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...
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.
I don't think anyone is contesting the grander vision.
The problem is that they sold out, way before they sold out. They slapped together something that might make it for a social media karme engine game kind of thing but not by any metrics any real valuable personification of influence. Besides what everyone else could already see, and even that they got wrong.
I kind of agree. It really is a great idea that's super valuable. It was just too early or poorly executed. Someone will do it better in the future. For all the mocking developer folks here think of Klout as GitHub for marketers/influencers (if done correctly) It would allow you to get a view into how influential this person really was just as now days you can learn a lot about a developer by looking at GitHub. That can drive all sorts of hiring/contracting/engagement experiences per year. That's a big market.
It really was a massive and admirable goal. Klout as you described could quickly become one of the most important tools of the web.
Instead, people like myself saw humor in gaming the system a bit, so I quickly was in the top 3 "influencers" of ridiculous things, like Whitney Houston knowledge.
It is too bad, because when I first heard of the idea, it seemed like a huge step in social media. But I think your right, this first attempt might have spoiled the concept a bit.
Is the issue that it's very difficult to come up with a universal popularity score? It seems like they were trying to find the clique that rules the high school, when in the real world we listen to different people for different things. Of course one score is much easier to sell to marketers than a large series of scores based on different attributes.
The strange thing is - as long as advertisers pay people to Tweet, there is a need for something like this.
Grander vision? Klout should die because it's trying to create a numeric score to measure e-popularity. Why cater to people wasting their life chasing a stupid metric? Better to leave it highly ambiguous.
From a geek perspective, I hate social with an intense passion. It drags the politics and power hierarchies of real-life onto the Internet, and reinforces the status quo.
> "But in our universe, people saw the algorithm as hackneyed, particularly when Justin Bieber had a higher Klout score than the US president."
Maybe Klout was wrong with this particular arrangement, or maybe your assumptions about who has more influence are wrong. Ever thought about that?
After all, "entertainment clout" can be very quickly capitalized as "political clout", as Mr. Terminator has demonstrated.
When it comes to selling products, whose endorsement will sell more products: Justin Bieber or the US President?
Remember Klout's score is used to give "perks" to influencers, the purpose of which is that they show those perks to their fans, therefore influencing them.
While I don't care about Klout at all, I have to say I'd rather bet on Justin Bieber than the US President for that specific purpose.
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.
“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.
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.
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) on it from two years ago still come to my mind because I too see powerful people skipped over completely by it. Eh.
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.
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?
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.
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.
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.
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.
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.
yid|12 years ago
cpncrunch|12 years ago
bane|12 years ago
dpcheng2003|12 years ago
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...
dotBen|12 years ago
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.
ThomPete|12 years ago
The problem is that they sold out, way before they sold out. They slapped together something that might make it for a social media karme engine game kind of thing but not by any metrics any real valuable personification of influence. Besides what everyone else could already see, and even that they got wrong.
jusben1369|12 years ago
sharkweek|12 years ago
Instead, people like myself saw humor in gaming the system a bit, so I quickly was in the top 3 "influencers" of ridiculous things, like Whitney Houston knowledge.
It is too bad, because when I first heard of the idea, it seemed like a huge step in social media. But I think your right, this first attempt might have spoiled the concept a bit.
mathattack|12 years ago
The strange thing is - as long as advertisers pay people to Tweet, there is a need for something like this.
mattgreenrocks|12 years ago
From a geek perspective, I hate social with an intense passion. It drags the politics and power hierarchies of real-life onto the Internet, and reinforces the status quo.
mantrax3|12 years ago
Maybe Klout was wrong with this particular arrangement, or maybe your assumptions about who has more influence are wrong. Ever thought about that?
After all, "entertainment clout" can be very quickly capitalized as "political clout", as Mr. Terminator has demonstrated.
When it comes to selling products, whose endorsement will sell more products: Justin Bieber or the US President?
Remember Klout's score is used to give "perks" to influencers, the purpose of which is that they show those perks to their fans, therefore influencing them.
While I don't care about Klout at all, I have to say I'd rather bet on Justin Bieber than the US President for that specific purpose.
cmis|12 years ago
hkmurakami|12 years ago
seivan|12 years ago
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.
orthecreedence|12 years ago
dude_abides|12 years ago
27182818284|12 years ago
petercooper|12 years ago
mulligan|12 years ago
unknown|12 years ago
[deleted]
chadrs|12 years ago
http://kloutpenis.com/
jdh|12 years ago
Klout did have a cool looking office for sure. Hard to find that in SF today.
redmaverick|12 years ago
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?
Crito|12 years ago
amorphid|12 years ago
skeletonjelly|12 years ago
ThomPete|12 years ago
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
thrownaway2424|12 years ago
gobengo|12 years ago
cordie|12 years ago
brk|12 years ago
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.
thkim|12 years ago
thescrewdriver|12 years ago
unknown|12 years ago
[deleted]
dexcs|12 years ago
AznHisoka|12 years ago
kartman|12 years ago
Aloha|12 years ago
rabino|12 years ago