Twitter pays up to $150M for Magic Pony Technology, which uses neural networks to improve images

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Twitter today is taking another step to build up its machine learning muscle, and also potentially to improve how it delivers photos and videos across its apps: the company is acquiring Magic Pony Technology (that is really the name), a company based out of London that has developed techniques of using neural networks (systems that essentially are designed to think like human brains) and machine learning to provide expanded data for images — used, for example, to enhance a picture or video taken on a mobile phone; or to help develop graphics for virtual reality or augmented reality applications.

Terms of the deal are not being disclosed but we have two separate sources who tell us that Twitter is paying $150 million in all for the deal. This takes into account retention bonuses for the staff, which numbers about 11, including co-founders Zehan Wang and CEO Rob Bishop.

“Machine learning is increasingly at the core of everything we build at Twitter,” said Jack Dorsey, Twitter CEO and co-founder, in a statement. “Magic Pony’s machine learning technology will help us build strength into our deep learning teams with world-class talent, so Twitter can continue to be the best place to see what’s happening and why it matters, first. We value deep learning research to help make our world better, and we will keep doing our part to share our work and learnings with the community.”

This is the third machine learning startup Twitter has acquired, after Whetlab last year, and Madbits in 2014.

Magic Pony Technology had raised an undisclosed amount of money from investors like Octopus VenturesEntrepreneur First and Balderton. One of Balderton’s ex-VC’s is actually a machine learning specialist at the company.

We first learned about Magic Pony Technology when they caught our eye after they presented last year at a Pitch@Palace, a tech event put on at St James’ Palace in London.

It made a few further waves this year, as it further revealed the way that its technology worked to help enhance visuals with information that may not be in the picture itself, but may be recreated from composites of similar pictures, much like how the human eye works. In fact, one anecdote I’ve read about the origin of the name “Magic Pony” is that it’s a reference to the remarkable nature of what they do. (“It’s unbelievable, like a magic pony!”)

The company, however, by and large has remained fairly under the radar, with a website that has never offered more than a simple statement about what it does and the number of patents that it has filed. There are around 20 now, with several of them listed here, which will now belong to Twitter.

As for what Twitter plans to do with the tech, it’s notable that Dorsey keeps his comments to a general statement about the place for machine learning in Twitter’s bigger business (those comments are further elaborated here, where Dorsey notes that the team will be joining Twitter’s Cortex division).

But more specifically, Magic Pony has been building out technology in the area of image processing and this has an obvious avenue into Twitter’s business. Given that a large part of Twitter’s audience posts on and reads Twitter, as well as its video apps Vine and Periscope, using mobile handsets, and given that mobile handsets sometimes produce less than perfect media, there is a clear opportunity for Twitter to use this directly in its own products.

“Twitter has gone after video in a big way and buying Magic Pony demonstrates how important video is for them. That’s the key thing,” Suranga Chandratillake, a partner at Balderton, told TechCrunch.

Less obvious, but also very interesting is that Twitter is gaining a very strong team working in still-emerging tech areas where the company has yet to lay out any intentions, like virtual and augmented reality.

“Magic Pony was already working on a pretty substantial VR and AR strategy before they were acquired and have some very interesting tech in that area,” noted Chandratillake.

“Our team has researched and developed state-of-the-art machine learning techniques for visual processing that can identify the features of imagery and use that information to process it in new ways,” said Rob Bishop, Magic Pony CEO and co-founder. “Joining forces with Twitter gives us the opportunity to bring the benefits of that research to hundreds of millions of people around the world, and allows Magic Pony to contribute to better quality viewing experiences on Twitter.”

Additional reporting Steve O’Hear