In Its First Acquisition, StumbleUpon Buys Video Recommendation Startup 5by

Content discovery service StumbleUpon is announcing that it has acquired 5by, a video startup based in Montreal.

The financial terms of the deal aren’t being disclosed, but the companies say the entire six-person 5by team will be moving to San Francisco to work out of StumbleUpon’s headquarters, where it will continue to develop 5by as a standalone product — so this isn’t just a talent acquisition.

“Initially, it’s about getting 5by out there and introducing it to the community,” StumbleUpon CEO Mark Bartels said.

So for purposes of introduction, I should mention that 5by describes itself as “your video concierge” and recommends online videos that you’ll probably enjoy, based on the category you’ve selected (such as “Geeking Out” and “Music Lovers”) and on your actions while using the service.

Bartels described the deal as “a directional bet on mobile and video” — that’s where advertising is moving, and he said StumbleUpon believes video will account for the majority of online content consumed by 2016. This is an area where the company faced a “build versus buy” decision: “We saw how fast video was growing, and we wanted to move faster.” Ultimately, he’s hoping to link 5by’s “corpus” categorizing different types of video content with StumbleUpon, so that the core StumbleUpon product gets smarter about video, too.

“Video and mobile and mobile video is its own beast,” added 5by founder Greg Isenberg.

This is StumbleUpon’s first acquisition, which is a bit surprising since the company was founded back in 2001. Bartels said StumbleUpon now has the freedom to look at these kinds of deals because revenue is doing well (it was $30 million last year and projected to be $35 million to $40 million this year) and the company is profitable, which is what it was aiming for when it laid off 30 percent of staff and restructured the team earlier this year.