AOL Buys Gravity Startup
January 24, 2014

AOL Buys Search Personalization Software Startup Gravity

Peter Suciu for – Your Universe Online

While the hit movie Gravity is a heavy favorite for an Oscar for best picture next month, a different kind of gravity was attracting news this week. On Thursday online portal AOL Inc. announced that it will acquire Gravity, a software startup that tracks users to show more relevant ads and other content. AOL will buy the personalization company for an estimated price of around $83 million.

In a press release issued on Thursday, the business model of Gravity was described: “Gravity personalizes the Internet beyond search and social by applying a personal and real-time filter to the ever-growing volume of digital information available for consumption. Gravity’s patented technology creates Interest Graphs based on individuals’ interests, preferences and habits and allows publishers to offer a tailored and relevant selection of editorial and advertising content to readers.”

The announcement noted that the combination of AOL and Gravity will advance the web portal’s ability to distribute “relevant and engaging content and advertising across the Internet through intelligent technology,” which in time could make it more engaging. It will further enable AOL’s publisher network of more than 2,000 partners to deliver even more personalized and potentially relevant content as well as branded content to users.

“The web is moving to the era of personal, and a personal web filter will reshape how consumers get information and services,” said AOL Chairman and CEO Tim Armstrong. “Gravity is joining AOL to lead the personalization transformation of AOL's brands and platform partners.”

Gravity will also provide AOL with a client base of top publishers and brands the company noted. These could include brands such as Sony, Intel, USA Today and GAP. The Gravity API launched last year and it reported that there have been more than one billion personalized page views per month on some of the biggest publisher sites around the web. This technology, according to Gravity, has helped increase engagement by 240 percent compared to sites that do not offer this personalization.

"Every day we’re presented with an overwhelming amount of information to consume on our favorite websites and apps," said Gravity CEO Amit Kapur. "It’s time to move beyond searching for the best content to having the best content search for you. We believe that by combining AOL’s vast brand, publisher and advertiser network with Gravity’s interest graph technology, we can do just that."

Kapur, who was also one of Gravity’s co-founders, was one of the first dozen employees at MySpace. He left the social media company in 2009 to create a startup that would work to alleviate information overload on the web.

As part of the deal, $7.7 million will be deferred and paid over the next two years after the deal closes. In addition AOL will acquire about $12 million of net operating losses. Those are expected to result in a future cash tax benefit of $5 million. The deal should close by the end of the first quarter of this year.

After closing the deal, the Gravity product and team will report to AOL brand group head of product Luke Beatty.

Bloomberg Businessweek reported that AOL shares fell 27 cents to $49 in morning trading on the news of the deal. Last week AOL sold a majority stake of its Patch local-news site to Hale Global.