Google has a reputation as an innovative company, but in fact it owes a lot of its success to acquisitions.Google basically bought AdSense, the paid search platform that made it a financial powerhouse, from Applied Semantics in 2003.
In addition, three of the four non-search businesses that Google has identified as its future — YouTube, Android, and display advertising — were acquired and run more or less independently today. The fourth — enterprise apps — was helped greatly by the acquisition of Postini.
There were also plenty of acquisitions that never paid off. Google is not as bad as Microsoft in this respect, but it does have a couple of embarrassing $100 million mistakes.
Join us as we count down Google’s top 15 acquisitions by value and show what happened to them.
Last October, Google M&A chief David Lawee called the 2005 acquisition of Android -- the mobile phone platform started by ex-Danger leader Andy Rubin -- its 'best deal ever.' Only two years after launch, Android has become the second-most-popular mobile platform (after Nokia's Symbian) in the world, with almost 25% share. Android doesn't generate direct revenue, as Google gives the OS away, but it provides a built-in userbase for mobile search (and mobile advertising), which Google recently said was contributing more than $1 billion a year.
Google paid about $50 million for social search Q&A service Aardvark in February 2010, but hasn't really done much with it -- answers aren't integrated into Google core search results. It's still a standalone service offered through Google Labs. In the meantime, competing Q&A site Quora has built a lot of buzz, although it serves a slightly different purpose than Aardvark, which is focused on answering questions with local relevance.
Google bought this mobile-payment platform in August 2010. Onlookers assumed it would be part of Google's social networking efforts. In fact, the team was put to work on in-app payments, and earlier this month Google said it would shut down the Jambool Social Gold service in May, and replace it with its own in-app payment system.
Google bought this ad technology company last June, making its 24-year-old founder Nat Turner a young millionaire. Invite is a demand-side platform (DSP), which helps ad buyers place their wares on ad exchanges, and hasn't yet been integrated into Google's other ad-buying products. Google recently wrote a blog post explaining when advertisers should use Invite versus the Google Display Network
In Jue 2007, Google paid $100 million for this company, which creates tools for advertisers and users to manage RSS feeds. It's still around, but RSS has become less interesting in the wake of Twitter -- which is now run by former Feedburner founder Dick Costolo.
David Lawee may think Android is Google's best acquisition, but from a pure ROI perspective it's hard to beat Applied Semantics, which built AdSense -- the paid search advertising platform that's still responsible for most of Google's revenue and profits.
This one was a mistake: in 2006, Google paid $102 million for this platform for automatic placement of radio ads, and offered a whopping guarantee of up to $1.1 billion based on performance. But the business never took off, and Google shut the program down in mid-2009.
Google tried to buy this video compression company for $106 million, but its shareholders held out for a higher price and eventually got $133 million in January 2010. Last summer, Google announced it would open-source the VP8 video codec it acquired with On2, and rename it WebM. Google has since tried to push WebM as a replacement for H.264, a much more widely used standard for Web video.
Google bought the social gaming company behind SuperPoke last August for $228 million (the price was originally reported at $182 million). Slide still operates but Slide founder Max Levchin has reportedly been working on secret new social initiatives.
Google bought this company in June 2007 and integrated its add-on email services, like spam-blocking and archiving, into Gmail for business users. It's been a critical part of Google's enterprise apps business ever since.
Google made a $700 million bid for ITA, which compiles flight information for airlines, travel agencies -- and rival search engines. The bid garnered complaints from competitors who rely on ITA's service, including Microsoft (Bing) and Kayak, and the U.S. Department of Justice is reportedly considering blocking it.
Android is all about increasing mobile search usage today, but Google hopes to make mobile advertising in general into a huge business. That's why it paid $750 million for AdMob in November 2009. Since then, however, AdMob execs have left -- including former CEO Omar Hamoui (pictured here) -- and sources have said the integration isn't going so well.
It looks like a no-brainer now, but when Google bought the video-sharing service in 2009, it was a huge risk: YouTube was full of copyrighted content that users uploaded without permission, and faced potentially billions in lawsuits. Google skillfully negotiated contracts with content owners and instituted a reasonable takedown policy, and as a result YouTube has thrived -- analysts estimate it's now profitable and earns more than $1 billion a year. This year, Google is increasing headcount by 30% and is hiring tons of new ad sales people.
The 2007 acquisition of DoubleClick launched Google into the display advertising business. It's been a mixed bag. Google boasts that it's making $2.5 billion a year from display, but about $1 billion of that is from YouTube. Also, display advertising isn't nearly as profitable for Google as its core search advertising business. Still, display advertising is a big business, and Google has to be in it. Buying DoubleClick was a lot faster and easier than building a display business from scratch.
Daily deals sites are the big new wave in online advertising, and threaten to replace a lot of small business search spending. Google tried to get on top of the trend by making a $6 billion offer for category leader Groupon, but the company's founders decided to go it alone. That looks to be a good move: earlier this year, reports came out that Groupon is planning a $15 billion IPO.
Despite a few misses and integration headaches, Google has a much better acquisition record than its deep-pocketed rival Microsoft.
That's probably most clear in the mobile space -- Microsoft bought Danger for a reported $500 million and squandered it, while Google bought Danger founder Andy Rubin's next project, Android, for one-tenth that price and turned it into the second-biggest mobile platform in the world. But there are other examples as well, like DoubleClick versus Microsoft's $6 billion aQuantive acquisition.
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