Google Acquisitions: Case Study - Elance

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Case study :

Google Acquisitions





Acquisitions by Google




Company Profiles




Acquisition History (brief of some companies not covered above)




Acquisition analysis




Acquisition Strategy



Overview



Google the promoter



Google the Venture Capitalist




Possible Acquisition targets




Key insights for start ups and small growing companies



Contents

Date
Acquired

Company/Product

Business Area

Value
(USD)

Feb, 2007

Adscape

Video game advertising

$23 million

Mar, 2007

Trendanalyzer

Software

Undisclosed

Apr, 2007

Tonic Systems

Presentation software

Undisclosed

Apr, 2007

Marratech

Video conferencing software

Undisclosed

Apr, 2007

DoubleClick

Online Advertising

$3.1 billion

May,2007

GreenBorder Technologies

Desktop enterprise security

Undisclosed

Jun,2007

Panoramio

Geospatial Photo
-
sharing Service

Undisclosed

Jun,2007

FeedBurner

Online RSS Feeds

$100 million

Jun,2007

PeakStream

Parallel Processing

Undisclosed

Jun,2007

Zenter

Presentations Software

Undisclosed

Jul,2007

GrandCentral

VOIP Phone Aggregation

$45 million

Jul,2007

ImageAmerica

High resolution aerial cameras

Undisclosed

Jul,2007

Postini

Communications Security

$625 million

Sep,2007

Zingku

Mobile social network and
communication platform

Undisclosed

Oct,2007

Jaiku

Activity stream & presence sharing
service that works from the Web and
mobile phones

Undisclosed

Companies/Products acquired in 2007

Date
Acquired

Company/Product

Business Area

Value
(USD)

Jan, 2006

dMarc Broadcasting

Radio advertising software and platform.

$102 million

Feb, 2006

Measure Map

Blog analysis.

Undisclosed

Mar, 2006

Upstartle

Writely, online word processing.

Undisclosed

Mar,2006

@Last Software

SketchUp, 3
-
D modeling.

Undisclosed

Apr, 2006

Orion

Advanced search method.

Undisclosed

Aug, 2006

Neven Vision

Computer vision

Undisclosed

Oct, 2006

JotSpot

Website applications

Undisclosed

Nov, 2006

YouTube

Video sharing

$1.65 billion

Dec, 2006

Endoxon

Mapping solutions

$28 million

Companies/Products acquired in 2006

Date
Acquired

Company/Product

Business Area

Value
(USD)

2005

2Web Technologies

Web
-
based spreadsheet.

Undisclosed

2005

Phatbits

Widgets engine.

Undisclosed

Mar, 2005

Urchin Software
Corporation

Web analysis.

Undisclosed

May, 2005

Dodgeball

Social networking.

$45million

Jul, 2005

Reqwireless

Web browser and Mobile email.

Undisclosed

Jul, 2005

Current Communications
Group

Broadband internet.

$100 million
(partial
investment)

Aug, 2005

Android

Software for Handheld devices.

Undisclosed

Nov, 2005

Skia

Graphics software.

Undisclosed

Nov, 2005

Akwan Information
Technologies

Latin American internet operations.

Undisclosed

Dec, 2005

AOL (5% stake)

Internet.

$1 billion

Companies/Products acquired in 2005

Company Profiles

Postini Inc.



Entity Name:

Postini, Inc.


Year Established:

1999


HQ Location:

959 Skyway Road, Suite 200


San Carlos, CA 9407, U.S.A


Founder:


Scott Petry


CEO:


Quentin Gallivan


Website:


www.postini.com



Acquisition Cost:

$625 million all cash

Basic Facts


With more than 35,000 businesses worldwide as
customers. Postini processes over 1 billion messages
per day, giving the company an incredible pool of
intelligence on what is happening on the internet, This
enables them to stay ahead of their latest tactics and
to proactively protect their customers from even the
most advanced attacks.

Postini invented the software as a service (SaaS)
approach to providing communications security and
compliance, and holds two fundamental patents in the
space, with more patents pending.

The companies "stateless" architecture and redundant
global data centers are backed by certifications such
as SAS 70 Type II, WebTrust, and the Department of
Commerce/UE Safe Harbor. The Postini Message
Center is available in 14 languages, with service and
support available 24x7 worldwide, and proven
99.999% reliability.

As an on
-
demand service, there is no software or
hardware to buy, install, maintain, or upgrade.
Administrators use standard web browsers to manage
the system, and users seamlessly continue to use their
existing email, IM, and web software. This delivery
model helps Postini customers save as much as 90%
compared to hardware or software solutions.


About The Technology


Postini provides On
-
demand services (software as a service) for
Communications Security, Compliance, and Productivity.

Listed below are the major features and differentiators:

• Email, IM, and web threat protection; and policy enforcement

• Electronic message archiving and recovery

• Message encryption (automatic or on
-
demand)

• Web content filtering and policy enforcement

• Business continuity

• 99.999% reliability



Communications security and compliance platform

• Nothing to install or maintain

• Controlled and predictable costs for protection and compliance

• Patented, real
-
time processing

• Postini Threat Identification Network (PTIN)®

About The Service


The company grew from a small and relatively obscure service with perhaps a couple hundred customers to a significant company

wi
th international
operations and multiple data centers supporting over ten million users across 35,000 businesses. Postini's scale is impressiv
e;
their servers block a
billion spams a day while processing as many as two billion SMTP connections every 24 hours. Postini is a great example of a
com
pany that
managed to grow and prosper during the "nuclear winter" in the technology and venture capital industry following the bursting

of

the bubble in
2000/2001. Postini's founder Scott Petry and then
-
CEO Shinya Akamine on the morning of September 11th 2001 negotiated the term s
heet for
Mobius' investment in the company with Ryan McIntyre, a Postini board member and former principal at backer Mobius Venture Ca
pit
al .

