What Do Google's Acquisitions Reveal About the Company's Strategy?

The year is 2001, and online business Deja is floundering as its once-profitable business of hosting Usenet archives becomes swamped with take-down notices and copyright violation orders. Google, a young company starting to make waves in the online search world, offers the struggling Deja and its waning Usenet community a lifeline, taking over the company and releasing a press release promising to service the needs of the community as best they could.

Although Google wrote a Usenet interface from the ground up, their promise did not stand the test of time and in 2008 Usenet died a symbolic death when the birthplace of the service, Duke University, decommissioned its Usenet server for good. However, nurturing the Usenet community was not the only promise made by Google in that 2001 press release. Omid Kordestani, then VP of Google’s business development, assured the world that "We will continue to build and acquire the necessary technologies to provide the best search experience to millions of Google users worldwide."

Hundreds of acquisitions of “necessary technology” later, it’s hard to argue that Google hasn’t kept its word. Laying claim to businesses ranging from package delivery systems to speech synthesis software, airborne wind turbines to video compression services, Google has bought an enviable arsenal of technologies with which to supplement its key products and services.

With this in mind, here we look at three of Google's key products, the acquisitions that formed them, and what these case studies tell us about Google's growth strategy.

Google Maps

Google's interest in mapping software was first noted upon the release of its 2004 annual report, which quietly made public Google's acquisition of two companies: the GPS-based traffic data provider ZipDash and a small Australian company called Where2. The latter had developed an intriguing C++ application that eventually became the basis for the in-browser, Ajax-powered Google Maps that we know today.

Google Maps’ (and Google Earth’s) 3D mapping functions were also acquired externally when, in 2004, Google bought Keyhole Incorporated. Contrasting their previously low-key purchases, Google grandiosely announced this takeover, stating, “With Keyhole, you can fly like a superhero.”

With these three key pieces to the puzzle in place, Google launched Maps in February 2005. However, it did so with very little fanfare, a one paragraph press release was deemed sufficient.

In the years that followed, Google maps was complemented with the purchase of aerial mapping company Endoxon and Israeli company Quiksee, who specialised in user created virtual tours and added to Google's street view service.

Google’s low-key approach to its mapping technology takeovers suggests that the bigwigs were keen to give the impression that Maps was born solely from minds of Google HQ's own engineering staff. This is an often overlooked benefit of acquiring smaller firms or ones that don’t have a fully released product, a benefit that Google has frequently reaped the rewards of since. The only acquisition that was actively advertised by Google at the time of its map acquisitions was Keyhole, which was also the only acquisition that already had a reasonably well known product. A necessary sharing of the limelight it seems.

YouTube

Google’s whopping $1.65 billion purchase of YouTube in 2006 shocked analysts and observers. The assumption was that the hefty price tag stemmed from Google desire to simply integrate the video sharing site with Google’s ad and search platforms and watch the money pour in. No major alterations, just a cash cow. As Forbes put it at the time: “Why buy YouTube? Why Not?”

These assumptions were proven to be incorrect however, as Google picked up another seven companies and their associated intellectual properties to bolster YouTube's services. Only three of those deals had their value publicly released, but those three alone totalled a cool $158 million.

Omnisio was arguably the most significant of the purchases, as it allowed users to annotate online video and splice sections of video together. These two features are now synonymous with YouTube and its user's creative process.

Google also focused on the more “behind-the-scenes” aspects of the platform, acquiring video monetisation service Episodic and a collection of video post-processing algorithms from Green Parrot Pictures.

What does this tell us about Google? Some would see it as a sign of corporate laziness, a company that would rather buy out a business than design its own service. This however is highly unlikely, especially considering the confidence Google seems to have in their own employees. Why would a company that spends $72 million a year on employee food benefits alone (never mind what they spend on haircuts, massages, golf buggies, and onsite doctors for their pampered personnel) then spend further billions acquiring the work done by employees of a totally separate company? To imply that Google's acquisitions are made out of laziness, is to imply that most of Google's employees are kept merely as a human zoo, furniture for the Googleplex. It simply doesn’t make sense.

