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“Google buys a start-up once every few days, or around one a week”
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"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.
One of the things I have learned from being on the Fortune 100 side is that large amounts of cash in reserve typically don't remain in reserve. Whether it's stock buyback, capital expansion or acquisitions, the cash must go.
We have watched Google acquire YouTube and DoubleClick most recently as large acquisitions but they also acquire companies that we may never hear about because the purchases are so small. If you need development resources, what better way to get the top talent than to acquire the company to which the talent resides. Since Google is the darling today for employment, it works well for close to 100% of the acquired firms to remain on with Google.
In my 2007 predictions post, I noted that I thought acquisitions and mergers would be huge this year with all of the cash flowing around. When an industrial company is acquired, it can take years (if ever) for another player to enter the market. With these Internet acquisitions, as soon as the details are made public, another twenty startups in that space can appear in days.
The buy vs. build question will go on forever. While there are still good reasons to build first, the buy equation has become much more attractive because there are good candidates in all price ranges. Even if your firm can't afford the YouTube-type acquisitions, there are hundreds (thousands??) of other perfectly acceptable substitutes. Will it get you the same bang? No, but it might fill the gaps that are needed in your organization.
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.