When cable companies and fashion magazines invest in big data (literally)

It’s not the first acquisition of a technology company by a technology user, but why not just license the software? Why buy the vendor?



Credit: Michele Ursino (CC BY-SA 2.0)

This week, media group Advance announced the acquisition of big data vendor 1010data, for a half billion dollars.

When I read a press release about a consumer company "investing" in big data technology, I usually interpret this as marketing hyperbole meaning that said company has made the acquisition of software licenses from the vendor putting out the press release. Less often do we read about companies using technology, acquiring the vendor providing this technology.

Yet, there are precedents

Probably the most recent example that comes to mind is Apple's acquisition of NoSQL database maker FoundationDB, the developers of database technology combining NoSQL databases with ACID transactions to address the challenge of transactional consistency in NoSQL databases. ZDNet, commenting on this acquisition, reported speculation that Apple was going to use the technology to bolster their cloud-based services. But why not license the technology? Why buy the entire company? Most likely to be certain that the development would be exclusively focused on the needs of Apple.

Heterogeneous acquisitions are usually tuck-in technologies

Looking back in time, I recall several deals in the data quality space. Ten years ago, Pitney Bowes, a maker of mail and document management systems, acquired two data quality vendors: Group 1 and Firstlogic. And seven years later, their challenger Neopost grabbed Dutch vendor Human Inference.

I call these deals heterogeneous' because in both cases a non-IT company snatched a software vendor. In comparison, Informatica's 2006 acquisition of yet another data quality vendor, Similarity Systems, was a software vendor buying another.

But when mailroom vendors acquire software vendors, the situation is very different. You may be looking at:

  • A vision, perceiving the blurring of boundaries between physical and digital worlds and wanting technology to create a competitive advantage.
  • A way to prevent a competitor to get access to this technology.

So what does the 1010data acquisition mean?

Advance is a global media company that operates a cable company (Bright House Networks), magazines such as the New Yorker, Vogue, Vanity Fair, and Wired, local media companies (30 newspapers and 12 websites in 10 different metro areas and states), and more -- and owns participations in Discovery Communications and Reddit. Clearly, these media properties produce lots of data, and I can very well see why Advance needs a big data platform. But, like Apple did with database technology, why acquire the vendor? Why not just license it?

Advance's move is actually a pretty clever one. This acquisition allows them to secure access to technology that is mission-critical for them today, already. And as technology and demand evolves, and they take further steps toward the digitalization of their business, toward the monetization of their data, Advance will fully control the platform and make sure it is aligned with their goals -- before being aligned with the goals of 1010data's 750 other clients.

And if they manage to grow the existing business of 1010data, they might even recoup their half billion dollar investment. And win twice.

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