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Why Lithium Bought Klout (And Why $200 Million Is Optimistic)

"We are a private company. This was a stock deal."

Lithium Technologies today acknowledged it had bought Klout, a deal Re/code reported more than a month ago. This is an all-stock deal for two private companies, so there’s no real dollar value, but Fortune’s report last night of a $200 million price was a rather generous interpretation, according to sources.

Lithium CEO Rob Tarkoff didn’t try to disguise that fact at a press conference today. “We are a private company. This was a stock deal. If the reports on the value of Klout are true, that makes Lithium an extraordinarily valuable company and I’m happy about that.”

Klout is not a universally loved company in social media spheres; its notion of measuring online influence by tracking social media activity has been rather controversial.

Tarkoff acknowledged Lithium and Klout are now ditching that terminology. “‘Influence’ is a loaded word,” he said. He and Klout CEO Joe Fernandez have agreed to talk about measuring “reputation and expertise.”

But why are the two companies combining forces?

Tarkoff said it’s about extending Lithium from its core business of helping companies with customer service.

“It’s this huge big data asset that Klout has created about who is everyone on the Web,” he said. “For us, this was the perfect way to bridge from service to marketing.”

Fernandez said the same thing in a different way: “We both want to change the way companies and consumers interact.”

Klout had $10 million in revenue last year, Fernandez said. It is on pace to become profitable later this year or early next year. The company will continue operating its consumer product as well as its Klout Perks business model, where brands pay to offer promotions to social media users with influence — err, reputation and expertise — in an area relevant to their business.

Lithium customers include Sephora, Best Buy and Telstra, while Klout customers include McDonald’s, American Airlines and Doritos.

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