News broke that Apple had acquired Matcha, a video programming recommendation site, earlier this week. It’s not surprising, despite the company’s relative unknown status and small amount of total funding: Apple makes a number of smaller, strategic acquisitions and we don’t find out about some until well after the fact. With Matcha, however, there’s a very good reason Apple came calling, and that has to do not with talent but with product.
First of all, it’s worth noting that according to two very reliable sources close to the matter, the purchase price was not the $ 1 to $ 1.5 million previously reported, but was instead at least eight figures and likely between $ 10 and $ 15 million. Nor was it an acqui-hire; this was about the product Matcha built and about the specific recipe for video recommendations it put together via its proprietary algorithm, according to one source close to the matter.
There are a number of companies out there trying to do what Matcha was attempting, including Squrl, Fanhattan and Dijit to name just a few. Apple has good reason to be interested in the space: its iTunes video store powers 800,000 TV show and 350,000 movie downloads per day. But just like with the App Store, the key to driving ever-greater sales, and potentially helping an Apple TV product offer more to consumers, is sorting out how content gets suggested to users so they don’t get lost in an overabundance of content choice.
Matcha was acquired after testing numerous approaches to generating recommendations, right at the point where it had refined its algorithm such that it saw an explosion in user growth, according to our source. The app did definitely do well on the App Store charts, and was ranked among the top 15 apps in the Entertainment category before it was shut down.
It was Matcha’s user acquisition and user engagement strategy that Apple was interested in, according to one of our sources, since the acquisition happened just after Matcha had completed a round of vigorous A/B testing and had “found the answer” to rapid user growth and time spent in app. Matcha’s pairing algorithms that drove the right content to the right users simply worked best of any other apps competing in that space, the source affirms.
And regarding Matcha’s shutdown, the sequence of events also requires some clarification. Matcha did shut down its services abruptly back in May, as reported by TechCrunch, with CEO and founder Guy Piekarz making only vague statements about “something better” coming. But our sources say Apple had already acquired Matcha back in May when the shutdown occurred, not post-closure as others have reported.
It’s tempting to draw the conclusion that this is tied directly to Apple TV, but the acquisition is perhaps better thought of along the lines of Apple’s previous pick-up of app recommendation service Chomp. Surfacing the best video content for users has benefits beyond just the Apple TV, for Apple’s media ecosystem in general, and it sounds like the recommendation algorithm was the key driving factor here, rather than any one particular platform ambition. But Matcha’s ability to unify recommendations across content sources definitely sounds like a good mix for a next-generation Apple TV user experience, and our sources agreed on that as well.