Lithium acquires Klout? Whatever for?

Summary:There is an unconfirmed story lighting things up that community platform provider Lithium is process of acquiring Klout, the so-call Influence measurement service. Why? Especially since Lithium's view of influence via their Chief Data Scientist Michael Wu is so antithetical to Klout's view. Check this out to hear how Lithium can make use of Klout if the acquisition goes through.

There is a story circulating that community platform and application provider Lithium, a CRM Watchlist 2014 (and previous years) winner is planning on acquiring so-called influence “measurer” Klout.  While reported for the 1st time Tuesday by re/code that there is a deal and it is something “north of 9 figures”, to be fair, no one on either side has confirmed or denied the story.

Regardless of that….

If Lithium is acquiring Klout, I’m not sure why yet. I’m not going to judge them either. To be clear, they are a company I have a great deal of regard for and they have been my clients on and off for years and a company I watch in any case.  Also, they haven’t acknowledged that they are buying Klout nor has Klout said anything so this remains speculative, unless there is a public announcement. So judging them on this as a good buy or not, well, not gonna do it…exactly.

What I will do is talk to this theoretical acquisition because it addresses something that I think might be important. Whether it’s a good move is dependent on what Lithium does with Klout, (though if it truly is a 9 figures acquisition, even the very bottom of that, it is far too much).

For those of you living off the grid who don’t know what Klout is, Klout is according to their own spin on things – a company that scores influence on social channels. They integrate a large number of social networks, have some sort of algorithmic set that they use to generate a “Klout score” that indicates your influence at the time on social networks.  Factors can include how active you are at a given time on Twitter, Facebook and several other social networks, and how many people are doing something with your post or tweet or whatever.  So for example, this typically generates a Klout score of 71 or 72 for me during a normal period of activity.

Personally, I have no problem with what Klout measures or even how they measure. But I have had a HUGE problem with how they characterize the value of that measurement.  It is by no means whatsoever a measure of influence.  It’s been accepted that way so if you subscribe to perception being reality then in fact, some companies see it as a measure of influence, so therefore it is.  But while there is no doubt about the power of perception, to treat influence this way is a dangerous reflection of what can lead to some bad results frankly.

Influence is a complex subject – very complex subject that involves more than some digital interactions that someone likes enough to repeat.  Influence if it’s seen in its proper context can impact decisions made by people in ways that can help or hurt other people or institutions and thus can’t be taken lightly.  But if you believe Klout’s version of influence, it’s a matter of your digital participation.

Let me give a personal example. My nickname in the CRM industry is “the Godfather of CRM” which, by and large, is both a great honor and an undeserved one as far as I’m concerned. But it is what it is. Companies hire me to advise them on anything ranging from CRM strategy to technology selection.  My Klout score as of today is 71.  If I decide to go off the grid for a vacation for a couple of weeks, I guarantee that my Klout score will sink by some points.  I’ll put it simply. Does my desire to go on vacation or to not tweet for a while have a single thing to do with my influence in CRM? Does it go away because I went away on a cruise?  

Of course not.

Yet, in effect, Klout claims it does.

What I would suggest, in a truly ironic turn of events, is read Lithium’s Chief Scientist Michael Wu’s work on influence, which is by far the best written. In a TechCrunch post in 2012 he shredded the logic of the Klout-type influence scoring companies, which is important to one of my suggestions below.  If you’re interested in a more detailed look at what determines influence, please look here where he starts his series on social media influence and the six factors that determine it – actually.

So what is Klout then? As I said, I’m not saying it is useless but it has been mischaracterized. 

The value of Klout will lie in its ability to determine the activism of a social channels participant.  What is the rate and level of engagement for a specific person in a specific area – which could be used to help catch a potential customer at a moment when they have the most heightened interest in something – making the opportunity for a sale better due to the refinement of the data available about that individual?  I’m sure if I put my mind to it, I can come up with 100 other uses for it. It is not valueless by any means.

Lithium buys Klout apparently, why then?

So why is Lithium apparently buying Klout? I truly don’t know and I trust when the time comes they’ll have a good explanation and all will be well in the world of business.

But that said, if Lithium is to get any value from a high-priced acquisition, (if that 9 figures North number is real), there are two directions they may want to consider taking, that I would suggest.

  • Turn Klout into an real influence measurement tool – This is by far the more difficult road. But I’m saying, okay, take Klout on the face, since it has some chops in the perception of the market, but turn it over to Michael Wu, to see if he can make something of it.  Honestly, this would be a further cost, because given what I see, it’s a looooong way from an influence measurement tool. But if it can be done, Michael can use it as raw material and figure it out with the support of Lithium.
  • Characterize Klout for what it really is – It is a measure of an ongoing string of momentary snapshots of an individual’s level of digital communications activity. Develop use cases to show the business value of it. As I said, to fine tune marketing and sales capabilities by finding the heightened times that someone is talking about a brand or a product that can lead to a more precise insight into the best time for the opportunity to close or the prospect to become a lead or the communicator to become a prospect.  Or maybe, if you are tracking community participants, their total digital activities can be monitored to give you an indicator as to who are going to be the power participants and potential activists within that community. These are rough and off the top of my head so don’t get down on me. But the concept is, be realistic about Klout and what it does and apply it in the right way and reset the market expectations on what it can do to something it genuinely does measure, rather than its simplistic fiction of influence measurement.

In any case, this one is actually interesting to see how it plays out.  IF my friends at Lithium do acquire Klout – and again, this isn’t a done deal – just a strong speculation triggered by the re/code post – I am going to trust their good instincts to at least figure out the actual uses of the service, correct its mischaracterization and get the optimal value with set of use cases that actually reflect what it does do. It would be smart to use the wisdom of their own Chief Data Scientist Michael Wu and not fall for the perception game – since Klout is perceived by some as a measure of influence, it is one.  Make it valuable, not hype. 

Topics: Social Enterprise

About

In addition to being the author of the best-selling CRM at the Speed of Light: Social CRM Strategies, Tools, and Techniques for Engaging Your Customers Paul Greenberg is President of The 56 Group, LLC, a customer strategy consulting firm, focused on cutting edge CRM strategic services and a founding partner of the CRM training company, BP... Full Bio

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