Yahoo Pays 30 Million For Summly – Developers’ Dream or Marketing Stunt?

By . Filed in Web 2.0

Yahoo’s CEO, Marissa Mayer seems to understand what the future is about. Well, to be honest, the fact that she has Yahoo’s backing means her actions are a key variable in how that future will unfold. After two mobile company acquisitions (Stamped and Jybe), each with just a flagship app under their name, Marissa set her eyes on the 17 year old wonder kid of Sillicon Valey, Nick D’Aloisio.

Nick is a very young british entrepreneur who invented Summly, a news app for iPhone. Now he’s in the position to reminisce about his humble beginnings at 15: "When I founded Summly at 15, I would have never imagined being in this position so suddenly," he writes on his site. The reported price is somewhere near $30 million dollars. Pretty nifty for a guy who isn’t allowed to drink yet.

But how did he this young coder/entrepreneur manage to get the interest of Yahoo within one month of publishing his app (November 2012) on the App Store?

Innovative App Algorithm?

It all starts with solving a problem. The problem which Summly solves isn’t an obvious one, but judging by the app’s success, Yahoo thinks the problem exists. "Summly gives you 400 characters, that’s more than a tweet, but less than a full article" says Nick in a video advertisement for his app.

Summly Launch from Summly on Vimeo.

The actual summary of the news is done by a proprietary algorithm, designed to mimic human thought process by using organic metrics. You’ve heard that probably. And like me, you probably didn’t understand a word of it.

But no matter, since technically Yahoo! owns that technology now, and after shutting down the app, they’ll go ahead and incorporate the algorithm into future Yahoo! Products. So they aren’t that open to sharing. Summly doesn’t rewrite news, it just selects certain key phrases from a text, and displays it to the user, cutting down time spent trying to filter through the tons and tons of information available on the Web.

But is this worth all that money or is this only marketing?

What It’s Worth

I would say it’s a marketing play. The actual algorithm, created by Nick in his bedroom, I dare say, is not the most innovative in the world, judging by the way the news are displayed. Don’t get me wrong. Nick is probably a genius.

He taught himself how to code at age 12. He created other apps before this one: Facemood (a Facebook mood analyzer) and SongStumblr (a music discovery service). He did all that at the age most kids still can’t memorize the entire alphabet. I know I didn’t. But let’s talk about the algorithm.

The million-dollar Algorithm

It’s basically a point-based classification system for different occurrences of certain keywords and keyphrases. Each of these is given a rank, and then the top ranking ones are displayed. Nothing innovative here. The trick is it’s smart enough to recognise verbs in different tenses, it’s smart enough to ignore linking terms like "and" or "but". It won’t however skip important linking terms like "and still", which is usually used before an important idea.

That’s great. It’s a good algorithm! And the previous app from Nick, Facemood, was probably the inspiration behind it. That app also used an algorithm to determine the mood of the user’s facebook friends.

So how much is the algorithm worth? Certainly not $30 million dollars. To be honest, I should mention that the current day algorithm is under constant improvement, with the help of NLP specialists and other big brained individuals. Nevertheless, I can’t help it think that Yahoo! could have developed a similar or better algorithm with a much smaller investment.

It’s Pure marketing – Here’s Why.

Yahoo! is trying to position itself as a Mobile Company in the future. You’ve seen it with their other deals and acquisitions. Don’t get me wrong, the fact that they get a brilliant young entrepreneur in their roster is cool also. The fact that they get a good algorithm, a sizeable user base, some good technology, that’s all cool. But that’s all it is. It’s just cool. And that’s what’s getting everybody talking about them now.

Everybody is awaiting their apps. Everybody knows they are going mobile. That sort of publicity is invaluable.

Funky Design – Check!

The actual design of the app is superb. I love it. It’s basically a flat design with awesome complementary coloring. Brilliant choice of fonts, with just a touch of 3D elements. The overlays are just right in intensity. Professionally done. Nick is displaying his impeccable marketing skills once again, through the design of Summly. It has nothing to do with the actual content shown but it helps sell Summly.

Heavy Funding, Good Support

Li Ka-shing, the Hong Kong billionaire (the 8th richest on the planet) had a hand in the product, 2 years back when it was still called Trimmit. One of his investment funds, Horizons Ventures caught word about Nick’s app (at beta stage) via TechCrunch, and wanted in. They wrote Nick offering help (worth $250,000) which got Nick staff, office space and a tech patent. You gotta hand it to the kid, he got a bit of help from high up.

Celebrities always help

On the actual day the app was launched, there was a big event with big celebrities showing up. Ashton Kutcher, who is also an investor in the app, Stephen Fry, Yoko Ono. All ages represented. If that’s not a good marketing plan, I don’t know what is. So from the moment the app was launched, news articles started pouring in. Everybody wanted to see how it goes.

Within 4 weeks, the app was already on 500,000 devices. That’s what good marketing gets you. At the end of that month (December 1), discussions with Yahoo! were already happening. So as you can see, there had to be a plan all long.

Conclusion

While headlines like "17 Year Old Entrepreneur Sells His App Company for $30 Million" catch a lot of eyeballs, the fact is not anybody can do it. You do need a lot of support, luck, timing, a ton of great marketing skills and… some more awesome marketing. Oh, and being part of somebody’s bigger marketing play is also important. Yup, it all comes down to marketing.

Author:

Victor is a 23 year old serial entrepreneur from Romania, Eastern Europe. His blog about success, entrepreneurship & business is VictorStuff.com.

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