What attracted Mobius most to Postini was Scott Petry's vision of building out a true platform company built around the simpl
e n
otion that email had
become more important to corporate America than the telephone. A company that could build a suite of services around messagin
g w
ould have the
potential to harness a huge customer base given the broad horizontal nature of email. The total addressable market was every
ema
il address in the
world.

Equally important was Postini's architecture and deployment model. Postini was a SaaS company well before SaaS was cool, and
pro
bably even
before the acronym of SaaS had been coined. Mobius loved the ease of deployment (just a change to the MX record in DNS) and t
he
recurring
revenue subscription model. And while the most notable SaaS companies to date have been built around specific vertical busine
ss
applications,
Postini is arguably among the first SaaS infrastructure companies.


The main concern for investors early on was whether enterprise customers would buy an outsourced security service for email t
ha
t ran "in the cloud".
Happily, Postini's choice to focus on anti
-
spam and anti
-
virus as the initial applications to deploy on their elegant and highly

efficient message
-
processing architecture proved to be prescient, and when the spam problem exploded in 2002 and 2003, Postini's revenues rampe
d p
rodigiously. Of
course, the CAN
-
SPAM act of 2003 did nothing to put a dent in the spam problem, and Postini's growth continued unabated. Today,
Postini's
customers range from ISPs and small and medium sized enterprises with minimal or non
-
existent IT staff, all the way up to big co
mpanies with
sophisticated and demanding IT departments such as Merrill Lynch, Business Objects, Cooley Godward, Johnson Controls, Mitsubi
shi

Motors and
United Technologies, to name but a few.

By late 2005, Postini had grown substantially and the company managed to attract Quentin Gallivan (formerly an executive at N
ets
cape and then
Verisign) to join the company as CEO. Under Quentin's able leadership, the company's growth accelerated further and began to
ful
fill Scott Petry's
original platform vision when Postini released a series of new products for instant messaging and archiving that have seen gr
eat

uptake within
Postini's existing customer base and have also served to bring many new customers into the Postini fold.

Right at the onset of 2007, Postini began to prepare for an IPO. At the same time, in February of this year, the company anno
unc
ed a partnership
with Google to provide their messaging security services to customers of Google Apps Premier Edition. As often happens, follo
win
g the early success
of this initial partnership, deeper discussions with Google about a more strategic relationship began. As the management team
s o
f both companies
got to know one another, it became clear that Google and Postini shared a common vision around the power and potential of ema
il
as the most
important communications platform in the enterprise and the value and leverage that Postini's communications suite could brin
g t
o Google's broader
enterprise vision. While the company had been pretty far down the IPO path, Google was the one M&A suitor Postini had encount
ere
d that was
compelling enough to divert the company from a public offering.

About The Company


Postini an e
-
mail security service provider delivered a
huge payback for VCs last week when Google bought
the company for $625 million.

Google, which began using Postini's technology in
February to provide messaging security services,
announced last week that it would pay cash to acquire
the company.

Prior to the deal, the San Carlos, Calif.
-
based company
was planning to file for an IPO, However, after Google
and Postini began working together earlier this year, the
two companies began to draw up acquisition plans.

Six years later since Mobius invested in the company in
2001, the purchase is providing a profitable exit for
Mobius and a half
-
dozen other venture backers, who
invested just over $26 million in Postini between 2001
and 2006, according to Thomson Financial (publisher of
PE Week).

In addition to Mobius, backers include August Capital
Management, Sun Microsystems and Summit
Accelerator Fund, all three of which participated in a $6
million round in 2001. Pacifica Fund, AltoTech Ventures
and Mobius took part in a $10 million Series C round in
2003. Bessemer Ventures funded a $10 million follow
-
on
round in 2005, while Mobius was the sole backer of a
$94,000 Series D in July 2005 and a $356,000 Series E
in September 2006.


About the VC Funding


Milestones


Postini was a natural fit for Google, which had already been licensing the company's e
-
mail tools for its $50
-
a
-
year Premium ver
sion of
Google Apps.

The deal underscores Google's ambitions to become a serious player in the business of selling software to companies and organ
iza
tions,
in competition with Microsoft and others. Google, which earns the vast majority of its profits from selling ads it places nex
t t
o search results
and on sites across the Web, has increasingly emphasized its small but rapidly growing software business. This year, Google's

ch
ief
executive, Eric E. Schmidt, said the company's strategy had three components: ''search, ads and apps,'' or applications, mean
ing

software.

As part of that strategy, Google has been trying to persuade businesses to replace existing e
-
mail systems and other programs wi
th the
company's own package of business software. That package, called Google Apps, includes the Gmail service, an online calendar
and

programs that can read and edit documents created with the Word and Excel programs from Microsoft. But many businesses
--

especi
ally
large ones
--

remain leery of moving some critical functions like e
-
mail to Google's programs, which, unlike traditional busines
s software
that resides on corporate networks, are delivered as services over the Web and are considered less secure.

