StyleFeeder Acquired by Time Inc.

1/18/10Follow @wroush

[Updated, see below] Time Inc., the New York-based magazine publishing giant, has acquired Cambridge, MA-based personalized shopping site StyleFeeder in a deal that closed on Friday. StyleFeeder founder and chief technology officer Phil Jacob, who I reached at his home this evening, confirmed the news, which was first publicly reported just before 8:00 p.m. Monday by the Wall Street Journal.

An unnamed source in the WSJ report pegged the purchase price at an amount “well into eight figures.” Xconomy has not been able to confirm that claim, and Jacob said he was unable to comment on it.

Four-year-old StyleFeeder, which was backed by Lexington, MA-based Highland Capital Partners and Boston-based Schooner Capital, provides personalized shopping recommendations to visitors using a combination of techniques. For users who are logged into the site, and for whom StyleFeeder has some historical data, the company uses machine learning algorithms developed at MIT to recommend products rated highly by other users with similar tastes. For users who aren’t logged in, the company can still make useful recommendations based on users’ locations and records of products that are popular in their areas.

Last March, StyleFeeder branched out, announcing a partnership with Hachette Filipachi Media, the publisher of Elle and a number of other fashion, automotive, health, and hobbyist magazines, under which StyleFeeder agreed to provide personalized product recommendations directly to Elle.com visitors. The affiliate fees that accrue from such purchases are becoming an attractive revenue source for many consumer-oriented publications. Fran Hauser, a digital strategy manager for several Time Inc. magazines such as People and InStyle, told the Wall Street Journal that with the acquisition of StyleFeeder, Time Inc. will be able to “share in [the] value creation” when editors help to generate consumer demand for products.

It’s safe to say, in other words, that online product finders like this one that StyleFeeder created for Elle are likely to turn up on the Websites of many fashion-oriented Time titles, including InStyle. Whether StyleFeeder will be allowed to continue its partnership with Hachette Filipachi and other brands outside the Time Inc. empire remains an open question.

The WSJ report said an official announcement of the acquisition could come Tuesday. [Update, 8:30 a.m., 1/19/10: Time Inc. has just published a press release announcing the news. It indicates that StyleFeeder "will become part of the InStyle family of brands" and that it will power shopping on InStyle.com.]

Thanks to growing affiliate revenues and conservative management, StyleFeeder has been a cash-flow-positive business for some time, and had a strong holiday season. According to a source familiar with the company, the startup did not need to be acquired to stay in business, and was not actively seeking a corporate parent. “Somebody came along,” this source tells Xconomy.

That somebody was clearly Time Inc., the magazine group of media conglomerate Time Warner. In addition to People and InStyle, Time Inc.’s titles include magazines such as Fortune, Sports Illustrated, Health, Real Simple, Money, This Old House, Golf, and of course the flagship Time. The company claims that one out of every seven U.S. Internet users visits a Time Inc. website at least once a month. It has been actively exploring new types of online transactions such as digital magazine sales that could help to offset declining advertising revenues at its big-name magazines.

As a venture-funded startup, of course, StyleFeeder would eventually have needed to achieve some sort of exit. The company has raised $4 million in seed and Series A funding from Highland and Schooner. If the Wall Street Journal‘s “eight figures” quote is correct—meaning Time has paid more than $10 million but less than $100 million—the acquisition represents a return of between 2.5x and 25x on the venture funds’ investment.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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