The Top 8 Game-Changing Acquisitions by Google
Note: This post was first published on Aug 19, 2013.
From its humble beginnings as a search engine, Google has evolved into a diverse Internet giant, offering services like video sharing through YouTube, social networking via Google+, navigation with Maps, emailing with Gmail, the Chrome web browser, and the Android mobile OS.
Google’s transformation into a tech powerhouse is largely due to its over a hundred acquisitions. Many of these acquisitions have either grown independently or have been seamlessly integrated into Google’s expanding suite of products and services.
While some acquisitions led to product discontinuations, Google greatly benefited by incorporating the acquired talent into its team. Interestingly, spending a hefty sum does not always guarantee success. For example, Google’s $12.5 billion acquisition of Motorola Mobility hasn’t been as fruitful as expected, as noted in this Forbes article.
This post highlights eight crucial acquisitions that have significantly shaped Google’s current and future success.
1. Applied Semantics
- Acquired on April 23, 2003
- Cost: $102 million
Originally known as Oingo, Applied Semantics was a key player behind the technology that powered AdSense. Google AdSense revolutionized online advertising by allowing publishers within Google’s network to automatically display text, image, video, or interactive media ads. These ads are smartly tailored to match the content and audience of the site.
How It Works
Before Google’s acquisition, Applied Semantics had developed its patented CIRCA technology (Conceptual Information Retrieval and Communication Architecture). This technology enhanced the efficiency of information retrieval from websites by understanding, organizing, and extracting relevant information.
AdSense, a product of Applied Semantics, uses advanced algorithms to comprehend the context and main themes of webpages, relating them to specific keywords.
With the acquisition of Applied Semantics and its CIRCA technology, Google not only improved its ad targeting but also enhanced its search engine’s ability to find information based on meanings and concepts, rather than just keywords, as detailed here.
Success!
This acquisition was a turning point for Google, helping it outshine Yahoo!, its main rival at the time. Google rapidly grew into a search engine leader and a dominant force in the advertising world.
By the last fiscal quarter of 2012, as reported by Google, AdSense generated $3.44 billion in revenue, contributing over a quarter of the company’s total earnings.
2. Picasa
- Acquired on July 13, 2004
- Cost: under $5 million
Google’s acquisition of Picasa marked an important step in enhancing its photo publishing capabilities, especially on Google’s Blogger, which was acquired from Pyra Labs. Shortly after acquiring Picasa, Google made this comprehensive photo management tool available for free, later integrating it into Google+ in 2011.
What It Does
Picasa, now a standalone photo management tool, offers basic photo-editing features and is closely integrated with Picasa Web Albums on Google+. It’s become popular among online photo enthusiasts, competing with platforms like Flickr and Photobucket, and serves as an effective backup tool for smartphone photos.
How It’s Doing So Far
Linking Picasa with Google+ was a strategic move to compete in the photo-sharing space dominated by Flickr. Google aimed to attract more users to both Picasa and Google+ through the ease of photo sharing and strong platform integration.
3. Android
- Acquired on August 16, 2005
- Cost: $50 million
The acquisition of Android Inc. was a landmark moment for Google. David Lawee, head of Google’s Corporate Development department, described it as the “best deal ever” in 2010. Today, Android’s success in the smartphone market speaks volumes about the value of this acquisition.
As of 2013, Android OS had become the leading smartphone platform, commanding over 75% of the market share. It rose rapidly from holding 52.5% of the market in 2011.
What It Does
For a detailed look at the evolution of Android OS, see our article. By harnessing the popularity of Android, Google has been able to significantly promote its wide range of products and services.
Together with its acquisition of mobile-advertising startup AdMob, Google ventured into mobile advertising through Android, with ads on Android devices contributing significantly to Google’s annual mobile ad revenue of $1 billion.
How It’s Doing So Far
Android continues to lead in the mobile OS market, outpacing Apple and Windows Phone. It’s also expanding its reach beyond phones and tablets, with plans to integrate into innovative technologies like Google Glass.
4. YouTube
- Acquired on October 9, 2006
- Cost: $1.65 billion
Contrary to expectations, YouTube, acquired by Google, continued to operate as an independent entity rather than merging with the now-defunct Google Videos. Initially, YouTube was primarily a platform for user-generated videos, and it wasn’t generating profits. The cost of maintaining its vast video library was substantial, raising questions about the logic behind this pricey acquisition.