The acquisition of Postini
--

a private company whose products allow businesses to control spam and viruses and help them to mon
itor and
preserve e
-
mail messages to comply with regulations
--

is an effort by Google to allay some of those concerns. ''In bigger busin
esses,
security and compliance requirements are a must,'' said Dave Girouard, Google's vice president and general manager for enterp
ris
e.

The Postini purchase allows Google to fuse security with its typical user
-
centric, simple and manageable approach to products, D
ave
Girouard, vice president and general manager of the Google Enterprise division, said today in a conference call. Before now,
Goo
gle was
relying on partnerships to safeguard its software offerings.

Girouard said the merger, will allow Google to bring on more large enterprise customers who may have been initially leery of
usi
ng Google
Apps because of significant business and regulatory requirements, such as e
-
discovery.

"Google is definitely looking to strengthen all angles for their enterprise Apps," Chenxi Wang, a principal analyst with Forr
est
er Research,
told SCMagazine.com today in an email. "Enterprise customers typically have stringent demands on security, reliability, perfo
rma
nce, etc.
Google has the other operational aspects well covered with the exception of security.“

The deal will allow Google to better compete with Microsoft over hosted enterprise email offerings, Joe Fisher, vice presiden
t o
f product
management at Tumbleweed Communications, told SCMagazine.com today. Google will hope to transition Postini customers over to
Google Apps.

"It's an arms race between those guys for eyeballs and seats," Fisher said. "(Google) is trying to figure out how to monetize

on

the Gmail
piece. Gmail is significantly lacking in capabilities [for the enterprise]. Google really doesn't have enterprise selling DNA
.“


Why Postini


Google and other companies say that software will increasingly move to the Web and will often be free and supported by
advertising. Over the last year, Google has pursued that vision with efforts to turn some of its Web programs, which are
popular with consumers, into business tools.


Last year, the company began to offer companies, academic institutions and nonprofit organizations a version of Gmail and
other business applications at no charge. In February, Google packaged a broader set of business programs, including a
word processor and spreadsheet, into Google Apps and began charging businesses $50 a user annually for a version that
includes customer support.


By comparison, the market research firm Gartner estimates that businesses pay on average about $225 a person annually
for Microsoft Office, which includes Word and Excel, and for Exchange, the widely used corporate e
-
mail program.


Microsoft, for its part, has sketched out a future in which business programs are likely to become a hybrid of desktop
software and Web services. Moving in that direction, Microsoft acquired FrontBridge Technologies, a Postini competitor, in
2005, and offers that company's products as Web services. And while its core e
-
mail Exchange products are still programs
that it sells and that customers must install on their networks, some Microsoft partners offer Exchange as a Web service.

Microsoft played down the notion that Google's acquisition of Postini would create more competition for Exchange and other
Microsoft applications. ''What we are hearing from our customers is that they are looking for an experienced solutions
provider,'' said Roger Murff, director of marketing for unified communications services at Microsoft. The deal is ''further
validation that we are doing the right thing and have been doing the right thing for several years,'' Mr. Murff said.


For now, Google's efforts to make inroads into the $2.5 billion corporate e
-
mail business remain just that. The company said
more than 100,000 businesses are using Google Apps, but it will not say how many of them are using the pay version.
Microsoft's e
-
mail products are used by 62 percent of corporate users, and I.B.M.'s by 26 percent, according to Gartner.


Web e
-
mail services like Gmail will not be a significant force in the corporate market until 2010, when they are likely to
become the first choice of 8 percent of corporate users, according to a Gartner forecast in January.

''Google has a long ways to go before they become a strong competitor to Microsoft'' in business software, said Chenxi
Wang, a principal analyst with Forrester Research.


Revenue Model & Future



Google plans to continue offering
Postini's services, which customers
pay for, to users of other e
-
mail
systems, Mr. Girouard said. But he
added that Google intended to make it
easy for Postini's customers to ''test
drive'' Google Apps. Mr. Girouard also
said Google had not decided which of
those services would be integrated into
the free and paid versions of Google
Apps.


Postini has 35,000 business customers
that delivered its services to 10 million
users worldwide. More than 60 percent
of those customers use Microsoft
Exchange, the company said.


Google may continue its security
purchases with a buy in the information
leak prevention space, Wang
predicted. But it is unlikely Google will
stretch its scope beyond firms that can
protect its Apps offerings.


Revenue Model &
Future
-

contd.


Scott Petry, Founder, CTO & EVP Product Devlopment

Scott Petry founded Postini and has served as a director since 2000. Helping
define and deliver Postini products and services, Scott has a wealth of
experience in product marketing and product development.


Prior to Postini, he held general manager and VP positions at Cygnus Solutions
(acquired by Redhat), director of advanced messaging products at SkyTel, and
product manager positions at Apple Computer in the Newton Group and the
Networking and Communications group. Scott holds a B.S. degree from San
Diego State University and was a member of the 1987 US National Rowing
Team.


Quentin Gallivan , CEO & President

Quentin Gallivan joined Postini as Chief Executive Officer in November of 2005.
Quentin brings to Postini over two decades of global executive leadership
experience in the high technology industry. Prior to joining Postini, Quentin
spent 8 years with VeriSign, a pioneer in On
-
Demand services, as executive
vice president of Worldwide Sales and Service. At VeriSign, Quentin was
instrumental in scaling the company from $13M in revenues in 1997 to over a
billion in revenues in 2004.


