The Art Of Google’s Deals

    November 28, 2005
    WebProNews Staff

In Silicon Valley and elsewhere, the technology startup process works like this: have an idea, innovate, develop, test, test it some more, get some venture capital, and pray that Google acquires the company.

Where Web 1.0, if it can even be called that, sought to get companies an IPO on Wall Street and inhale billions of dollars of investor cash, Web 2.0 might be the shift in focus. Several rumors swirled about Google buying Riya, a facial-recognition technology maker, for $40 million even before the company officially launched.

BusinessWeek calls it “Googling For Gold,” and no wonder. The search advertising company has about $7 billion in cash and a market capitalization of $126 billion, give or take the changes in the stock price.

But waiting for Google may not be a wise strategy for new technology firms. They’ve shown little interest in spending money. The BusinessWeek article noted how Google was interested in Skype, but not for the billions of dollars Skype’s owners eventually got from eBay.

Google doesn’t really rush anyway. Only recently did the company merge its Local and Maps tools, and remove the beta label from those products. Google News has held onto its beta label for some time, though the only real change they seem to have made was an algorithm change that heavily favors the biggest news sites online.

As for potential dealmaking, BusinessWeek cited Google’s views on that when the company prepared to go public in 2004:

“We would fund projects that have a 10% chance of earning a billion dollars over the long term,” wrote founders Sergey Brin and Larry Page. And then they added: “Do not be surprised if we place smaller bets in areas that seem very speculative or even strange. As the ratio of reward to risk increases, we will accept projects further outside our normal areas, especially when the initial investment is small.”

David Utter is a staff writer for WebProNews covering technology and business. Email him here.