When a 17-year-old high school student can sell an iPhone app based on another firm's technology and with no revenue for $US30 million ($28.6m), has the world gone mad?
The Summly app, which at its core uses technology from Silicon Valley nonprofit research institute SRI International, summarised news articles to make them easier to read on a small screen.
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Teen becomes tech millionaire
Nick D'Alosio created his news summarisation app when he was 15-years-old and just two years later, he's a millionaire after Yahoo buys the technology.
It had been downloaded less than a million times before Yahoo pulled the app after acquiring the firm for a reported $US30 million. Founder Nick D'Aloisio, who lived in Australia until the age of seven, is now arguably the world's youngest self-made millionaire.
Cornell University computer science professor Emin Gün Sirer claims Summly “developed no natural language processing technology of its own”.
“They are the quintessential bolt-on engineers, taking a Japanese bike engine, slapping together a badly constructed frame, and laying down a marketing blitz. That's why the story sells,” he said.
Summly itself says SRI International “built the summarisation technology behind [the app] with the help of the Summly team”.
The number of active Summly users and a business model were unclear. Despite shutting down the app, for its money Yahoo gets the intelligent and well-spoken D'Aloisio and two of his staff.
But is $US10 million a head justifiable, particularly considering D'Aloisio is only obliged to stay for 18 months? Are the critics just jealous?
“The question is, can Yahoo make more than $US30 million because they made the acquisition?,” said Phil Morle of Australian technology incubator Pollenizer.
“I believe that they can. Great entrepreneur and product guy and a world needing a decent reader now Google has killed their [RSS Reader] product.”
Sirer said the Summly technology wasn't particularly advanced compared to current leaders in the field of natural language processing, as it simply focused on news stories, which were usually already summarised in the first few paragraphs anyway.
“Summly wasn't reading Ulysses by James Joyce and extracting the fact that the three-masted ship Leopold Bloom sees on the horizon is a metaphor for the Holy Trinity and therefore represents the Catholic Church,” he said.
“It wasn't reading a 12 page article in Harper's and extracting the cleverest puns and pop culture send-offs lovingly embedded by a writer who is good at his craft and earning below his potential.”
By contrast, the best algorithms were already going beyond summarising towards extracting informed opinions from a piece of text.
But does this criticism miss the point? The highly connected technology journalist Kara Swisher of the Wall Street Journal said Yahoo paid “a very high price” but the core value was not in the technology but D'Aloisio himself, who offered a “fresh face” and the prospect of making Yahoo appear cool again.
This led tech blogs such as Mashable to wonder whether Yahoo paid $US30 million for little more than a good piece of PR.
Sebastien Eckersley-Maslin, CEO of Australian technology investment firm Bluechilli, said even as a PR play, for struggling Yahoo the deal “makes sense”.
Huge acquisitions are also fairly common in the tech space, for instance Facebook paid $US1 billion for Instagram last year while also in 2012 Google paid $US25 million for five-man email startup Sparrow. Recently, Dropbox bought pre-launch startup Mailbox for a reported $US100 million.
D'Aloisio, raised in Australia but now living with his lawyer mother and Morgan Stanley executive father in Wimbledon in London, took a sabbatical from King's College School six months ago after attracting investor interest.
He received a total of $US1.5 million in venture capital funds first from Hong Kong billionaire Li Ka-shing then from Rupert Murdoch, Yoko Ono, Zynga CEO Mark Pincus and actors Ashton Kutcher and Stephen Fry.
For Roamz founder Jonathan Barouch, who has recently had to change the focus of his app after struggling to reach just 200,000 downloads, the Yahoo deal makes sense as it helps the fading firm acquire “talent with core skills who can help move the dial” and a technology that could be adopted across Yahoo's suite of products.
He said the fact that a teen who grew up in Glen Iris, Melbourne could reach such success may inspire young Australians to study computer science and entrepreneurship.
“There will be kids all across Australia thinking 'if that kid can do it so can I',” said Barouch. “That is the kind of national response we want to encourage rather than the typical tall poppy responses.”
D'Aloisio, who plans to put the money into a trust fund, did not respond to phone calls and emails requesting comment, while fellow Australian Summly staffer John Henderson declined to comment. SRI International did not respond to a request for comment.
"If you have a good idea, or you think there's a gap in the market, just go out and launch it because there are investors across the world right now looking for companies to invest in," D'Aloisio told Reuters.