Amazon.com Inc. acquired a Santa Barbara data analysis and search engine start-up in May to help improve its Alexa virtual assistant and other services, according to four sources familiar with the deal but unauthorized to discuss it.
The previously unreported acquisition of Graphiq Inc. and its more than 100 employees has given Amazon a new Southern California outpost. It recently began looking to hire additional software developers and data associates in Santa Barbara to work on Alexa.
Investors in Graphiq made out with more than they put in, according to a source, suggesting the deal was worth at least tens of millions of dollars. Another source estimated the deal's value at $50 million. Amazon and Graphiq declined to comment.
Founded in 2009 as FindTheBest, the company sought to collect and organize details about products, places and people to simplify online research.
Graphiq Chief Executive Kevin O'Connor has said he came to the idea after struggling to find a reliable way to compare ski resorts while he planned a vacation and colleges as his son eyed further education. He wanted to see key information such as prices, hours and ratings in one online spreadsheet. Data came from public sources, employees and users. The company started generating revenue by selling ads alongside its tables.
The company later introduced features to tailor comparisons around individual preferences. And it launched websites and apps focused on specific topics such as technology, genealogy, real estate and government data. They draw millions of monthly readers.
Graphiq not only created a large, internal content development team, but also developed graph and chart tools so that news partners such as the Los Angeles Times, Reuters and the Associated Press could provide interactive visualizations in their articles.
Last month, Graphiq announced that features for news publishers would no longer be available after Friday. A company spokesperson last month declined to comment beyond a statement about that decision.
The statement said, "We greatly enjoyed working with publishers over the last few years to help them tell the news and look forward to continuing to use our technology in other exciting areas."
The technology Graphiq has developed to connect the dots between billions of pieces of information could be valuable to Amazon as it tries to make Alexa smarter. Akin to Siri on the iPhone, Alexa answers queries about the weather, sports and other topics on devices such as Amazon's Echo speaker.
Last year, Graphiq produced a now-unavailable Alexa app that aimed to answer questions such as "What is the fastest 2016 sedan?" according to app aggregation website ChatBottle. Amazon also gave Graphiq access to a database about books to put its technology to the test, according to a source.
Amazon faces competition from most of the world's largest tech companies, including Alphabet, Apple, Microsoft and Baidu, in delivering answers to consumer questions faster and more conveniently.
O'Connor told Inc. magazine last fall that "people are going to realize" that Graphiq's technology is "extraordinarily strategic."
"You can see it happening with the Amazon Echo, Siri, Google Now," he said. "Rather than making people think like computers, we're making computers think like people."
Graphiq also drew interest from Google and IBM before settling on an agreement with Amazon, according to sources.
The deal marks the second significant purchase of a company co-founded by O'Connor. He founded and led ad tech firm DoubleClick through 2005, when the company was sold to private equity firms for $1.1 billion. Two years later, in its biggest acquisition ever at the time, Google spent $3.1 billion in cash on DoubleClick to vastly expand its ability to place ads across the Internet.
O'Connor then became a fixture in the Santa Barbara tech community. He's heavily recruited from UC Santa Barbara and has used his wealth to invest in start-ups such as construction software maker Procore and event planning app MeetUp.
Graphiq had raised about $32 million in private financing, according to Crunchbase. Its biggest venture capital backers included Kleiner Perkins Caufield & Byers and Pritzker Group Venture Capital. Montgomery & Co. and Silicon Valley Bank also provided some funding. Representatives for the firms declined to comment or didn't respond to requests to comment.
It's unclear whether Graphiq, which went through a round of layoffs last summer, has trimmed staff further as part of the transaction. LinkedIn data show a slight drop in headcount to 131 employees from 145 in March. Departures have included the company's head of people operations.
Elsewhere in Southern California, Amazon maintains software development workforces in Irvine and San Diego and several sprawling fulfillment centers in the Inland Empire.
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Image credit: Product shot by Amazon.