M&A Alert—April 21, 2011
Walmart Acquires Kosmix
Transaction Size: $300 million
Kosmix offers software that enables search, filtering, discovery and categorization of large amounts of real-time online data. Initially known for its vertical search engine, RightHealth (a health and medical information site), Kosmix has recently begun focusing its search technology toward aggregating and analyzing content from social media sites. Kosmix operates Kosmix.com (a search engine site that allows users to discover social content by topic) and Tweetbeat (a site that allows users to search, monitor, aggregate and categorize social content including tweets from Twitter, updates from Facebook & comments on YouTube in real-time). Tweetbeat also enables users to track tweets from influential Twitter users and track tweet volume via a graph. TweetBeat generated more than five million visits in March 2011. Kosmix was founded in 2004 by Venky Harinarayanand Anand Rajaraman, the founders of Junglee (an online shopping engine) which was acquired by Amazon.com in 1998. The founders and the Kosmix team will operate as part of the newly formed @WalmartLabs. Competitors include search engines such as Mahalo, Hakia, Powerset (acquired by Microsoft), Quintura, Semantinet and Trueknowledge, and also social media monitoring platforms such as Scout Labs (bought by Lithium), Proximal Labs (bought by Jive), Filtrbox (bought by Jive), Overtone (bought by KANA), Visible Measures, Viralheat, HootSuite and PeopleBrowsr. Founded in 2004, Kosmix has 70 employees is based in Mountain View. Kosmix has raised $55mm in total funding from Accel (Theresia Ranzetta), Cambrian Ventures, DAG Ventures, Time Warner Investments and LightSpeed Venture Partners (Ravi Mhatre).
Walmart operates a leading global chain of discount department stores. Walmart operates over 8,000 retail stores in 15 countries and e-commerce businesses in 9 countries. In 2001, Walmart launched Walmart.com, as its e-commerce business unit. Like other major retailers, Walmart has announced a multi-channel retailing strategy that will integrate customers’ online and offline shopping experience. Walmart has also announced its plan to continue to expand the @WalmartLabs team and expects this new group will create technologies and businesses around social and mobile commerce that will support Walmart’s multi-channel retailing initiative. Eduardo Castro-Wright, Vice-Chairman, was the key executive sponsor of the acquisition.
Walmart does not disclose transaction value although WSJ.com reports the transaction is valued at $300 million. Kosmix is a private company and does not disclose revenues, although Kosmix mentions their monetization strategy is via advertising relating to its search engine.
Comparable transactions include Jive Software’s acquisition of Proximal Labs in April 2011 for an undisclosed amount, Salesforce’s acquisition of Radian6 for $326mm-$340mm in March 2011, ExactTarget’s acquisition of CoTweet (transaction value undisclosed) in March 2010, Kana’s acquisition of Overtone in April 2011 (transaction value undisclosed), Lithium’s acquisition of ScoutLabs for $20 million to $25 million in May 2010, Jive’s acquisition of Filtrbox in January 2010 (transaction value undisclosed) and Microsoft’s acquisition of Powerset (a search engine that today powers Bing) in July 2008 (transaction value undisclosed),
WalMart is focused on building a cohesive multi-channel retailing experience. The success of this initiative places a heavy emphasis on utilizing customer data (such as purchase behaviors, preferences, interaction/communications via social media) and inventory (online/offline local inventory) data in a way that facilitates information gathering, discovery and purchases by consumers. Kosmix brings capabilities in extracting, filtering and organizing data, which can create new services for consumers such as personalized search and recommendation. It is also worth noting that Kosmix’s founders have an online retailing background from their Junglee/Amazon days, another plus for WalMart’s multi-channel effort.
Architect Partners’ Observations
The WalMart/Kosmix transaction again highlights the value of data analysis. Corporations are eager to generate new revenue by extracting value from the enormous volumes of customer data that resides both within the organization itself and outside the organization in the social web. The opportunity for companies to make connections between entities, people, places, products, & services in order to drive additional revenues through personalization & recommendation is enormous and still in its very early stages.