• by Gavin O'Malley  @mp_gavin, January 23, 2014

Buying into the promise of personalization, AOL has agreed to buy technology startup Gravity for about $83 million. All of Gravity’s more than 40 employees are expected to keep their jobs.
 
Since founding Gravity in 2009, former MySpace execs Amit Kapur, Jim Benedetto and Steve Pearman have been developing applications to understand consumer interest beyond search and social insights.
 
What they came up with were “Interest Graphs,” based on individuals’ interests, preferences and habits, which in turn helps publishers offer a more tailored and relevant selection of editorial and ad content to readers.

“The Web is undergoing a fundamental transformation, whereby content actually searches for you,” Amit Kapur, CEO of Gravity, said Thursday. “The technology that’s making this possible is so necessary because the amount of content continues to explode, while real estate continues to shrink,” Kapur explained -- referring to the rise of smaller mobile Web interfaces.
 
Determined to establish deeper connections with readers -- and serve them more targeted ads -- publishers are investing big in personalization technology. Over the past year, Gravity’s technology has been running on top AOL properties, including AOL.com, TechCrunch and Sporting News.
 
Going forward, Gravity’s personalization efforts with extend across all AOL properties, while it will continue to pursue partnerships with independent publishers.
 
According to Kapur, it is unlikely that operating under AOL will hurt Gravity’s relationships with other publishers. “On the contrary, publishers will see the value in the size of our network -- the network effect -- which will help them deliver more personalized content to their readers,” he said.
 
AOL has also agreed to pay an additional $7.7 million two years after the deal closes and said it will assume about $12 million of operating loss, which it expects will result in a future tax benefit of $5 million.

“The Web is moving to the era of personal, and a personal Web filter will reshape how consumers get information and services,” AOL Chairman and CEO Tim Armstrong stated.
 
In addition to its technology, Gravity brings with it a client base of publishers and brands, including Sony, Intel, USA Today and GAP.
 
Since the launch of the Gravity API last year, there have been more than 1 billion personalized page views per month across its network of publisher partners, according to the company. By its own measure, Gravity’s technology has increased engagement by 240%, compared to sites that do not offer such personalization technology.

Since taking over AOL in 2009, Armstrong hasn’t shied away from big acquisitions and difficult strategic shifts. In 2011, Armstrong decided to drop $315 million on The Huffington Post -- a deal some analysts suggest has yet to pay off. Last year, he oversaw the acquisition of video ad start-up Adap.tv for $405 million.
 
However, essentially abandoning his bet on hyperlocal news, Armstrong recently agreed to sell a majority stake in Patch to the turnaround specialists at Hale Global.

Separately, last year, Yahoo acquired Jybe for an undisclosed sum. Founded in 2011 by three ex-Yahoo employees, the start-up specialized in technology that allowed for the personalized delivery of media. “Yahoo’s our biggest competitor in the personalization space,” Kapur added.

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