For Startups, Some Good News From Google

Eric Schmidt at Davos. Photo courtesy of World Economic Forum.

Given the state of the startup world, getting acquired by one of the web giants is viewed a preferred way to cash in on one’s labors, and there is none with a bigger wallet than Mountain View, Calif.-based search giant, Google (s GOOG). It seems that the company is looking to open its wallet even wider, and that is good news for web startups.

In its latest 10-Q filing with the Securities & Exchange Commission, Google said that during the first three months of 2010, it bought nine companies for a total of $145 million — a group that includes Docverse and Aardvark. In addition to these nine companies, Google paid $123 million in stock and cash for On2 Technologies and is still awaiting approval for its $750 million offer for mobile ad network, AdMob. But that’s old news. What should matter to startups is this bit buried deep inside the filing:

We expect to increase the number of acquisitions we make in the remainder of 2010 compared to 2009. These acquisitions generally enhance the breadth and depth of our expertise in engineering and other functional areas, our technologies, and our product offerings.

This is in keeping with what Google CEO Eric Schmidt said in late September 2009: that the company will buy at least one company a month. From a Reuters article at the time:

“Acquisitions are turned on again at Google and we are doing our normal maneuvers, which is small companies…My estimate would be one-a-month acquisitions and these are largely in lieu of hiring,” he said. “There may be larger acquisitions, but they really are unpredictable.”

Now what kind of startups would Google be interested in? I would narrow the focus down to two — mobile and social. The company has made it abundantly clear that its mobile ecosystem is its next big opportunity. See, for instance, its acquisitions of Toronto-based Bumptop that was announced over the weekend, Israeli games company LabPixies and mobile app maker Plink. Similarly, Google will do whatever it takes to keep enhancing the Android platform.

Whether it’s mobile location or some other core mobile technology, if it makes Android better than Apple, Google is going to find a way to buy it. If I was a betting man, I would wager that Google will spend lavishly on startups and technologies that help establish the Google payment platform and bolster the feeble Google Checkout efforts.

Social is where I expect Google to spend a lot of its acquisition energy. As Facebook starts to increase its social dominance over the web, Google is going to respond by buying what it can’t build. Innovative social services, especially those with an infrastructure twist, will be likely candidates for Google.

Now play fair Google, and share your likely acquisition candidates with rest of us.

Photo: Eric Schmidt at the Annual Meeting 2007 of the World Economic Forum in Davos, Switzerland, January 26, 2007. Copyright World Economic Forum. Photo by Severin Nowacki via Flickr / CC BY-SA 2.0.

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