Thursday, May 10, 2007

Google Acquisition Style: Small As Well As Big

Google has recently made some major acquisitions:
Google paid $1.65 billion to acquire video-sharing site YouTube in November, it's biggest deal at that time. Then, a month ago, it announced a $3.1 billion deal to buy DoubleClick, which offers advertising delivery technology and services.
However, the Reuter's review of Google's recent acqusitions and executive pronouncements also reports that Google "still sees small technology deals as its primary thrust for buying businesses."

Looking into Google large acquisitive actions in the market make, one would conclude that Google sees itself primarily as a company that supplies content (through search or otherwise) and advertising space. Big acquisitions are meant to protect this turf. The big acquisitions seem to be saying that Google might use technology but is not about technology alone, just as neither Amazon nor eBay are simply about technology. So, it is a bit odd when Eric Schmidt, Google's CEO, reiterates "Google's oft-repeated stance that it sees itself as a technology tools maker, not a media content owner."

All these businesses are using technology to provide some very traditional services, which can be provided at lower transaction costs but higher volumes on the digital world-wide web.

However, the smaller acquisitions are rampant:
"In the past, we would buy businesses in lieu of (hiring) engineers," Schmidt said. These days, Google buys a start-up once every few days, or around one a week, he estimated. Two examples of this approach -- Keyhole (Google Earth) and Urchin (Analytics) -- had strong technical teams, a technology head start, and were bought relatively inexpensively in the hopes of later generating billion dollar revenue streams, he said.
That makes it more clear.

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