AOL has acquired Santa Monica based content personalization startup Gravity for $83MM in cash, with an additional $7.7MM paid out over the next two years (unclear if it’s an earn-out contingent on hitting certain targets). Gravity had raised $20.6MM in funding from Redpoint Ventures, August Capital, and Upfront Ventures. Because it’s unclear how much the VC’s own of the equity, the maximum return would be 4.4x and a ~50% IRR (depending on if the $7.7 gets paid out), and based on data from CrunchBase. AOL will also absorb $12MMM in net operating losses (NOL’s) from Gravity, which could offset AOL taxes (and purchase price) by $5MM.
With the acquisition, AOL will gain Gravity’s interest graph technology, which can help tailor content to specific users based on interests (i.e. Huffington Post, owned by AOL). It can take the form of “Sponsored Stories,” “Recommended For You,” or “What You Missed”-type widgets. Gravity can also power cross-platform experiences, like the ones seen on PandoDaily and TechCrunch, and will likely be utilized by AOL across other properties.
AOL CEO Tim Armstrong said, “We think we can get a clearer signal with content with personalization to improve our results and better monetize what we offer.” The press release says the acquisition will help AOL deliver personalized content, both on the editorial and advertising side.
Gravity co-founder and CEO Amit Kapur, and other executives, will be joining the Company. Luke Beatty, who created Associated Content, a crowdsourcing content platform purchased by Yahoo in 2010 for $90MM, and hired in August by AOL, will manage the new 40 person team, having overseen the Gravity acquisition and just promoted to head of product for AOL Brand Group.
Gravity was founded in 2009 by MySpace execs but didn’t launch until a year ago. It has personalized over 1 billion pageviews per month. It also says it increases engagement by 240 percent compared to non-personalized sites.