Deals

How Hunch's CEO just slapped a "For Sale" sign on his company

We haven’t heard much about Hunch, the once-buzzy recommendations site based in New York — and what we’ve heard hasn’t been good. So it was interesting to read CEO Chris Dixon’s response to an anonymous questioner who asked why Hunch was building a general recommendations platform instead of focusing on solving one specific problem.

Dixon (pictured here, left) wrote an answer that is instructive when read closely:

We’ve talked to probably a hundred large websites about partnering and have found that personalization/recommendations is at the top of the priority list for almost all of them. It has surprised us, for example, how many large sites are either a) building significant internal operations to add personalization/recommendations to their sites or b) have recently hired senior executives to be “head of personalization.” … [P]eople seem to see personalization/recommendations as so important that they want to do it themselves. So our take is that what we are focused on is going to be a central theme in technology over the next few years and we are very well positioned having been working on the problem for almost 3 years.

Meanwhile, in the search space, technology like what we’ve built at Hunch is becoming increasingly important.

Dixon goes on to cite Google CEO Eric Schmidt on how mobile search will increasingly be personalized and anticipate users’ questions — something close to what Hunch does, in other words.

Reading between the lines here, Dixon seems to be saying that Hunch has found it challenging to sign partnerships for its recommendation engine because most companies want to own the technology themselves. He then argues that Hunch has a head start in solving the problem — which his potential partners may only realize after working on it for a while. And recommendations are important to the crucial search market, which currently has only two meaningful players, Google and Microsoft.

Dixon seems to be positioning Hunch for a sale to one of those two. Not likely Google, which is actively thinking about personalization and recently bought Aardvark, a question-answering startup which some have compared to Hunch. Perhaps Microsoft, though, which is Google’s last meaningful competitor in Web search?

On Twitter, I observed that Dixon’s post amounted to slapping a “For Sale” sign on Hunch. At first, Dixon disagreed. Then he observed that the “#2 [player] never builds hard tech themselves.”

Why build when you can buy? And why admit you want to sell when you can play hard to get?

If Dixon is dressing his company up for sale, he’s got the right backers. Hunch raised $12 million in March in a round of funding led by Khosla Ventures. Khosla partner Gideon Yu, a Hunch board member, is known for his role in high-profile Web acquisitions and investments, from Yahoo’s purchase of Flickr (cofounded by Hunch’s chief product officer, Caterina Fake); YouTube’s $1.65 billion sale to Google; and Microsoft’s $240 million investment in Facebook.