Peter Kafka

Recent Posts by Peter Kafka

Why Twitter Is Buying Bluefin — And Why Bluefin Is Selling


Bluefin Labs

As Business Insider reported, Twitter is buying Bluefin Labs, the social analytics company.

My understanding is that the deal isn’t done yet, but it will be soon. When it is, Twitter will likely end up spending more than $70 million for the company. Bluefin raised a reported $20.5 million over its four-year life, so at least some of its investors, which include Softbank and Time Warner, will see a respectable return.

This isn’t an “acqhire”: Twitter is buying both Bluefin’s team and its technology, and will end up turning its Boston headquarters into a Twitter outpost.

Selling this early, at this price, wasn’t part of Bluefin’s plan. The notion was to create a full-fledged rival to Nielsen by starting out with social analytics, aimed at telling programmers and marketers what people were saying about them when they watched TV. Eventually they were supposed to add more verticals.

But people familiar with the company said that it has had trouble peddling its analytics services to big brands, so selling now makes sense.

And it makes plenty of sense for Twitter, because it gives the company a turnkey research operation, which it will need if it wants to fulfill its enormous revenue and valuation expectations.

Twitter was telling outsiders it expected to generate $350 million in revenue last year, and $1 billion this year. So it’s already selling lots of advertising. But it’s in a very similar position to Facebook a few years ago: Marketers are willing to take a flyer on Twitter ads, because lots of people are using it and it seems interesting, but they’re not quite sure what they’ll get out of it.

At least part of Bluefin’s job will be help close those sales, and get them to buy again by proving out Twitter’s value to both programmers and advertisers. You can think of it as an analogue to the well-respected research teams that already exist at the big TV networks — except the TV guys have decades of tradition and research backing up their pitches. Twitter’s job is much harder.

Meanwhile, Nielsen is trying to do the same thing. Last year, it acquired SocialGuide, a small social analytics company. And in December, Nielsen and Twitter announced a research alliance,  so it will be interesting to see what happens there.

The deal also creates a question mark for Trendrr, another analytics company that has gotten some attention from advertisers and programmers. Bluefin had a lot more funding and marketing horsepower behind it, and concluded that it was better off selling. So Trendrr will have its work cut out for it if it wants to stay solo.

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