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Breathless business strategy analysis time: Why did Apple buy Topsy?

That video above explains to you what Topsy basically does: it allows you to search through about 400 million tweets sent every day and figure out trends around them. Since Twitter’s biggest value is essentially that it can cover information in real-time, but its biggest deficit is that so many people are tweeting (and so much of it is inane) that it’s hard to get through, Topsy is kind of the main platform that can be used to bridge that gap. Well, Apple just went and did the damn thing — it bought Topsy for $200 million plus. There’s 340 major news articles linked off Google News at this moment about the Topsy purchase, all attempting to figure out what exactly the reasoning is. (Apple will not comment directly on the plans, per policy and per good business sense.)

I took a strategy MBA class this semester that met at 8am on Saturdays; the professor was an older dude (mid-70s) and frequently, instead of sticking to the syllabus, he’d name a company (“Let’s talk about Whole Foods“) and we’d do a SWOT on it for 2+ hours. I learned literally next to absolutely nothing in this class (twice I left early, once to walk to a football tailgate in sub-40 weather, just because it was better than listen to another round of someone saying what the opportunities for Amazon are), so I may not be the best person to analyze this situation, but here goes.

Topsy does have access to the Twitter “fire hose” — literally every tweet sent — because it’s a Twitter partner. So, it’s possible that Apple bought Topsy to have access to real-time data about what people are saying about the company and its products. Similarly (as mentioned in the same article), it could be using it as an integrative tool with ITunes Radio — i.e. you can receive info about an artist or song that’s trending or your friends are mentioning and instantly play it. Having access to real-time convos about music could give Apple a leg up in the streaming area vs. Pandora and Spotify. Usually, when Apple purchases smaller companies, it’s tied to an emergent business need; for example, they bought AuthenTec (a fingerprint security firm) last year and then rolled that technology into the iPhone 5s. They just bought PrimeSense, Embark, and HopStop, which are related to motion tracking and maps (Maps being an area in which Apple has flopped over the last two years).

The more “whoa” idea behind the purchase of Topsy is that Apple intends it to be an answer to Google for search on mobile platforms. Think about it: you want to know something about a celebrity, or a place to eat in Akron, OH. You have an iPhone. Since Apple doesn’t have a search engine, typically you’re relying on a Google app (Apple’s frenemy). But what if iPhones had a built-in Topsy app, with streamlined access to the fire hose of tweets since 2006? What if you could use that to figure out what you needed to on your phone? You’re never going to force Google out of the search market, but suddenly Apple has a semi-viable alternative to Google for their phones. That’d be kind of interesting.

It could be as simple as a recognition of the need for social analytics, which has never been Apple’s wheelhouse. Or it could be as simple as what’s written here by an entrepreneur-turned-VC-guy:

Put simply, the amount of public, real-time information that is now being created by hundreds of millions of users and soon billions of objects will change the way every major business, organization or government must operate.

And remember, as I mentioned quickly above, this is access to data that Google doesn’t have:

Because remember, if you’re comparing the big tech companies, Amazon has tons of user data (on what people buy!), Facebook has tons of user data (on people’s habits, click-throughs and social circles!), Google has tons of user data (on what people search for!), and Apple has … products. They’re good products but that’s what they are: products. Big data hath been the gap:

It comes down to this: sometimes, some of these businesses can be a little misguided about thinking one of them can serve all the needs that people have. The world is segmented for many different reasons, but right now I’d say an average person uses Facebook to track their friends and figure out where people are in life (kinda like social orienting, in a way), uses Amazon to buy stuff, uses Google to search for things and information, uses Twitter to find links or follow people that interest them, and uses Apple for its products and access to songs/movies/shows/etc. I think sometimes companies forget, in pursuit of market share, that shifting what a person understands about a company and how to use it takes some time; for example, if we were suddenly supposed to go to Amazon and do Facebook-type stuff there, would anyone do it immediately? Probably not. (That’s almost like what happened with Google+, in a way.) I don’t think that Apple acquiring Topsy can suddenly make Google less relevant as a search engine, because frankly, not enough people know about Twitter as a search option to make it even have a dent in what Google does search-wise. It’s an interesting move, just like most acquisitions are on surface, but can it completely change the way we function day-to-day? Probably not. If Apple does get access to this “fire hose,” though, it might make their marketing efforts — already pretty strong — even stronger.

The bottom line is that data about what consumers want, and the ability to foster the right relationship with those consumers, is the most important thing in the modern consumer-facing business era. That’s why Topsy was worth north of $200 million; it connects a behemoth company back to the everyday user, and hopefully quickly and effectively.

Ted Bauer

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