Today, Lithium officially announced its acquisition of Klout and its 60-plus employees. Klout has had its fair share of controversy over the years — primarily because its primary influence score tried to be a universal number, independent of context, and it provided limited offerings for marketers. So when the acquisition news leaked a few weeks ago, many of us who have been following both companies have been scratching our heads: Why would Lithium, a leading community platform vendor, spend hundreds of millions to scoop up Klout? Here is my and my colleague Zachary Reiss-Davis’ perspective on the acquisition:

  • Lithium claims that Klout will enable it to round out its social marketing offerings. Today, Lithium provides a robust community platform and a social engagement platform, providing marketers with solutions for establishing both depth and engagement. But the company lacks a solution to help marketers meet their reach objectives. According to Lithium, Klout will help it close this gap by enabling Lithium to implement future advocacy offerings and do so through Klout’s reach of 500-million-plus consumers. 
    Our take: We agree that the Klout purchase provides a good opportunity for Lithium to offer brands a reach solution but only if it integrates Klout into an influencer engagement offering. Increasingly, brands are launching successful influencer and brand advocacy campaigns to drive awareness of their products. Lithium could use Klout to build a new community platform that facilitates two-way interactions between brands and their influencers and advocates. But the platform will need to integrate with existing Lithium communities as well as provide features for spreading information across a wide range of third-party websites. The question is, can the company build an advocate or influencer platform competitive with existing platforms offered by vendors such as Social Chorus, Dynamic Signal, or GaggleAmp?
  • Lithium claims that Klout provides the company with an opportunity to grow its customer base. Lithium has gained a strong foothold in the retail and financial services industries. For example, Sephora, Home Depot, and Barclays all run their customer support communities on Lithium. But the company lacks a strong presence in the consumer packaged goods (CPG) industries. Klout’s presence in CPG (McDonald’s and Doritos are customers) provides Lithium with an opportunity to get in front of Klout’s installed base and upsell its community and social engagement offerings.
    Our take: In a mature community platform market, Lithium must look at other ways to grow the business and stay relevant to brands that need to engage with their customers across multiple online and offline channels. Yes, the Klout acquisition gets the company in front of large CPG brands and other industries where it has struggled to penetrate. But the jury is still out on whether these industries provide Lithium with the opportunity to grow revenue from upselling and cross-selling its community and engagement offerings.
  • Lithium claims that the Klout acquisition brings valuable consumer data. In its press release, the company states that the combination of the two companies “establishes one of the biggest data footprints of consumer preferences, attitudes, and activities on digital channels.”
    Our take: We strongly agree that for social marketers, data is king. But much of Klout’s data is available via its API, so it does not provide any new data that Lithium does not already have access to. That said, there is an opportunity for Lithium to integrate Klout’s measurement of online contextual influence with its own community data to provide new insights to marketers about who matters for their brand.

Do you agree with our perspective on Lithium’s Klout acquisition? We would love to hear your thoughts!