Klout CEO Joe Fernandez on Klout’s Newfound Clout

Joe Fernandez has a lot to celebrate.  His online influence measurement startup, Klout, is enjoying both explosive growth and the kind of attention that many startups can only dream about. It’s no wonder that last month, San Francisco-based Klout was handed $8.5 million in financing led by none other than Kleiner Perkins. The round, which also included capital from Greycroft Partners, brought the two-year-old’s financing to $10 million.

So what’s the problem? With attention comes criticism, and sometimes lots of it. A common complaint about Klout — as well as rivals PeerIndex and Twitalyzer — is that frequent tweeting is key to maintaining a high influence rating, while truly influential people don’t necessarily tweet all day, if at all.

This week, criticism has seemed to intensify, with Klout first lambasted for assigning clout to spam bots, then called out for awarding high “influence” scores without factoring in sentiment, as was recently the case when designer Kenneth Cole used the Egyptian protests to promote his spring line.  (Cole’s tweet, universally slammed in retweets, roughly doubled his Klout score.)

I talked with Fernandez last night about how Klout is dealing with such appraisals, Klout’s particularly close relationship with Twitter, and why establishing Klout’s clout has been double-edged. Our conversation has been edited for length.

You’ve been in the news a lot lately. Were you ready for so much attention?

It’s kind of hard to hold on. They always say it’s a good problem to have, but you have to kind of adjust. And we’re a young organization, and when [employees] read blog posts that say that Klout is the worst thing ever, as a leadership team, we have to say: “Hey, guys. This is a lightning rod for controversy. But we know what our system issues are and what challenges we face and we have to stay focused.”

People seem to love or hate the company.

Because we’re talking about influence, which is kind of a weird thing. It’s something that people see through their own lens, like love or jealousy, but we’re putting data behind it and making it a standard. And influencers who have high scores want to talk about us, which is just making us bigger every day.

When do you think you reached the point of establishing real clout yourselves?

The first time I remember thinking, wow, was when Britney Spears’s manager called us and came over to talk about improving her Klout score. The Kleiner [funding] definitely changed things, too. After that, any kind of sympathy people might have had for us as underdogs went out the window.

Now people see us as doing something you have to pay attention to, and we have to accept what that means. We can’t have spam accounts with high scores. Journalists want to talk about it. The repercussions are very different than they were.

Klout’s algorithm incorporates inputs from Twitter, Facebook and LinkedIn. What can you say about how it prioritizes what it gathers from these very different platforms?

We know that everyone is very different. I’m way more active on Twitter; my girlfriend is way more active on Facebook. We weight whichever platform you’re most active on.

And we look at all the networks differently. If you try comparing them with each other, you end up with these currency exchange calculations that don’t really work. LinkedIn, for example, isn’t transactional in the way that Twitter is, and, to an extent, Facebook is. But it gives us context. If you’re not active on Facebook or Twitter, but we see that you’re a VP at Boeing, you’re probably influential in aeronautics, and that’s a good thing for us to know.

By the way, we’ve been tracking LinkedIn for several months but we’re not showing in on the public site yet. We’re still crunching data behind the scenes.

Yesterday, a blogger pointed out the very high score Klout assigned a spam account called Bieberrrr. How big an issue is this for you?

There are spam accounts on Twitter that end up with high Klout scores and sure, that makes us look really bad. But you can see how hard it is. That account has been alive for days, if not weeks, and Twitter hasn’t shut it down, and they have a hundred times the resources and employees that we do. It just shows how hard detection is. We’re constantly changing the algorithm, and the hope on our side is that those results don’t come up again, but spammers change fast, too.

In a widely read post this week, analyst Jeremiah Owyang observed that Klout scores are incomplete without sentiment analysis. Could there come a day when you’ll involve employees in assigning Klout scores, rather than simply relying on your computer-generated algorithms?

I can’t see us ever having human intervention. There’s some stuff we’re thinking about where people can kind of give some feedback – like if you’re a fan of Jeremiah and think he’s more influential than we say he is, you could let us know. But it’s not our intention to curate internally or have employees massaging the data.

We’ve had the conversation about sentiment analysis, and our decision in the past was: love or hate somebody, if they’re causing a huge amount of interaction – like Glen Beck, who is equally loved and hated – they’re influential.

The Kenneth Cole thing was something where an account got attention really fast for something that was universally viewed as negative. So I get [the complaint that his score rose]. But  people are paying a lot more attention to that account now, waiting to see if there’s another screw-up. Also, the score is on a rolling, 30-day timeline. So you should be seeing a downward slope [in the account’s score] as all that attention dies down.

You’ve already meaningfully changed your algorithm at least once, last fall. Why?

Well, our algorithm changes almost every day. But we had a really big change driven by what we’re seeing on Twitter, which is that people are increasingly using it as a chat room, where there’s this back and forth conversation about nothing. One person says, “Good morning.” Another says, “Thank you.” If you go more into the long tail, there’s a lot of junk. And we decided not to count all that stuff. The idea was that people who are more influential don’t participate as much in those meaningless conversations.

How are you making money? You have something like 1,500 corporate clients right?

We have more than 1,500 using our API, and they use our data on their Websites but give us attribution. The Huffington Posts uses our data. So does Hootsuite and CoTweet. Those are one set of customers using our API. But we’re not charging most of them – only a couple of the very biggest companies. Then six months ago, we also began working with brands like Virgin and Disney and those guys do pay us to make connections to people who are influential.

They pay you for names?

We never give them names. We email people who have registered for Klout. And then we email only people who are influential about topics that are relevant to that brand. For Nike, that might be people who are influential when it comes to running. And we offer those people something on behalf of the brand. The brand pays us upfront to reach out to X amount of people.

We’re doing one for the newest Matt Damon movie, where we’re emailing people, and they may take free tickets to see it. But we tell our users that we’re simply giving them [these tickets], that they can say they love [the movie] or hate it or say nothing at all. We’re just seeing what can happen if we put people in the right situation, and that’s what we’re reporting back to the brand.

What are you seeing so far?

It’s still very experimental, but our users really love it. They love being acknowledged by the brands and they like getting to participate in cool activities. We’re still figuring everything out. There’s still a lot to learn and a lot of challenges out there. But it’s showing early promise.

If it works well, isn’t is possible that Twitter will develop its own way of measuring authority?

We have a strong relationship with Twitter. We used to be in the same office; we share investors with them. The feeling, from my perspective at least, is that this is a little like Zynga, riding on the back of Facebook. Hopefully, we have that kind of [mutually beneficial] relationship. The truth is that people can only have a high Klout score if they’re really engaged with Twitter, so right now, Twitter thinks we’re great. Down the road, who knows, but we’ll take the honeymoon while we can.