Google offered $2.5-$4 billion to buy Twitter a few months ago, Nicholas Carlson reports.
Google should buy all these leading companies–and more.
Google has cash coming out of its ears, and the cash is currently doing the company no good whatsoever. Google has $30 billion in the bank. It’s earning next to nothing. Google generates another $2 billion of cash each quarter, or $10 billion a year. Google could buy Groupon, Twitter, and Foursquare for, say, $10-$15 billion in all. Google shareholders would never miss the cash–not for one second. And Google would then own the leading companies in three potentially huge new businesses, none of which Google is currently in.
Google’s core business, search, is maturing, and despite a lot of excitement about display ads, Android, YouTube, etc., Google’s other businesses are still a rounding error. Groupon is already generating $500+ million of revenue a year. Twitter and Foursquare could become massive new businesses, especially with Google’s help.
Some of these businesses–and, more importantly, Facebook–could eventually become competitors to Google’s core business. Google needs a local and social strategy, and it would benefit from having a commerce strategy. In addition to growth engines, therefore, these businesses could help protect Google’s dominance from new competitors.
There’s very little downside risk: If Twitter and Foursquare and Groupon ended up being worthless (unlikely), Google would just take a meaningless write-off. Some journalists and Twitter-pundits might snicker at Google’s “stupidity,” the way they snickered at Google’s “stupidity” in paying $1.7 billion for YouTube (great deal) and Microsoft’s “stupidity” in investing in Facebook, etc. But whatever. That’s a small price to pay for owning the top companies in several exciting new categories.
History has shown again and again that buying the No. 2 or No. 3 player in online categories is usually a much worse move than paying up to buy No. 1. Groupon, Twitter, and Foursquare are No. 1s, at least for now.
Google sucks at social, and it has never done anything in commerce or, really, location. Thus, if Google buys these companies and doesn’t screw them up (not a given), Google will suddenly add competencies that so far it has been unable to develop internally. Again, that’s worth paying up for.
Google’s spending big bucks to move into social, commerce, and location-based services is VASTLY smarter than some of Google’s other bizarre investments, such as wind-farms and self-driving cars. These businesses are complementary to Google’s core business and close to its core competency. Wind farms aren’t.
The bottom line: Google has way more cash than it will ever need, and the cash is a competitive weapon. Instead of just letting that cash sit around and earn peanuts, Google should convert the cash into potential future growth engines. Google can afford to buy companies that other companies can’t–and it can afford to pay top dollar for them. If all the bets don’t pay off, whatever–Google has way more cash than it needs. And Google’s investors are invested in the company in the hope that it will one day pay out the cash as dividend.
So just write the checks, Google. Be bold. The time is now.
See Also: “My Nightmare Interviews With Google”