Last night we reported the news, first published by Business Insider, that Twitter was buying Cambridge-based social TV analytics startup Bluefin Labs. Since then, AllThingsD and Xconomy have verified the deal. It’s the second Boston-based acquisition for Twitter in as many weeks, and it’s a great move by the company. I’ll explain why in a moment, but first, here’s what we know:

  • The price is being reported between $70 million (AllThingsD) and $100 million (Xconomy)
  • The company will stay in Boston (AllThingsD)
  • It’s not clear if it’s the biggest Twitter acquisition to date. Business Insider says yes; Xconomy says no.

What Bluefin does

Bluefin is a social media analytics company for measuring buzz about television. It captures the volume and sentiment of social media conversation (largely tweets) around a show and, yes, its commercials, and turns that into structured data using language learning algorithms.

Advertisers can learn what people think of their commercials, and whether they do better or worse airing during different shows. Networks can see what characters and plots people like. If you want to read about the company’s history, from the MIT Media Lab, to the founder’s experiment recording everything his newborn said learning to talk, to the company’s current state, read this piece in MIT Technology Review or this one at The Boston Globe.

Why Twitter was smart to buy Bluefin

The reason this is such a good move for Twitter is that it opens up a whole new way for the company to make money, while potentially improving its current revenue model.

As Dan Lyons explains at ReadWrite, there are two obvious ways to think about the value of Twitter: as an audience that creates content against which ads can be sold, and as a trove of data to sell to someone else. So far, Twitter has mostly experimented with the former, adding sponsored tweets to your stream. And as its media rich cards are introduced, those ads will get more profitable. But as Facebook knows well, the value of this sort of advertising is still being sorted out.

Contrast that with Bluefin, which takes the data from Twitter and provides value to advertisers already spending big in television. Most people hear “social media” and “TV” and think of so-called “second screen” apps, but the real value of Bluefin is more basic. Use the data from Twitter to make TV programming and its advertising better.

By buying up Bluefin, Twitter can approach networks and advertisers with a comprehensive package. Buy sponsored tweets to run during your show or commercial, and also buy data about how viewers are reacting to it.

Why Bluefin sold

Selling now should mean decent returns to Bluefin investors, but considering it raised over $20 million, it’s far from a home run. So why sell now? Peter Kafka at AllThingsD reports the company had trouble selling to the big brands. The move also makes sense in the context of Twitter’s relatively recent crackdown on its API, (which Bluefin is clearly paying attention to). Most of Bluefin’s analysis is based on tweets, so selling to Twitter means easier access to the raw data on top of which Bluefin adds its value.

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Between Bluefin and Crashlytics, both of which appear to be staying in Greater Boston, Twitter’s presence here is suddenly way more significant. I’ll be writing more about that in the future, but if you have thoughts or tips either leave them in the comments or shoot me an email. walter at bostinno.

Image via ShutterStock

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