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Lithium to Acquire Klout
Lithium's acquisition of the social influence scorer positions it to expand its data resources.
Posted Mar 28, 2014
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After more than a month of speculation, Lithium Technologies, an online community and social engagement platform provider, officially announced Thursday that it will acquire Klout, which scores influence on social networks.

Though financial terms of the deal were not disclosed, it has been widely reported that the purchase price was $200 million.

Klout, which was founded in 2008 by Joe Fernandez and Binh Tran, provides registered users with a Klout score from one to 100 based on their ability to spread messages across social networks. Brands can use the service to identify individuals who could amplify messages about their products or services.

According to Fernandez, who appeared alongside Lithium CEO Rob Tarkoff at a press conference in San Francisco to announce the purchase, Klout started with Twitter and quickly expanded to other social networks, Wikipedia, and several other sites. The company reportedly delivers Klout data more than 50 billion times per month.

Together, Lithium and Klout now become the "single source of trusted content from trusted people," Tarkoff said. "The acquisition," he said "brings the relationship to CRM" and "bridges the gap" between customer service and marketing on social media.

Tarkoff said further that Lithium and Klout together will bring "shared value for brands and consumers." Together, the two companies reach more than 500 million consumers across 10,000 specific interest areas and 300 branded communities.

"Customer profiles are the next big battleground in delivering a continuum of customer experiences in a digital world," said Ray Wang, principal analyst and founder of Constellation Research, in a statement. "It's about knowing who is valuable, trusted, and credible. The combination of profiles with an engagement platform will provide a powerful combination for customers."

Fernandez, meanwhile, assured current customers that Klout's mission will not change under Lithium: "It will maintain a brand and destination. We will keep evolving it with the assets that the combined company now has."

Tarkoff said the acquisition allows Klout to add Lithium social communities to its scoring process, which has seen its share of controversy. In 2012, for example, it was revealed that teen idol Justin Bieber had a higher Klout score than President Barack Obama.

According to Fernandez, there are more than 400 factors that go into compiling Klout scores, but it essentially "comes down to how trusted you are and, when you post, do people care."

Paul Greenberg, president of the 56 Group, has had mixed feelings about the company. "While Klout has always been calling itself an influence measure, they have never been able to truly measure influence. That was a misrepresentation," he says. "What they are able to do with some real effectiveness is measure digital engagement over time, which, for companies that are looking to personalize interactions with customers, is a huge plus. The amount of data that Klout gathered as a result, misrepresentation or not, was not just enormous, but incredibly valuable."

Greenberg, though, calls the acquisition "a win-win" in this case. "On the one hand, Lithium can evolve the technology and use the massive data store to have Klout do what it actually does—measure engagement," he says. "On the other hand, this acquisition helps Lithium extend beyond just a community platform because of the tentacles that Klout has extended into the social Web. It puts Lithium into the engagement platform world, which is a gigantic, roiling, and nascent market."

Though Klout had trouble generating revenue in the past, Fernandez claimed that the company's revenue last year hit "double digit millions" for the first time and it was on pace to break even fairly soon.

In the past year or so, Klout has expanded with Klout for Business, a portal intended to offer deeper analytics to brands, as well as content creation aggregation, so users could share articles and posts with their audiences. The company even signed some key integrations to social CRM solutions, including Crimson Hexagon Social Analytics, Genesys Social Engagement, and Badgeville and Simply Measured.

Tarkoff said the acquisition further paves the way for a set of new products that Lithium plans to introduce in May.

In the meantime, Klout will continue to operate out of its San Francisco headquarters and eventually move to the Lithium Technologies offices nearby. Fernandez will join Lithium's executive team and will continue to run Klout as its general manager and a senior vice president at Lithium.


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