Not your father's incubator: Science's Delicious acquisition is all about making data-driven investments
Mike Jones isn’t a big fan of the term incubator. Maybe it’s the leftover bad taste from the countless failed attempts at the early stage company building model in the late ‘90s. Either way, the former MySpace CEO and his partners at Santa Monica’s Science, Inc. prefer to call their current venture a “technology studio.” But whatever the name, one thing is clear: Science is looking at the investment landscape like no one else in the industry.
Jones and company made as much clear with last Thursday’s acquisition of social bookmarking service, Delicious. There are a number of ways that Delicious could prove interesting, Jones tells Pando, including its potential to become a meaningful standalone business. But the real motivation for Science’s acquisition was data.
Now more than two years into this technology studio experiment, Jones and his team have demonstrated an insatiable appetite for data. “It forms the foundation of our entire investing thesis,” Jones says.
The company has built what it dubs the Science Growth Labs, which is an internal data-driven customer acquisition consultancy. The initiative follows in the path of Science's Pinterest-focused Hello Society – the result of another platform acquisition – adding additional solutions to address Facebook, Search, and Email marketing channels.
“For every investment we make into a consumer product brand, we want to have a shadow group that figures out growth strategies for that company,” Jones says.
Science Growth Labs works with each of its portfolio companies – a group that includes ecommerce up and comers like DogVacay, Dollar Shave Club, and Urban Remedy – but spends as much as 80 percent of its time doing paid consulting work for external clients. This means that Growth Labs is as much a revenue center for Science as it is a source of information and insight.
The Delicious acquisition marks the first public sign of Science’s evolution beyond online marketplaces and digital brands, toward its next areas of focus: mobile and content. Expect to see other such acquisitions announced in the very near future, Jones says.
"If we’re going to start getting smart and make investments in mobile and content, we should have some level of data that we’re working around that’s clean and informs our decision-making,” Jones says. “Think about what Delicious is at its core: It’s really data-driven content. There’s a ton of value in understanding what’s trending online, and what’s happening behind the scenes when things trend. Delicious generates incredible amounts of friending data on a minute-by-minute basis.”
The platform represents a utility to some people, and a mobile experience to others, Jones adds. He goes on to say that, beneath it all, Delicious represents a clearer signal of what’s trending online and how these trends spread than any other signal that Science has access to. Unlike Facebook and Twitter, Delicious offers Science contextual information around links, including meta-data and categorical data, he says.
This, of course raises questions about consumer privacy. But the reality is that online consumers have reached a point of understanding that free “social services” that don't exploit user data are the exception rather than the rule. Delicious, for example, has long served targeted ads based on user's consumption habits – a practice that Science has since suspended. Science’s portfolio companies have yet to experience any meaningful backlash pertaining to their data utilization, but that could change as it becomes more substantial and more widely understood.
Science acquired all of Delicious’ technology and intellectual property, but the company’s former employees will remain with seller, AVOS Systems. Science will rely on its internal engineering team to continue operating the service. The company seems content simply to watch and learn from Delicious' user behavior, at least for the time being, rather than focus on monetizing the service in its own right.
It’s a move reminiscent of Digg's acquisition by Betaworks, a similar New York-based studio. Betaworks has been less explicit about the informative potential of the data generated within Digg's once dominant content-sharing platform, and while it’s unclear if the group uses this data to inform its investment theses, the potential surely exists.
Plenty of investors and entrepreneurs turn to data to better inform their product and market theses. But Science appears unique in its commitment to generating and analyzing that data proprietarily, rather than turning to external analytics platforms such as Mattermark, CB Insights, or Tracxn.
“We’ve thought a lot about value-added venture capital and how do we build a platform that focuses on customer acquisition,” Jones says. "Science is structured as an operating company which gives us a lot of latitude to make acquisitions, maintain offshore dev teams, pay salaries, operate a design lab, and so on. You’d have to be a monster fund to support this type of infrastructure on a 2 percent management fee."
It’s still too early to render a verdict on the effectiveness of this approach, but it makes Science an interesting case study within the industry.