What It Does
YouTube’s growing popularity provided Google with an excellent opportunity for ad revenue generation. This led to the introduction of short ads at the start of popular YouTube videos, a significant source of revenue for the company.
These in-stream ads, which can be skipped after a few seconds, offer valuable insights into viewer preferences, allowing Google to charge advertisers premium rates.
How It’s Doing So Far
Today, YouTube stands as the world’s largest video-sharing website, with projected revenues of $3.7 billion. Morgan Stanley even predicted that by 2020, YouTube’s revenue could reach $20 billion. Considering the investment returns, Google’s $1.65 billion expenditure on YouTube seems to be a wise decision.
5. DoubleClick
- Acquired on April 14, 2007
- Cost: $3.1 billion
Google’s purchase of DoubleClick for over $3 billion was one of its most controversial moves. The acquisition sparked an 8-month investigation by the US Federal Trade Commission (FTC) over antitrust concerns, but it was eventually cleared, finding no substantial threat to competition.
What It Does
Google aimed to combine DoubleClick’s dynamic, multimedia ads with its own text-link ads. The goal was to enhance online ad targeting, serving, and analysis, leveraging DoubleClick’s expertise in display advertising.
DoubleClick was also known for its controversial use of tracking technology, raising privacy concerns due to Google’s access to extensive data on web traffic and user behavior.
How It’s Doing So Far
On June 4, Google announced the launch of a new HTML5 creative development tool, the Web Designer. This tool, integrated with DoubleClick Studio and AdMob, will enable advertisers to create dynamic web ads for free. Additionally, Google plans to integrate DoubleClick with their social media marketing platform, Wildfire, to deepen audience engagement. This integration is expected to significantly boost Google’s display advertising revenues.
6. AdMob
- Acquired on November 9, 2009
- Cost: $750 million
The acquisition of AdMob faced scrutiny from the FTC over antitrust law concerns, similarly to DoubleClick. The deal was finalized on May 27, 2010, after the FTC concluded its investigation. Google outbid Apple for AdMob, with Apple subsequently acquiring AdMob’s competitor, Quattro Wireless, for $275 million.
What It Does
Google saw mobile advertising as a burgeoning industry and sought to expand and integrate it with its powerful search platform through AdMob. AdMob excels in displaying ads on mobile devices and providing analytics on ad campaigns’ performance.
Experts like Ian Schafer believe Google’s primary interest in AdMob was to access usage data from popular apps, particularly those on Apple’s App Store. AdMob’s data provided insights into app usage patterns, ad engagement, and user loyalty.
How It’s Doing So Far
Google’s acquisition of AdMob has been instrumental in launching its mobile display ad business and gaining valuable app usage data. Continuously developing and enhancing AdMob, Google is making significant strides in the mobile advertising arena.
7. Meebo
- Acquired on June 4, 2012
- Cost: $100 million
Google acquired Meebo for $100 million to enhance its social networking platform, Google+. Meebo was discontinued a year later, and its team was absorbed into Google+, with the Meebo toolbar being shut down on June 6, 2013.
What It Does
Meebo started as a browser-based instant messaging service supporting various IM platforms. It later evolved into a tool for web publishers, enabling social sharing through a pop-up feature on web pages.
The Meebo team focused on Google+ integrations, contributing to features like Google+ Sign-In, Badges, +1 recommendations, and Share buttons.
How It’s Doing So Far
While still in its early stages, Google’s integration of Meebo’s expertise into Google+ shows promise in enhancing messaging services and promoting user engagement. This acquisition could mark a significant step for Google in competing against other internet giants like Facebook.
8. Waze
- Acquired on June 11, 2013
- Cost: $1.3 billion
Google’s acquisition of Waze, an Israeli mapping service start-up, for over $1 billion, was its fourth most expensive purchase. Waze is known for its award-winning navigational app and its strong user base of over 50 million ‘Wazers’ worldwide.
What It Does
Waze adds a social layer to navigation by crowdsourcing real-time traffic updates and other road conditions. This approach has enriched Google’s mapping services with valuable social data and community engagement, potentially filling a gap in Google Maps.
How It’s Doing So Far
The long-term impact of Google’s Waze acquisition is still unfolding. However, regulatory bodies like the US FTC are closely monitoring the deal to ensure it does not breach antitrust laws and unfairly enhance Google’s dominance in online mapping.