The tech giant spent a reported $200 million to acquire a social analytics start-up. Here's why.
Apple raised an eyebrow or two Monday, confirming to The Wall Street Journal that it had acquired Topsy, a social media analytics firm that monitors conversation and sentiment on Twitter, for a reported $200 million. The news left many wondering what Apple, traditionally a hardware company, would want with the six-year-old start-up.
According to Gartner's consumer technology analyst Brian Blau, however, the deal makes perfect sense. "There's a combination of interesting pieces that could be really useful for a company like Apple," he says.
Topsy, for starters, is one of just three authorized resellers of Twitter data, along with Gnip and Datasift, which announced Tuesday it had landed $42 million in funding. Topsy's algorithms can sift through that Twitter fire hose and glean insights into user sentiments and trends.
"From a marketing standpoint, Apple could use Topsy to figure out what customers are saying on other social channels," Blau says, and he's not just talking about what customers are saying about Apple, either. "Apple needs to keep up with competition and understand what customers are saying about them, as well," he says.
While most companies are happy to outsource these services, Blau says the acquisition fits with Apple's philosophy of owning its products beginning to end. "They want to make sure they have control of each piece of their technology," he says, adding that the reported $200 million Apple spent on the start-up is still probably less than they would have spent to develop similar capabilities in-house.
The acquisition, finally, puts Apple in a league with other technology companies that are incorporating social data into their traditional services. Both Google and Bing's search engines are influenced by social data. Ross Rubin of Reticle Research toldThe New York Times he predicts that Apple will begin using Topsy analytics to make smarter recommendations for the App and iTunes stores. Derrick Harris at GigaOm, meanwhile, guessed that social data could improve Siri's functionality.
For his part, Blau says paying attention to social will also give Apple earlier insights into product issues. "They've probably missed some opportunities and found out about issues with products much later they should have known about them," he says. "That's probably the major reason why they acquired this company."
Two questions remain now: Will Apple shut Topsy down and keep the data for itself? And will Topsy continue to focus solely on Twitter analytics? Requests for comment from Apple and Topsy were not immediately returned.
"Apple will need to have access to all different types of social data in the future, whether they can get it from Topsy or not," he says. "How they will get it if they don't get it from Topsy is the question."