Prior to joining VeriSign, Quentin was Vice President and General Manager of
the Asia Pacific Region for Netscape Communications Corporation. Quentin
also spent over 12 years with the General Electric Company, including
executive leadership roles as Vice President of Asia Pacific, based in Hong
Kong for a GE business unit and Vice President of North America for a GE
business unit based in Maryland.


Founders Profile

Grand Central Communications



Entity Name:

Grand Central Communications


Year Established:

2005


HQ Location:

48389 Fremont Blvd., Suite #110


Fremont CA 94538, U.S.A


Founder:


Craig Walker & Vincent Paquet


CTO:


XXXX


Website:


www.grandcentral.com



Acquisition Cost:

$45 million

Basic Facts


GrandCentral Communications is a next
-

generation
personal communications company.

The company provides consumers with One
Number…for Life™ by integrating all existing phones,
numbers, and voicemail boxes into one. The company
gives subscribers unprecedented control over how
incoming calls are managed through a simple web
-
based interface.

In short GrandCentral is an internet service that uses
VoIP to link customers' phone numbers together.


Some of the features are listed below:



Check your messages by phone, email, or online



Keep all your messages online for eternity



Record and store your phone calls (just like


voicemail)



Quickly (and secretly) block an annoying caller



Click
-
to
-
dial from your address book



Surprise your callers with a custom voicemail


greeting



Forward, download, and add notes to your messages

About The Service


The backend the company has taken a proprietary soft
-
switch that
they have enhanced and along with their border controller on it. It
is a highly customizable soft
-
switch that the company has their
layers of applications on top of it. That's where all of the
interesting call control features happen.


On the front end, MySQL, some PostgreSQL, and some Flash,
Ajax and PHP. There is some interesting stuff you can do with
Flash and Ajax with the way the comapnies player works and it is
a powerful combination to put the two of them together.

About The Technology



GrandCentral is similar in concept to AT&T TrueConnect 500 service offered in the 1990s. While TrueConnect also offered a sin
gle

number that routed to customer selectable phones, GrandCentral is a much more robust offering. TrueConnect required AT&T inte
rve
ntion
to change the phone number list. GrandCentral has the advantage of the internet, where end customers can alter phone setting
themselves.

GrandCentral was founded in late 2005 by Craig Walker and Vincent Paquet, who had worked closely together for years while run
nin
g
internet telephony pioneer Dialpad Communications. After being acquired by Internet giant Yahoo! in June 2005, they suspected

th
ere
were other problems that could be solved using next
-
generation communications services and both missed the intensity of the star
t
-
up
environment.

Craig was fresh off a flight at San Francisco's International Airport when the big idea struck. Back on solid ground (and wit
h b
etter cell
phone reception), Craig muddled his way through three separate voicemail boxes
-

one for his cell phone, one for his work phone,

and one
for his Blackberry. Three numbers to dial, three passwords to enter, three inboxes to check. He knew that millions of people
sha
red his
frustration. And he knew there had to be a better way.

Together, Craig and Vincent laid the plans, hired the team, and started building a new company that would let users roll all
the
ir phone
numbers (and voicemail boxes) into one. Company was initially funded by Minor Ventures ($4M) before being purchased by Googl
e o
n
July 2, 2007.The company formally launched its services in the beta version on September 25, 2006.

During the initial phases in Sep 2006, Co founder Craig Walker said in one of his interviews “Our marketing plans are really
foc
used
around viral marketing growth. We believe that if we do our job right, our users will be our best ambassadors to spread the w
ord

that there
is this great service that I use and love and has all these cool features. How can we spread viral growth? We also demo'ed at

th
e DEMO
conference and that generated some good publicity and PR and if you have a service that people like you just need to get the
bal
l rolling
and hopefully they will tell other users and they will tell other users.”

This marketing Plan along with the Demos and wide media coverage got Grand Central midst the spotlight, the company earned
recognitions like
FierceVoIP
-

"Fierce15" VoIP Companies of 2006
, Being named

by IDC as One of the Ten Emerging Mobile Players to
Watch in 2007

, First place in the GadgetFest shoot out in 2006, Being named as

Top Internet Telephony Company in Silicon Valley's
Emerging Technology Awards

in Nov 2006,
CNET "Webware 100" Award for Communications

in Jun 2007 and finally being named in the

2007 "Pulver 100"

.

Project CARE (Communications and Respect for Everybody) is an initiative taken up by GrandCentral to help those in need, to
sta
y
connected by offering individuals a local phone number and voicemail box for life. Through the Project CARE initiative, Grand
Cen
tral is
providing, free of charge, a local phone number and voicemail box to members of the homeless community in San Francisco. This

pr
oject
helped the company garner some media coverage and prove it’s a socially driven, people centric company.

About The Company


Currently the service is in private beta and is accessible by
invitation only; invitations can be obtained from existing
members (though requests from the website's "reserve"
request are frequently responded to with an invitation from
the beta team within 24 hrs). With an invitation, a new user
can create an account on the service's website and choose
a central phone number. During the private beta the service
is free; before the Google acquisition there were plans to
launch a $15 a month premium service (no advertisements,
more outgoing calls, more voicemail storage and up to six
unified numbers).

