Tesco to Buy Social Marketing Pioneer BzzAgent

Primordial social marketing firm BzzAgent will be acquired by Tesco subsidiary Dunnhumby for a reported $60 million, the companies said today.

BzzAgent will operate as a standalone subsidiary of London-based Dunnhumby, which provides consumer loyalty and personalization services to some of the world’s largest retailers.

The BzzAgent system, first developed in 2001, provides free product to a network of “agents” who then talk them up – usually in a positive way. The Boston-based firm claims to have 800,000 word of mouth soldiers in its network. Over 10 years these volunteer endorsers, it says, have worked on more than 2,000 programs for 500 clients. Their advocacy often happens online, but can also include orchestrated social gatherings, in-store conversations, and chance encounters.

In 2004, a high-profile takedown (subscription required) in The New York Times accused BzzAgent of undermining the organic conversations about products that help people make everyday buying decisions. Partly in response to that article and similar complaints, including one by consumer watchdog Commercial Alerts, BzzAgent revised its code of conduct to hold its agents to a higher standard of disclosure.

Dave Balter, BzzAgent’s CEO and founder, will continue in that role and will also join the Dunnhumby executive team.

“Together, the companies will use the power of peer influence and word-of-mouth to improve customer insights and product sales for consumer goods companies and retailers,” the two firms said in a statement.

Dunnhumby parent Tesco is a mammoth supermarket and merchandise chain. With 2009 full-year revenues of $87.8 billion (£62.5 billion) in revenues for 2009, it is the third-largest retailer in the world in terms of revenues, behind only Wal-Mart and French Carrefour, according to Deloitte.

Its business is primarily in Europe and Asia. U.S. operations consist of 145 stores, compared to 2,482 in the U.K. alone.