Why Facebook Would Buy Chai Labs

Facebook is buying Chai Labs, a small startup founded by the former product manager and launch engineer for Google (s GOOG) AdSense, Gokul Rajaram, according to All Things D. While the small deal — an “acq-hire” of a company with relatively little funding and few employees — fits in with Facebook’s deal-making history, many observers seem to be scratching their heads today about what exactly Chai would do for Facebook besides raise its former Googler count.

Well folks, it’s not that complicated. Chai Labs makes a content management system for publishers in the travel, local, shopping and entertainment verticals to help them algorithmically create interesting content. Its customers include NBC Local (s GE), Associated Content (now owned by Yahoo) (s YHOO), and the Travel Ad Network. Chai helps these customers understand what users are searching for in real-time and then ranks and surfaces appropriate content that’s likely get picked up in search results. For U.S. News & World Report, Chai built a page that generates aggregated travel guides by analyzing the sentiment in opinions of travel writers and user-generated content portals. For NBC Local’s New York City restaurant review site, Feast, Chai augments the site’s editorial content with a “Feast Rank” system that gives each restaurant a single, weighted-average score that’s dynamically calculated based on recent mentions in newspaper reviews, blogs, Citysearch user write-ups and elsewhere.

What could these tools be awesome for? Facebook Pages and Places. You can imagine that dynamic, SEO-aware content generation would be highly effective for the brands, media companies and business owners who want to create and maintain interesting Facebook Pages. Not to mention, Facebook improves its understanding of search queries and sentiment analysis while getting in-house expertise in SEO, SEM and keywords.

Further, Rajaram is a significant hire himself, and yet another former Googler now at Facebook. In addition to his crucial work on AdSense, Rajaram is an advisor to Canoe Ventures, Coupons.com and Tumri, and was a director at Associated Content before it was bought. If All Things D is right, Facebook is only spending around $10 million to buy the company, which had raised something like $2.4 million from investors including Joe Kraus (partner at Google Ventures), Marc Andreessen (partner at Andreessen Horowitz) and Reid Hoffman (partner at Greylock).

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