The cost associated with the ability to forward calls from a
GrandCentral (GC) number to a destination number that is
outside of the local calling area of the GC number is per
-
minute and is currently absorbed by Grand Central. This
cost also occurs when a call is initiated from the user's
GrandCentral address book to place a call by selecting the
destination entry and then selecting a "call from" number
where the "call from" number and the destination number
are not local numbers to each other on the PSTN. If either
feature is used beyond the $15 credit (750 minutes) during
beta, a user will be disconnected. When the user again
attempts the call, he will be given the option to "recharge"
his account with additional free credits. Upon recharge, the
activity will be allowed again.

When the beta testing term is completed, a user will be
able to recharge his account using a credit card or other
payment method

Business/Revenue Model


Craig Walker, Founder and CEO


In 2001, Craig became the CEO of Dialpad
Communications, where he led the company out of
bankruptcy and transformed it into the most profitable
VoIP company in the industry. When Dialpad was
acquired by Yahoo! in 2005, Craig became Senior
Director of VoIP and successfully merged the Dialpad
team with the Yahoo! Messenger group.Prior to Dialpad,
Craig was a technology venture investor at Sterling
Payot Capital and a corporate attorney at top tier law
firms in Silicon Valley, where he represented companies
ranging from early stage start
-
ups to Cisco Systems.

Vincent Paquet, Founder and COO


Prior to co
-
founding GrandCentral with Craig, Vincent
was Director of Business Development at Yahoo! in the
voice communications group. He joined Yahoo! when it
acquired Dialpad Communications, one of the world's
largest VoIP providers. At Dialpad, Vincent was VP of
Business Development and Marketing, where he
oversaw all revenue
-
generating activities. He helped lead
the reorganization and turn
-
around of the company, until
its successful acquisition by Yahoo! in 2005. Prior to
Dialpad, Vincent was a Vice President at Los Angeles
-
based IFA, the French foreign investment agency. Prior
to joining IFA, Vincent built and managed a European
distribution network for France
-
based Microspire, a
telecom component manufacturer.

Founders Profile


Interestingly, Google says they bought GrandCentral because it fits well with their other services that "enhance the
collaborative exchange of information between our users." In other words, this is yet another Web Office play from
Google.

In today's increasingly virtual and fragmented workforce, a service such as GrandCentral is an ideal complement to other
Web Office tools such as GTalk, Gmail and Docs&Spreadsheets. The key to a successful distributed team is
communication and GrandCentral is a service that makes telephone communication much easier and gives more control
to the user
-

e.g. you can set rules as to what calls you accept and when, and even hear why someone is calling before
taking the call.

Analysts think this will also ruffle some feathers at Skype/eBay. One such analyst says “I use Skype a lot
-

and I have a
Skype
-
In San Francisco phone number, because even though I live in New Zealand the center of my work existence is
Silicon Valley (and 50% of R/WW readers come from the US, compared to just 0.8% from my home country). Skype
-
In is
a handy service, although the call quality tends to be poor. But GrandCentral appears to offer a lot of compelling features,
which may in time make my Skype
-
In number redundant.”


Unfortunately, right now the GrandCentral service is restricted to those who have a U.S. telephone number and also the
service isn't accepting new users at this time. However you can "reserve" a number by submitting your name and email
address. This is the sort of functionality consumers will expect in online telephony services from now on, so Skype needs
to step up to the plate and compete with GrandCentral on features.

What's more, once again Google has positioned itself at the leading edge of innovation in an emerging Web Office market
segment. They did it with wikis (JotSpot), online word processing (Writely), email (Gmail), RSS (Feedburner) and perhaps
with presentation software too (Zenter).

EBay Inc unit Skype, a pioneer in the Internet phone market, has signed up more than 200 million users for its free or low
-
cost phone services globally. Newer names in the field include venture
-
backed firms Jajah, Jangl, Jaxtr and Rebtel, which
together have signed up millions of users in just the past year. The market potential is huge especially considering the
value adds Grandcentral has over the current players.


Why GrandCentral

Dodgeball



Entity Name:

Dodgeball


Year Established:

2000


HQ Location:

144 Broadway, 21st Floor




New York, NY10018


Founders:


Dennis Crowley

Alex Rainert


Website:


www.dodgeball.com



Acquisition Cost:

USD 40 MM

Basic Facts


Dodgeball
-

was founded in 2000, initially as a city guide
based on user
-
contributed content. Dodgeball grew out of a
grad school project started by Crowley and Rainert at New
York University’s Interactive Telecommunications Program.

It began receiving press coverage back in 2000, when all it
did was allow people to exchange information about what
they thought of various night spots around New York City.

By the end of 2003, Dodgeball had upgraded its offerings,
going from simply a restaurant review service to something
that could “speed up serendipity,” in its owners’ words.



Acquired by Google in 2005



Re
-
launched as a Social Network App: 2004



Initial Branding: "Friendster For Your Mobile Phone"



Cities: 22



Users: About 25,000

About The Company


Dodgeball uses mobile phones as a social networking
tool.

Users can alert their circle of friends with text messages if
they are going to be in a certain place or hang
-
out.

They can also receive text alerts if friends of friends are
going to be in the vicinity.

There's also a "crush' feature that allows users to meet
other Dodgeball users.

About The Service


The company is currently earning revenue through
sponsored advertising. For example it has a deal with
Absolut Vodka for the sponsorship of a nightlife channel.
The deal involved Absolut getting a special spot in the
dodgeball network where people could associate with the
brand as a “friend” in the same way they would with
people they know.

