Why The Acquisition Of Summly Was Odd

When Yahoo! acquired Summly for $30 million, several people noticed that the deal seemed off.  The hype around the news was that Summly was run by a 17-year-old CEO named Nick D’Aloisio.  Summly was an app that skimmed through the news and edited articles down to just a few words.  Summly never cracked the 1 million user mark and did not have any revenues.  Another issue is that the app’s core technology was not invented by the founder.

Summly licensed their technology from SRI, a company that spun out Siri and sold it to Apple.  “They licensed the core engine from another company. They are the quintessential bolt-on engineers, taking a Japanese bike engine, slapping together a badly constructed frame aligned solely by eyeballs, and laying down a marketing blitz,” stated Cornell professor Emin Gün Sirer.

Supposedly D’Aloisio said that the technology was developed by Summly and they owned the I.P. behind the service.  Summly’s website actually says that “SRI International, with the help of the Summly team, built the summarisation technology behind Summly. They own a small share in the company and are helping us improve the algorithm.”

Yahoo! shut the app down and insisted that the deal was centered around having Summly’s CEO lead the company in the mobile space.  However D’Aloisio is going to be staying in London to finish school and he promised to stay at the company for only 18 months.  Plus the kid is only 17 years old so how much of an influence can he really be at a bureaucratic media giant.

Perhaps Yahoo! was trying to impress the investors behind Summly, which includes Li-Ka Shing (Hong Kong business magnate), Matt Mullenweg (Automattic/WordPress founder), Mark Pincus (Zynga founder), Ashton Kutcher (celebrity), Stephen Fry (celebrity), and Josh Kushner (founder of Thrive Capital), Brian Chesky (founder/CEO Airbnb), and Yoko Ono (widow of Beatles singer John Lennon).  Yahoo! also received a lot of praise for helping a teenager realize his dream.  The $30 million may have been worth it since it is less than 0.75% of the cash that they are sitting on according to BusinessInsider.

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