U.K. retail giant Tesco has acquired U.S. social-media marketing firm BzzAgent for around $60 million, according to people familiar with the matter. The deal price, which includes an earn-out, underscores the growing interest among major retailers to buy into digitally derived advertising strategies.
BzzAgent, a Boston-based startup, specializes in creating word-of -mouth campaigns for big companies such as Unilever, L'Oreal and Michelin. The company enlists more than 800,000 people in the U.S. to try out certain products, which they can choose to write about to their Facebook friends or Twitter followers. The company does not pay any of its consumer volunteers, and they are not required to say anything about the products.
"We couldn't find a more exceptional partner in what we hope will be a huge opportunity," BzzAgent CEO Dave Balter said. The 10-year-old startup raised $13.8 million through a series of funding rounds from VC firms General Catalyst Partners and Flybridge Capital (formerly called IDG Ventures Atlantic).
Mr. Balter will report to the head of Tesco's subsidiary company Dunnhumby and its CEO Simon Hay. Dunnhumby helps retailers create in-store marketing campaigns and loyalty shopper programs by analyzing data on household buying habits. The U.K.-based company has worked with U.S. companies, such as Procter and Gamble, Coca-Cola and Kroger.
BzzAgent will remain a separate business, but plans to work closely with Dunnhumby to expand its base of consumer volunteers using its large database of household and consumer information. BzzAgent's 60 full-time employees will be staying on as part of the acquisition.
The deal marks the emerging interest among retailers to tap into social media. In April, Walmart paid $300 million for Kosmix, a technology that organizes social-media content, from articles and tweets to YouTube clips and Facebook shares, into categories. Walmart hopes to take advantage of all those so-called social signals to better understand consumers' sentiments on products as well as their buying habits.
"Retailers are buying into social marketing," Mr. Balter said. "They will all eventually have to."