Dodgeball aims to get advertisers to provide something of
value to their users like sending location
-
based messages
containing information on good parties, drinks specials,
etc. that relate to the brand but aren’t solely the brand
(spam).

In the future when the market matures they intend to earn
revenue from premium SMS and downloadable
applications.

Business/Revenue Model


Dodgeball provides Google with a bunch of interesting
technologies and use patterns


shortens technology
development life cycle

Dodgeball uses the mobile phone as its native platform, an
aGoogle wants to further extend it's reach.

Dodgeball does a better job mapping to real
-
world social
networks than Orkut, since there's an actual reason *not* to
friend someone in db, namely that you don't want to get
spammed with 100 SMSes a night.

Google's mapping work is good at "Where am I?" and "Where
is the gas station?" but not so good at the question "Where
are my friends?" Dodgeball is really good at that.

Potential explosive market for integrated services of social
networking like Orkut integrated with Dodgeball.

Given that the core Dodgeball proposition
--

we can mix fixed
information about places and fluid information about people to
create new value
--

improves a) the more information you
have upfront and b) the more people are using it, the addition
of db to Google is really good news for db, and will provide a
really interesting platform for Google to experiment with

Why Dodgeball


Dennis Crowley:


Dennis Crowley is the founder of
www.dodgeball.com
. Since
2000, Dennis has been experimenting with the ways people use
mobile devices to coordinate social interactions. His work
focuses on merging location
-
based services with social networks
to help people connect with the people and places around them.


He has developed and managed mobile applications for Vindigo,
MTV Networks and ABC and was previously a member of Jupiter
Research's technology and operations research group.


Alex Rainert:


Alex Rainert has been working for the past 6 years creating
unique, usable and intuitive interfaces for various platforms. Sinc
2002, he has been exploring how a spoonful of technology can
truly change the way people act and think socially.


Recently Alex worked at ECCO design, uniting the user interface
with the physical design of a product, matching form to function.
Prior to working at ECCO, Alex had worked at Razorfish and
R/GA as a Programmer, Information Architect and most recently
as an Interaction Designer. Having been responsible for both the
technology as well as the interface of a project allows him to
create solutions that address both the technical possibilities as
well as the users' needs.


Founder Profiles



Ensure the right valuation of the company at the time
of due diligence.



Many people consider that price paid by


Google for this acquisition to be much lesser


than estimated USD 40 MM

Have a clear “go
-
ahead” plan. Frustrated with Google’s
plans and lack of focus on dodgeball, the founders of
dodgeball quit Google a some time back



Commitment on future plans, engineering


resources

Have a clear business case for the active acquisition
area for Google.



Hot acquisition domain for Google is mobile


applications nowadays, especially technology


and applications that could help it in the


advertising space as well.


Lessons

AdScape Media Inc.



Entity Name:

AdScape Media Inc.


Year Established:

2006 (2002 as BiDmic)


HQ Location:

600 Townsend St., Ste. 242E,



San Francisco, CA, USA


Founder:


Dan Willis


Website:


www.adscapemedia.com



Acquisition Cost:

$23 Million


All Cash


Adscape Media is the in
-
game advertising company, and the developer
of the world’s first dynamic in
-
game advertising technology. Adscape
Media’s patented technology, AdverPlay™, allows advertisers and
publishers, measurable in
-
game advertising opportunities. Adscape
offers dynamic delivery, plot/storyline integration and truly interactive
marketing opportunities.

Adscape Media supports each brand and its message with
demographically targeted campaigns, time targeting, geographical
targeting and auditable reporting of impressions.


Adscape Media offers the only proprietary Two
-
Way connection
between in
-
game ads and the real world.

RVG enables two
-
way text,
audio and video communication via SMS Text or eMail. RVG
Technology enables the advertiser to send brand messaging, and many
other transactions that are relevant to the game, benefiting both the
advertiser and game publisher by offering exclusive offers/content
directly to the game
-
player without interrupting game
-
play.


AdScapewas formed out of BiDmic which was
founded in 2002. The company opened a
headquarters in San Francisco in 2006 after being
joined by a couple of former very experienced
game industry executives. The executive team
has more than 100 years of gaming industry
experience.

Adscape, a startup that launched in February
2006 with $3.2 million in funding from Atlanta's
HIG Ventures, is behind the other players in the
burgeoning in
-
game advertising market, which
include Microsoft
-
owned Massive, IGA Worldwide
and Double Fusion.

Founded by former Nortel engineer Dan Willis,
Adscape hired former Sega executive Bernie
Stolar as the company's dean of games. It has not
announced any game publishers as customers.

The company has 22 published patent
applications for Adscape Media, and a number
more (8 patent applications, and 1 granted patent)
for BiDamic, which show a thoughtful and rich
history of development.

Adscape Media offers dynamic delivery of
advertising with plot and storyline integration
-

ways for advertisers to show fresh and
changeable (dynamic) advertisements within
video games which can be shown without
interrupting gameplay. This makes its solution an
interactive marketing platform.

About The Company

About The Service

Basic Facts


Adscape Media is the developer of the world’s first dynamic in
-
game advertising technology. Adscape Media’s patented technology,

AdverPlay™, allows advertisers and publishers measurable in
-
game advertising opportunities. AdverPlay uses Real World/Virtual Wo
rld
Gateway™ Technology (RVG™) to provide a two
-
way connection between in
-
game ads and the real world. RVG technology controls the
delivery of ads and many other transactions based on game genre, gamer demographics, time of day, and geographic location.


