Big data enterprise search marketing company BloomReach has acqui-hired the founders of ShopLogic, an AngelPad-backed big data startup that helps ecommerce businesses optimize the discounts they offer to maximize profits. ShopLogic says its investors were reportedly supportive of the deal, so it was likely more than just a soft landing.
After years in stealth, BloomReach wowed me back in February 2012 when it announced its big data marketing system which creates custom commerce landing pages for each of a site’s visitors based on the search terms they used to get there.
For example, let’s say you Google search for red v-neck sweater, and you see a search ad for “red sweaters” pointing to a BloomReach client’s site. If you click through the ad, BloomReach will automatically cobble together all the most relevant products to your search onto the landing page you see. That might include red u-neck sweaters, brown v-neck sweaters, and red v-neck cardigans. BloomReach uses big data to scan all of a site’s products, incoming traffic, and related web search queries to determine the best possible ads to buy and landing pages to generate to convince people to buy things. Forrester reported that BloomReach delivered 638% profit ROI for emerging brands and 196% profit ROI over three years for large brands.
With $25 million in funding, BloomReach has plenty of cash to get into the M&A game that tech giants are using to pull in top talent and buy complementary products. At first BloomReach was working on a partnership with ShopLogic, after being connected by the startup’s mentor, AngelPad advisor and current director of Facebook ad product Gokul Rajaram. But they found their missions and areas of expertise meshed so well it made sense to just acqui-hire the founders.
ShopLogic is a two-man startup composed of CEO Kevin Chan and CTO Dennis Maskevich. Its big data approach combines purchase history, real-time shopping behavior, and third-party to determine how likely a commerce customer is to make a purchase, and what kind of offer might ensure they open their wallets.
For instance, if someone came to ‘Josh’s Shoe Site’ by searching “Buy Josh’s shoe site Nike Air Jordans” and had previously been quick to make purchases there in the past, I might know to only offer them a 5% discount because they’ll probably buy the shoes anyways. Meanwhile, if someone was a first time visitor to my shoe site, and got there by searching “Nike Dunks compare prices”, ShopLogic could help me automatically show them a bigger 20% discount. Customer 1 had high purchase intent so ShopLogic showed them a smaller discount to preserve the margins of its clients. Customer 2 had a lower likelihood of conversion so it showed them a higher discount to get them to buy before they looked elsewhere and net their client some profit
ShopLogic had raised “in the hundreds of thousands of dollars” from accelerator AngelPad and later from Data Collective. Chan tells me “We had really good traction with several mid-size customers and the we were generating revenue at a profitable pace” though that’s so tough with a team of two. Now they will stop marketing and selling ShopLogic, though existing customers will be available to current customers for a transition period.
BloomReach CEO Raj De Datta tells me “The deal was driven by the quality of the team. Kevin and Dennis have expertise in search, machine learning, and how to get the best users regardless of channel” hinting that BloomReach may soon expand beyond search ads into other types of display and social advertising. De Datta says the “acqui-hire strategy is one we plan to use for bringing in teams that have worked together and proven they get results.” That demonstration of ability to produce success in the market is something you can’t get out of the traditional hiring interview process.
But it begs the question, if ShopLogic was doing so well, why sell? Chan tells me “You make the decision about where the opportunity is. Their vision aligned with where we wanted to go. It seemed like a natural progression — a way to there a little faster than we would have on our own.” As I wrote in my piece “As Tech Giants Scramble For Talent, It’s Buy Or Die“ the best potential employees are often already employed by themselves. Acqui-hires can be the only way to get them on your team.