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M&A is back in full-force in the consumer internet space, but this time around, it's not just the usual suspects -- tech companies -- doing the buying.
Case in point: yesterday, Walmart announced that it is buying social media company Kosmix. Founded in 2005, the company, which raised $55m in investment over the years, "filters social media to connect you to content that interests."
On the surface, Walmart's acquisition is head-scratching. What can Walmart possibly do with a company perhaps best-known for its property Tweetbeat, which is "a real-time source for what people are saying about any major event"?
According to Kosmix CEO Anand Rajaraman, the answer is 'a lot.' He explains on his blog:
At Kosmix, we’ve been building a platform, called the Social Genome, to organize this data deluge by adding a layer of semantic understanding. Conversations in social media revolve around “social elements” such as people, places, topics, products, and events.
For example, when I tweet “Loved Angelina Jolie in Salt,” the tweet connects me (a user) to Angelia Jolie (an actress) and SALT (a movie). By analyzing the huge volume of data produced every day on social media, the Social Genome builds rich profiles of users, topics, products, places, and events.
He goes on:
Quite a few of us at Kosmix have backgrounds in ecommerce, having worked at companies such as Amazon.com and eBay. As we worked on the Social Genome platform, it became apparent to us that this platform could transform ecommerce by providing an unprecedented level of understanding about customers and products, going well beyond purchase data. The Social Genome enables us to take search, personalization and recommendations to the next level.
In other words, Walmart is not really acquiring Kosmix for its 'social media' prowess, but rather for its technology, which Walmart will clearly try to apply to the world of ecommerce.
It will be interesting to see how Walmart does this, and while it's far too early to judge the merits of the acquisition, it actually wouldn't be surprising to see more acquisitions like this.
Many of the things being done in the social media analytics space are resulting in the development of technologies that analyze large amounts of data, and which could be applied to other industries. In some cases, it's even quite possible that some of the companies producing technologies will find that the opportunities outside of social media are far more lucrative.
From this perspective, savvy tech-heavy social media startups might soon consider whether a pivot away from pure-play social media market positioning makes sense. For the best, Facebook or Google might not come calling, but a phone call from Walmart probably isn't too shabby either.