In late 2004, Adscape needed to accelerate the delivery of the first production release of AdverPlay. As a start
-
up company, the
y needed
to engage publishers and studios to incorporate AdverPlay into their next generation games. To support that effort, they also

ne
eded to
obtain the commitment of advertisers to prime the advertising network. These business imperatives required a robust, demonstr
abl
e ad
delivery platform.

“GDC and E3 are the key events in the games industry for engaging publishers and studios,” states Dan Willis, Adscape Media c
o
-
founder and CTO. “They were being held in early 2005 and we needed to publicly demonstrate a commercial product at those
conferences. If we missed that window, it would be a full year before we had another opportunity. We had the in
-
house skills to
finish
production but at that time we simply didn’t have the capacity or established development process to get it done with the lev
el
of quality
we needed within that tight timeframe.”

To accelerate the delivery of AdverPlay, Adscape engaged HeadGames, the game technology division of bitHeads. “I needed a par
tne
r
that could ramp
-
up quickly and provide the project leadership needed to get the job done right,” adds Willis. “I knew of the tra
ck record of
bitHeads and was confident they could deliver.” A HeadGames team was immediately deployed to work along side Adscape Media s
taf
f
to productize the architecture and take more responsibility for project management, software development, and unit and integr
ati
on
testing of the AdverPlay release.

“HeadGames worked truly hand
-
in
-
hand with our in
-
house team,” states Willis. “They dealt with the uncertainty of bleeding edge
technology, helped finalize the design, defined the project plan, then delivered a high quality product to schedule. We could

no
t have
achieved that with other consultants or outsourcers who typically require detailed specifications and project plans and close

ma
nagement
oversight.”

With the timely delivery of the first production version of AdverPlay, Adscape Media was able to conduct a critical public de
mon
stration at
E3 in early 2005. That led to successful engagements with initial publishers, studios and investors.

“Also, by having HeadGames take responsibility for the final production of the first release, our in
-
house team was free to focu
s on the
research to advance our core intellectual property within the AdverPlay engine,” concludes Willis. “By hitting that first lau
nch

window with
HeadGames help, we were able to focus on core IP for the entire following year. That IP is our main differentiator in the mar
ket

today and
the driver of our shareholder value.”

About The Company


contd.


Over the past few years, the video game experience has
become richer and more interactive. We think this rich
environment is a perfect medium to deliver relevant,
targeted advertising that ultimately benefits the user, the
video game publisher and the advertiser.

As more and more people spend time playing video games,
we think we can create opportunities for advertisers to reach
their target audiences while maintaining a high quality,
engaging user experience. That said, we will test ways of
successfully implementing this form of advertising and
Adscape's technology will be instrumental in those tests.

Ad platform is an organic part of any business that relies on
revenues from ads. Since it wasn’t that expensive and time
to market is very important


Adscape Media is a small in
-
game advertising company.

In
-
game ad revenue is expected to reach $200 million
this year and as much as $700 million by 2010,
according to Parks Associates and Yankee Group
Research, respectively.

Recent developments show that the future of in
-
game
advertising transcends relatively simple bill boarding.
Adscape’s interactive RVG technology brings a new level
of interactivity and bi
-
directional communication
opportunities into and out of the game.


Hurdles Google could face:

Google's biggest hurdle will be Microsoft, which last year
acquired Massive, one of the largest in
-
game ad
providers. In this area Microsoft has a rare advertising
advantage over Google, thanks to thriving sales of its
Xbox 360 gaming console and a long list of gaming titles,
according to analysts.


Other rivals, such as IGA Worldwide and Double Fusion,
are bigger and have more venture capital backing and,
thus, would have been more expensive to buy, analysts
said.

AdScape "has a technology, but not much of a market
presence, so the price will be significantly lower" than it
would have been for one of the other companies

Business/Revenue Model

Future


Buying AdScape will allow Google to serve ads to yet another market, the fast
-
growing video and Internet game industry.

Ownership of Adscape gives Google access to a patent portfolio that could position the company well in a battle against
Microsoft to deliver advertisements in video games.

Google’s new intellectual property includes one patent granted to San Francisco
-
based Adscape

then called BiDamic

in
2005 for a “system and method for interactive on
-
line gaming.” Invented by CTO Dan Willis, the patent is for a complex
gaming system that sounds similar to Microsoft’s Xbox Live service, which lets owners of the Xbox console play games and
download multimedia via the Internet. BiDamic filed the application in September of 2002, mere months before the launch of
Xbox Live.

In addition to several pending patents, Google also gets access to Adscape’s AdverPlay and Real World/Virtual World
Gateway technologies, which make it possible to deliver dynamic advertisements like billboards in Internet
-
enabled games
and lets advertisers communicate with gamers via email or SMS text messages, respectively.

The acquisition marks Google’s first foray into the in
-
game advertising business and comes as it has been amassing deals
and technologies to deliver ads across many different types of media, including newspapers, radio, and TV.

In
-
game advertising is an area where we believe Google could add a lot of value to users, advertisers and publishers,” said
company spokesman Brandon McCormick.

Many are wondering how Google plans to do just that. “That’s the $23 million question,” said Kelly Hyndman, a Washington,
D.C.
-
based partner with IP law firm Sughrue Mion. Mr. Hyndman believes the search king is likely to use Adscape’s patent
portfolio defensively against companies like Microsoft while marshalling the expertise of executives including Mr. Willis to
build its own game ad delivery system.

