Why Google’s acquisition of Motorola is very risky

Monday’s shock story was that Google is buying Motorola Mobility, the handset division of Motorola, for a whopping $12.5 billion. That’s a 63% premium and represents a high-risk investment for Google who spent about a third of its cash pile on it.

Google i forsvarsposisjon

The massive acquisition in fact quadruples the $3.1 billion Google paid for DoubleClick in 2007, the second biggest acquisition by Google, and adds 80% more employees (i.e. Google almost doubled). The move was a big surprise which for the first time puts the company squarely in the smartphone hardware — rather than solely software — business.

I’m frankly amazed that the Google stock only declined 1.2% during Monday as a result of the acquisition, because this is in my opinion a very risky gamble. Why? [Update: Dropped another 3.3% during the Tuesday]

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Somehow Facebook’s looking old-school

Almost inexplicably, Google have actually created something really cool in the social space and for the first time in about 7 years Facebook is not the most exciting social network in town. Google+ is.

Facebook’s announcement about being able to video chat to your grandad on Facebook seemed to leave the tech world feeling distinctly underwhelmed. Techies quickly went back to coo-ing over Google+’s as yet hardly discovered features – multi-person video (hangouts), circles and built-in photo editing, to mention just a few. There’s a lot to play with in Google+.

Though Facebook’s new chat will have a big uptake among Facebook users, and probably greater impact in terms of numbers of users than Google+, with its currently limited expert/techie user base. But that techie user base is an important one, because they talk so much.

Considering things, it could be Twitter that’ll see a punch from Google. With sharing and following being highly customisable, you can have Twitter-like functionality, allowing you to see the updates from people that are interesting to you, such as celebrities, politicians, photographers, and so on. Though Google+ may be just a tad too complicated to get the average celebrity on board… But it might just be a matter of time!

Research shows that we enjoy being in tighter networks, or tribes if you’d like, on average not more than 150 people in total (which is quite a lot less than the number of “friends” people have on Facebook, for example). So if Google+  lets us interact with select tribes with more ease  and customise to whom we want to share what with, I think Google+ really could be a winner – with time, that is.

Google+ is still missing quite a bit of Facebook’s magic. Continue reading

No time to build, so we buy: Markets moving too fast for Google

As news of Google’s attempted acquisition of the daily deals site Groupon ricocheted around the Web, one big question loomed large: Wouldn’t it be easier for Google to build a similar service than pay several billion dollars for Groupon?, reports The New York Times.

Not really, said Susan Wojcicki, a senior vice president for product development at Google who oversees the company’s advertising products. Wojcicki was one of the featured speakers on the second day of the D: Dive Into Mobile event at the Ritz Carlton Hotel in San Francisco.

“It’s hard to assemble a team and organize as quickly as you want in these situations. Finding the right people, interviewing them and hiring them takes time. Companies are willing to pay a premium to be in the market right now. You’re buying people with expertise and learning about new markets.”

The move by Google represented its interest in cracking the local advertising market, which Wojcicki said would continue both by efforts within the company and perusing the market for potential acquisitions.

There are two reasons why Google and others are willing to pay a premium to be in the market ‘right now’:

  • the leading company in most segments of the web is worth much more than the second player – these are winner takes all markets, and once the leader is established it is hard for anyone else to catch them
  • these markets are developing so quickly that large companies are often unable to start playing early enough to take a meaningful position without acquisition.

Google would have plenty of competition in a rapidly accelerating market if entering local advertising and deals, as Foursquare continues to develop its base and rival for internet dominance and Facebook recently implemented similar location-based technologies to offer its users discounts when ‘checking in’ to establishments.