What does make sense is that Google simply has a great respect for passion and talent -- the company's juice budget alone is testament enough to that. Even with the incredible human resources already at its disposal, Google would rather acquire an external business with true passion for their product than attempt to emulate that passion internally.

Google Docs

The true origin of Google Docs can be found at a rather more humble company known as Upstartle. Upstartle had a single product, an online word processor called Writely, and was purchased by Google in 2006.

Google Docs' spreadsheet functionality was also purchased, this time from a firm called 2Web Technologies. The presentation software was sourced from two separate Google acquisitions: Tonic Systems, which provided the system under the hood and Zenter, which contributed the UI and social features.

The lighting bolt that really brought this Frankenstein's monster of acquired software to life, AppJet, was founded in 2007 by two ex-Google employees. AppJet, and more specifically its product EtherPad, allowed multiple users to make edits on a single document in real time, the true cherry on top of the Google Docs cake.

When looking at the way Google pieced together the technology behind their acclaimed Google Docs web app, “the main things that stands out is the interesting choices Google made when deciding which software firms to acquire” said a spokesman for More Than A VDR, an expert on digital acquisitions and the software that helps make them happen. “Generally speaking, it seems that they stayed away from firms that were seeking to emulate the super professional look and functionality of MS Office and instead focused on smaller and less ambitious firms providing pick up and play UIs.” This tells of a Google that seeks out startups while they are still small, malleable, and able to easily adapt their culture to suit the things Google knows to be true.

Google's acquisitions related to Google Docs are also great examples of the company's tendency to hand-pick firms that share Google's "big picture" vision for the end result of a product. Rajen Sheth, then senior product manager for Google Apps, spoke about the direction Google was taking when designing its Docs applications, a direction that was mirrored by almost every acquired business involved in the product: “We think that 90 percent of users really use only 10 percent of the functionality (of MS office). We put a lot of time and effort into figuring out what that 10 percent is that people use and how to build that into Google Docs."

The Future

Several key conclusions ring out when looking at Google's acquisition history. The Big G clearly have a great respect for passionate, talented teams and a strong focus on user experience. Google would rather work with companies creating inclusive and universal products as opposed to specialised software designed to be used and understood by the minority. Google also seems to have a tendency to acquire small and malleable startups which won't struggle to adapt its culture to fall in line with Google's way of thinking, adjusting their output to be immediately recognisable as a "Google product."

Out of all of Google's products, it seems to be pumping most of its acquisition budget into its mobile offerings and, more specifically, its Android OS. During 2012, approximately 33 percent of Google's disclosed acquisitions were related to Android and mobile products and since it first disclosed acquisition in 2001, almost 20 percent have been related to mobile technologies. This is understandable, especially considering that users accessing the web on mobile devices are set to overtake those using static hardware by 2014.

Within the mobile sector, Google has focused its acquisition crosshairs on a wide variety of companies, each offering their own little piece to Google's ongoing quest to stay ahead of the mobile revolution.

Google Now is one of the mobile products that is getting a new lease on life after the acquisition of social data analysis and behaviour prediction firm Behavio in April this year. Behavio's Funf technology would allow Google Now, a product which offers users helpful information "cards" (suggested content based on the content of the user's emails, calender appointments, and general device usage) to improve the quality of content it delivers by collecting and interpreting data collected by mobile devices in new ways. This hints that Google Now data collection will be a priority for the programmers of future android versions.

Another mobile acquisition Google made this month is data transfer app Bump. Bump uses the accelerometer sensors from your smartphone to detect which two users have "bumped" their phones together and sends the data they are trying to exchange to the appropriate devices. Google's purchase of this company, one which by all accounts seems to have been shedding users, is another example of Google's interest in sensor-based technologies, bridging the gap between the physical and the digital world and ensuring that a device really knows its user. Acquisitions related to image recognition, smart watches, and facial recognition as well as another behaviour detection and recommendation app called Alfred (provided courtesy of Clever Sense) are all telling of a company looking to give mobile devices the power to truly "know" their user like never before.

As Google continues to trawl for startups to incorporate into the Google family, be on the lookout for acquisitions that help Google turn phones into devices with a full range of senses. Phones that can see, hear, and touch the world around them to become less like a tool and more like an assistant, helping users before they are even ask to be helped.