Gamers.com in 2001 and now boasts a client roster of more than 100 businesses.

Scout Labs, on the other hand, has a much shorter history. According to information provided by Lithium, Scout began developing its product and recording data in 2006, and honed the application through a series of private beta cycles in 2008. Since its public release in February 2009, the company has added more than 350 clients, with the growth rate increasing by nearly 20 percent month over month.  

According to a statement from last July, one of Lithium's objectives for social CRM has been to create a customer network across multiple social sites. Having acquired Scout's technology, Lithium executives say their company will create a comprehensive platform that enables companies to listen, engage, and act on conversations across the social Web.

"[As a result of the acquisition] we can combine the data from the customer communities that we host with the data we gather from the social Web," says Philip Soffer, Lithium's vice president of product marketing. "That's something that our customers are very interested in doing. Monitoring is great but you need to act on what you learn. What we think is really interesting about [combining Lithium and Scout Labs tools] is allowing us to create authentic responses to things on the social Web."

Soffer says Lithium looked at a range of companies offering social media monitoring and analysis tools but quickly zeroed in on Scout Labs as the best fit for acquisition. Lithium was particularly impressed, he adds, by Scout Labs' rapid adoption in multiple areas of the enterprise.

"The most interesting thing about Scout Labs," Soffer says, "is that it was built for wide diffusion within the organization. Just about anyone in a given company can use it. They believe anyone can benefit from hearing the voice of the customer and that fits the philosophy that we have."

That may be true, but Forrester Research analyst Zach Hofer-Shall says the acquisition is about more than just a mutual philosophy: "Scout Labs has picked up a pretty impressive customer list in [its] early age," Hofer-Shall contends. "What Lithium does here is get the technology and also the customers that have already bought into social media and social media data."

Hofer-Shall predicts this move could lead to deals involving other vendors similar to Scout Labs, particularly a well-established company such as Radian6"Radian6 might also be primed for acquisition," he says. "It is a profitable company and it is building a very impressive customer base. They would be a more difficult acquisition but it doesn't mean it can't happen."

Blake Cahill, senior vice president of marketing for Visible Technologies, agrees that the acquisition is a glimpse into the future of the monitoring industry. His company, which aims to help clients successfully monitor, analyze, and participate in social media conversations, as well as protect their executive and corporate brands online, is also an industry player.

"As more and more businesses become social, the synergies between managed communities and open communities will grow," Cahill says, whose company was also named a 2009 Rising Star. "So I'm not surprised to see community vendors trying to do more in open listening. In fact, I fully expect to see existing platform players attempt to penetrate the marketing, PR and customer service departments by building or buying into the social channel." 

Of course, no one can be sure this deal will catalyze similar moves within the industry, but multiple sources contacted by CRM uniformly agree that, at the very least, the acquisition represents a huge victory for Lithium.

"Lithium's acquisition of Scout Labs is a smart and timely play," says Matthew Lees, an analyst with the Patricia Seybold Group, a technology research firm, via email. "While not the first such move in the industry, it solidifies Lithium's position…by augmenting its product suite…. [Lithium] hadn't yet been able to monitor and measure the activity and sentiment of conversations held outside the community. Acquiring Scout Labs gives it this capability, making Lithium's story an even more compelling one, particularly to brand marketing and market research professionals."   

[Editors' Note: This article has been updated to include additional commentary.]

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