New York – Inside Market Data reports that AOL is shutting down the Relegence news analytics business it acquired in November 2006. According to IMD, Relegence offices in New York and London will be closed tomorrow. Apparently AOL will continue to use the Relegence technology internally as a news engine for its consumer-oriented products, including AOL Money & Finance and its MediaGlow subsidary.
Relegence was acquired by AOL in November 2006, reportedly for between $55 and $65 million. We estimated Relegence’s revenues were around $8 million at the time. Relegence was positioned as a low-latency news intelligence platform targeted to traders. In September 2005, Relegence had partnered with Credit Suisse’s research department to launch Relegence Connect, which combined CS’s taxonomy of supply chain information (for example, which companies were suppliers to GM) with Relegence’s news engine. The goal was to give buy-side traders and analysts an edge in identifying news stories which might have a downstream or upstream effects on stocks.
At the time, the AOL acquisition of Relegence seemed an odd fit. AOL had no other institutional initiatives targeted toward the institutional investor community. Either Relegence would be the nucleus of a new business area for AOL, or it would languish. The latter was the case.
Senior executives began defecting soon after the acquisition. Senior vice president Bob Grant left in 2007 and founder and former chairman Edo Segal left in 2008. According to IMD, current President Steve Fadem departs tomorrow, together with the rest of Relegence’s non-technical staff.
IMD estimates current sales at $6 million. These revenues would have been under pressure in the current environment anyway. The reality is that the buy side is aggressively reviewing all external expenses and consolidating vendors where they can. Relegence’s closest competitors have always been Bloomberg and Thomson Reuters, which are the primary sources that traders use for breaking news.
One area that Relegence did not pursue aggressively was the search-based research space, populated by firms such as Connotate and First Rain, which tend to cater more to analysts than traders on the buy side. [Note: Sandy Bragg is a member of First Rain’s advisory board.] From a technology perspective, this would have been a natural extension of Relegence’s news filtering capabilities, but the acquisition by AOL forestalled investment in additional institutionally-oriented business.
AOL paid a steep price for technology it undoubtedly could have licensed for far less. In the end, it is one less player in the search-based research space, which is going through a broader retrenchment.