Inside The Twitter-Summize Deal

Twitter has confirmed that it is buying Summize and rolling it into the San Francisco-based company’s main offering. After the rumors of the deal were reported by Josh Chandler last week, I was able to confirm that the deal was done and would be announced on time. So right on time, the two companies made a joint announcement.

As indicated in the post, I promised to get some more financial details on the acquisition. Peter Kafka pegs the price at $15 million in stock and cash, though I am much more confident on the information from my sources, who say Twitter gave away north of 10 percent of the company to acquire Summize. My sources peg Twitter’s value at around $80 million. If you remember, I had reported about $15 million in new funding earlier this summer. As part of the deal, Summize employees are going to join Twitter, though CEO Jay Virdy is going to leave and do something else.

We’re excited to announce that Twitter has acquired Summize—an extraordinary search tool and an amazing group of engineers. All five Summize engineers will move to San Francisco, CA and take jobs at Twitter, Inc. This is an important step forward in the evolution of Twitter as a service and as a company.

As I outlined in my posts last Monday and yesterday, I think it is a super-smart move by Twitter, and if the company plays its cards right, it’s going to pay dividends in the long run. What they have given away is chump change compared to the potential. As I wrote last week:

The deal would be a good move by Twitter, and would be putting some of its recently acquired $15 million in VC funding to decent use as it would help the company get hold of of a business model.

Summize has come up with a clever way of peering through Twitter’s vast data stream and finding out what’s hot, where and how. The results are essentially keywords — topic-, person- or location-based — and thus can be used to show contextual advertising next to the pages that show these results. Summize has thereby developed an ability to monetize conversations without being intrusive.

Unlike a lot of others, I am not ready to throw my lot with some of the newer services just yet. One of the things that continues to attract me to Twitter, warts and all, is the relatively simplicity of it core service. I fell in love with it long before it became a Silicon Valley diva with a bad drinking problem. Of course, we all know recovering divas can slip into bad habits again. That is one thing I worry about: ability of Twitter to actually harness and not mess up this new acquisition.

Update: Michael Arrington interviews Ev Williams, one of the founders of Twitter about the company’s plans in an extensive interview.