Google Acquisitions: Who's Next?

Rich Tehrani has a good article speculating on which companies Google may be interested in buying next. His educated guesses include Skype, Red Hat, Oracle, Adobe and WebEx.

Let's look at Google's acquisition history to date.

Their first acquisition was at the beginning of 2001. They bought the Usenet archive from Deja and renamed it Google Groups. The Usenet archive was started in 1995. It's basically the Internet's largest forum about all conceivable topics. The archive already had 650 million messages when Google acquired it. This archive is an incredibly rich source of information. If for example, you are doing competitive corporate research this should be the first place you go for the latest tips and gossip from people in the know. If you're wondering about the efficacy of a certain VoIP product relative to competing products for example, check out what people are saying here. Or, if you've got any passionate (and also possibly obscure) hobbies, you are bound to find tons of information from people worldwide who share your interests here.

In 2003 Google scooped up Blogger from Pyra Labs. There are probably at least one million bloggers and five million blogs being hosted by the free Blogger blogspot.com service. Blogger is the leader in blogging market share now. There is a lot of potential to create massive revenue generating opportunities with Blogger. (See my previous note on this.)

In 2003 they also acquired Neotonic Software, Applied Semantics, Kaltix, Sprinks and Genius Labs. In 2004 they bought Ignite Logic, Picasa, Zipdash and Keyhole. They also made a minority investment in Baidu.

This year they've acquired Urchin and Dodgeball.

Check out some good analysis of Google's acquisitions by Andrevan and Rifkin.

We are due for a big Google acquisition soon. Most of the companies Google has bought to date have been tiny companies with very bright ideas. Google has scooped them up for cheap. Might they break this pattern by making a large acquisition outside the fold over the next year?

Renehan doesn't agree with me. He phrases it eloquently in his blog. I like his term "brainiac":

"A major acquisition is not afoot. Google has never purchased market-share, and never content. They've always purchased technologies, knowledge, tools, expertise, and brainiac staffs - usually at bargain prices.

But Google recently announced plans to raise over four billion dollars in new capital. Some of this money is bound to be used for acquisitions.

My guess is that at least some of Google's acquisitions over the next year will be based on wanting to diversity their revenue base. Almost 100% of their revenues are now derived from their exorbitantly successful online advertising offerings. Any acquisition or investment in a technology property that ensures their market lead in the online advertising world will continue to be their first priority.

But it would also make sense to try to cash in on their huge new blogger base. The majority of bloggers are young people under 25 years old. These people could make wonderful loyal life-time customers. It would make sense for Google's Blogger to start offering fee-based services to these people as they are ready to go beyond Blogger basics.

This is why I think they may buy a large hosting company and domain registrar in the near future. Perhaps Go Daddy would make a good candidate. Sure this is an unapplealling, low-margin, mostly customer-support and call-centre-based business. Very unlike Google. But there would be so many profitable synergies there for Google. Go Daddy is the world's largest domain registrar company and the third largest web hosting company. They host over four million websites now. According to Rich Miller, "Go Daddy's primary marketing plan could be characterized as selling as many domains as it can, and then upsell shared hosting or dedicated servers to its domain customers."

The Go Daddy Group is still a private company. It's growth rate has been phenomenal. It's been listed as the fastest growing technology company on the Inc. 500 List of America's Fastest Growing Private Companies. The company was founded by Bob Parsons in 1997. Parson's previous company (personal finance and tax software) was acquired by Intuit in 1994 for $64 million.

Everyone speaks of Go Daddy's successful Super Bowl Ad campaigns. But their remarkable growth has probably had more to do with them being one of the most aggressive banner advertisers on the web. They were one of the first to see how cheap CPC campaigns can be, and their online campaigning has been very effective.

Go Daddy is a private company and does not have to release financial figures, but according to Parson's blog, revenues in 2005 should be about $170 million. Profits are probably still slim and Parson may possibly be ready to sell for the right price.

But Go Daddy and Google seem to have very different corporate cultures based on their leaders values and personalities. Major revamping would be necessary. Maybe it would be easier for Google to buy one of Go Daddy's competitiors instead.

Google is also falling behind on blog-tracking services as compared to MyYahoo and MyMSN. Some of the other companies that look like very ripe acquisition targets in this space include Technorati, IceRocket, Feedster, Feedburner and Findory.

Update: in Mid September 2005, Google launched their new Blog Search service.