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article imageGoogle buys a start-up once every few days, or around one a week

By Chris V. Thangham     May 12, 2007 in Business
Google CEO Eric Schmidt says Google purchases a new start up once every few days or one a week.
"Google buys a start-up once every few days, or around one a week, Schmidt estimated" comes from an eWeeek article recapping a Google reporter briefing earlier this week.
Allen Stern of Center Networks says this is a typical response of a Fortune 100 company; they never keep too much cash reserves with them. They either buy a stock buyback, capital expansion or acquisitions, so he says the cash always goes into that form. It is sort of like investing; one would want a higher rate of return than a simple savings bank interest. Here are some of the list of companies Google owns now, many of them were acquired.
Google’s purchases YouTube and DoubleClick is talked about a lot, but they also bought many smaller purchases, as Google CEO Eric Schmidt says one purchase a week. Allen says this is a right strategy for a growing company with high cash reserves; it keeps acquiring smaller companies with a significant pool of talent and incorporates them into Google’s. In many cases, almost 100% of the employees in the company Google buys end up working for Google because of the perks given at Google.
Allen Stern is predicting that in 2007 there will be plenty of acquisitions and mergers and would be huge this year with all of the cash flowing around and big companies like Google showing healthy profits. In Internet marketplace compared to industrial companies, it is easy to build a new startup compared to industrial companies which needs larger investment and more time to compete. Internet companies are coming up very quickly in bunches with varying price range.
The bigger companies instead of spending huge money to build it on their own, it becomes easier for them to buy rather than build. So, they acquire companies at a faster rate. But Google is not buying for buying sake; it is adding to its existing core of companies and sees how well the new companies will fit with theirs. Like DoubleClick with its Google Adsense, YouTube with its Google Video, Writely with Google Docs, Presently (a PowerPoint type application) with Google Docs and many more.
Allen says Google will buy at least 2-3 billion dollar acquisitions by end of this year. And other companies will be doing more of the same. The overall internet market will expand since it is easy to start and there are no barriers in Web 2.0 environment.
So overall I still suggest that we will see at least 2-3 billion dollar acquisitions by Google this year. And while acquisitions will be up significantly in 2007, the overall Internet market will expand as the barriers to entry remain close to zero.
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