Search Consolidation Act #1: Truveo goes to AOL
This post initiates a new consolidation series - about the Search market, similar to the one I have been writing about Social Media M&A. With the increasing number of search players, this consolidation is to be expected as large Internet companies (the famous GEMAYANI) look at acquiring assets to strengthen their own market position.
As it is often the case, I did not expect that Act #1 would actually involve one of my own companies: Truveo. Truveo, the little video search engine that could, had developed over the past couple of years pieces of unique technology that allowed the company to better any other search engine on discovering videos on the web. The company was started early 2004 by my friends Tim Tuttle and Adam Beguelin, who bootstrapped the venture for a year before raising a small round of financing that I was very lucky to get involved as an angel investor.
After building the core technology for about 18 months - including their core asset, the "visual crawler" - the team deployed their crawling infrastructure, and started building their index of videos found on the Web - leading to a successful launch in September 2005 of a destination site (Truveo.com) that would be followed by distribution deals enabling other search engines to leverage Truveo's index. It just so happens that there was such an interest around the team and the technology they had built that M&A discussions replaced partnership discussions - leading to the AOL acquisition is announcing today. The deal actually closed on Dec 21st (and investors got nice Christmas gifts in their shoes bank accounts two days later). And no, ladies and gentlemen, I will not give any clues as to the size, magnitude or weight of those gifts since AOL has elected not to disclose the financial terms of the transaction (which is too bad).
The rationale from AOL's standpoint is explained in this quote, found in the press release:
“Consumers across the web have eagerly anticipated a video search engine that offers relevant, up-to-the-minute, premium video results,” said Jonathan F. Miller, Chairman & CEO of America Online, Inc. “The addition of Truveo’s video search technology, video assets, and experienced talent complements the overall video experience on AOL and takes it to new heights. Truveo is a hidden gem in the video marketplace, offering AOL members and users of AOL.com a vast, new array of tools and an extensive collection of updated, hard-to-find video assets. The Truveo acquisition takes AOL even farther down the path of being the premier destination on the internet for video and search.”
The press will most likely ask Tim and Adam why they decided to sell “so early” as things were genuinely going very well: the company had generated a lot of business interest in the US market and overseas, and could have gone the execution route - and I have no doubt that we would have been successful. At the end of the day, and I am only commenting on my own account here, I believe that AOL was clever enough to offer compelling arguments in favor of the acquisition, and add a unique asset to its video arsenal.
So congratulations to Tim and Adam, and the team, for having built a truly innovative company, and executing almost “by the book” - including this exit (shoot - I can't use any qualifier here). It was a pleasure working with you all, even if I could not get them to start a blog (though it is not too late). And best of luck for the integration within AOL.
Oh yeah, and anybody announcing the deal before 6am PT has broken the embargo :-P.
I just saw the Reuters brief story on the acquisition and was amused by that statement:
Financial terms of the deal were not provided.
The deal was the largest purchase by the Time Warner Inc. division in 2005 and smaller than the $435 million purchase of Advertising.com in 2004, an AOL spokesman said.
One can only wonder why the actual number is not announced, but anyway we know it is the largest of the year for AOL , and it is less than the $435M we got for Advertising.com (the fund I was GP of before starting SoftTech VC was an investor in that company). Staci Kramer from PaidContent was the first to call an actual number: $50M (note that I am not confirming anything).
Lots of coverage of the deal (as usual, Memeorandum lays it out for us).
After a good launch, it appears their efforts to become a destination site had stalled, at least if you believe the Alexa data:
http://www.alexa.com/data/details/traffic_details?q=&url=truveo.com
I suppose that may have been another factor in their decision to sell early?
Posted by: Greg Linden | January 10, 2006 at 09:57 AM
Good thought Greg, but no it was actually not the case at all.
Posted by: Jeff Clavier | January 10, 2006 at 10:04 AM
I think they sold out at a point they've got the highest return on their initial investment!
Posted by: Yakov | January 10, 2006 at 12:05 PM
Who're you using for "N" in GEMAYANI?
We've got the rest:
Google
eBay
Microsoft
AOL
Yahoo!
Amazon
N??
Interactive Corp.
Brad Feld includes Liberty Media in his "AGILE AMY" but there's no N there.
I've stayed with GYMAAAE for now, which isn't as catchy as GEMAYANI because Interactive is more of a conglomerate company.
Thanks.
Posted by: Michael Parekh | January 10, 2006 at 01:32 PM
N is for NewsCorp!
Posted by: Jeff Clavier | January 10, 2006 at 01:46 PM
Congrats Jeff!
Posted by: Jeremy Zawodny | January 10, 2006 at 05:56 PM
actually, N is for MySpace ;)
Posted by: Dave | January 11, 2006 at 12:11 AM
Congratulations! The hit streak remains alive. You're becoming the DiMaggio of angels.
Posted by: Chris Yeh | January 11, 2006 at 12:58 PM
Nice for you and truveo team Jeff ;)
Now you have time to help the little French one Pooxi.com ;)
Posted by: David Pooxi | January 11, 2006 at 03:22 PM
Hi Jeff, I think a more appropriate acronym is YEA GAMIN. It captures the concept, don't you think? :)
Posted by: Mark Goldenson | March 25, 2006 at 07:09 PM