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AOL Buys Personalization Startup Gravity for $90 Million in Cash

"It's been search, then social and now personal," said CEO Tim Armstrong.


In a bid to add another publishing and advertising tool to its offerings, AOL has acquired personalization startup Gravity for about $90 million in cash.

As part of the deal, which is expected to close in the first quarter, the New York-based company said it will also “acquire approximately $12 million of net operating losses, which is expected to result in a future cash tax benefit to AOL of approximately $5 million.”

“It’s been search, then social and now personal,” said AOL CEO Tim Armstrong in an interview last night about the transaction, echoing a motto that Gravity CEO Amit Kapur has been using since he co-founded the company in 2009. “We think we can get a clearer signal with content with personalization to improve our results and better monetize what we offer.”

“This throws more fuel on the fire to grow our network,” said Kapur. “The broader reach that our technology gets, the better data insights we can have.”

Gravity has raised close to $21 million since it was launched in 2009, with venture investors including August Capital, Upfront Ventures and Redpoint Ventures.

Post-acquisition, AOL is going to use Gravity’s technology on content across its properties, such as the Huffington Post, and across multiple devices to offer more relevant content, as well as continuing to power the same for other publishers.

But it will also use its personal and real-time filters to help marketers gain insights based on content consumption and also offer more engaging ads.

Kapur and his team of 40 — which I wrote about recently — have been aimed at creating a digital concept known as an “interest graph.”

As I noted:

The company has been integrating its personalization technology across a range of content sites, including NBC, Disney and several AOL properties, with more to come. Essentially, its products aim to tailor consumers’ Web experience as they surf and then surface the content most relevant to them.

It’s not just people but also brands, such as Sony, Intel and others, because these, too, have interest attributes that presumably will help them figure out how to advertise and target customers better.

Here is Gravity’s Taco Bell interest graph, for example:

Armstrong said that AOL was attracted to the purchase because it hopes to turn Gravity’s technology into a platform. “AOL is going to be a super-customer of Gravity,” he said. “But this is about extending those capabilities even further as personal becomes the most important signal for publishers and advertisers.”

The Gravity name will continue, said Armstrong, and the team will continue to keep its main headquarters in Santa Monica, Calif., reporting to AOL Brand Group’s head of product Luke Beatty.

“Amazon has taught us that custom page presentations work and customers appreciate experiences that take into account interest graph data,” said Beatty. “We have to because there is so much content that there must be a unique presentation for every user.”

Here’s a video interview I did with Kapur in December, talking about the future of personalization:

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