Why Adscape

Endoxon AG



Entity Name:

Endoxon AG


Year Established:

1988


HQ Location:

Lucerne, Switzerland


Founders:


Stefan Muff, Bruno Muff


Acquisition Date:

December 2006



Acquisition Cost:

USD 28M

Basic Facts



The

company

was

formed

in

1988

under

the

name

of

Symplan

Map

AG

which

established

itself

as

“the

leading

Swiss

supplier

of

geo

data

and

geo

marketing

services”
.

Already

specializing

in

cartography

and

information

technology,

Symplan

Map

implemented

a

number

of

highly

successful

internet

solutions

before

merging

with

Endoxon

AG

in

March

2001
.



Following

the

merger,

the

company

focused

on

three

main

GI

products/services
:

Data

-

topographic

maps,

aerial

photos,

road

navigation

data,

satellite

imagery,

road

maps,

detailed

town,

city

plans
;

Analogue

Maps

(paper,

DVD

CD
-
ROM)

-

map

products

are

based

on

satellite

pictures,

orthophotos,

current

town

and

city

plans

and

specific

customer

information
.

Web

based

applications


Before

the

acquisition,

it

employed

80

people,

with

offices

in

Switzerland,

India

and

St
.

Petersburg
.

Its

Indian

subsidiary

assembles

satellite

images

of

different

countries

(Switzerland,

Germany,

Austria,

Japan,

Dubai)
.


Around

50

of

Endoxon's

80

employees,

among

them

CEO

Samuel

Widmann

and

founder

Stefan

Muff,

joined

Google's

Swiss

offices

in

Zurich
.


After

the

acquisition

by

Google,

Endoxon

spun

off

the

remaining

three

of

its

six

units

in

cartography,

geo

data

trading

and

geo

marketing

business

areas

into

Mappuls

Corp
.
,

founded

on

November

23
,

2006
.

Bruno

Muff,

one

of

the

founders

of

Endoxon

Corp
.
,

became

its

new

CEO

and

was

joined

by

20

members

of

staff
.

About The Company



The

company

provided

imagery

for

map
.
search
.
ch
,

a

successful

map

service,

and

local
.
ch
,

a

local

search

service,

both

owned

by

Swiss

Post

and

limited

to

Switzerland

.

This

web
-
mapping

service

did

scrolling,

zooming,

layering

and

address
-
searching

since

the

early

days

due

to

AJAX

technology,

long

before

Google

Maps

and

the

others

were

doing

it
.


Users

can

search

&

find

places

in

the

vicinity

of

their

home,

their

place

of

work

or

other

places

which

they

visit

occasionally
.

It

provides

access

to

directories

(private

and

business

telephone

and

other

directory

entries)

and

leisure

activities'

listings
.


GoYellow
.
de,

the

German

directory

publisher,

also

uses

Endoxon’s

“Blue”

technology
.

About The Service


Google

acquired

Endoxon’s

internet,

mapping

and

data

processing

business

units
.

These

complement

Google

Earth

and

Google

Maps

technologies

and

services
.

Endoxon’s

assets

and

its

European

network

bolster

engineering

and

technical

resources

for

Google,

and

will

help

improve

the

functionality

of

Google

Earth

and

Google

Maps

across

Europe
.


Endoxon

is

a

pioneer

in

Ajax

mapping

technologies

which

enable

the

integration

and

processing

of

geo
-
referenced

data

and

high
-
resolution

aerial

and

satellite

images

for

dynamic

internet

and

mobile

services
.

Ajax

is

behind

the

most

popular

local

search

products

on

the

market

today

and

reduces

the

need

for

page

loads

resulting

in

faster

search

and

user

‘stickiness’
.


By

acquiring

Endoxon

and

its

"Blue"

technology,

Google

tremendously

strengthens

its

own

mapping

expertise,

particularly

on

the

web

and

on

mobile

devices
.



The

move

also

had

to

do

something

with

location
.

Google

began

selling

local

business

advertisement

for

Google

Maps

earlier

this

year,

its

European

local

business

advertising

remained

limited

to

the

UK,

France,

Italy,

Germany

and

Spain
.

Google

said

it

bought

Endoxon

to

improve

that

business,

or

at

least

the

platforms

from

which

those

advertisements

are

served
.

It

potentially

sees

this

acquisition

as

an

opportunity

to

broaden

its

business

advertising

reach

in

Europe

past

these

five

countries
.

Why Endoxon


Endoxon

has

several

significant

innovations

to

its

credit
-



It

is

responsible

for

the

first

MMS

service

and

the

first

independent

mobile

portal

Mobidick

in

Switzerland

for

SMS,

MMS,

WAP

and

WEB,

provided

via

all

3

Swiss

mobile

phone

network

operators
.



It

also

created

another

landmark

for

the

Swiss

Museum

of

Communication

and

Transport
:

The

first

hiking

map

done

with

an

aerial

image

or

“Swissarena",

the

largest

walkable

aerial

image

of

Switzerland

at

a

size

of

200

square

meters

and

the

nation's

second

largest

depiction

after

the

country

itself
.


Endoxon

had

been

working

on

a

technology

called

"blue",

which

is

visualized

information

on

the

web
.

“blue”

is

the

clever

linking

of

a

world

map

server,

a

search

engine

and

a

GIS
.

It

is

a

high
-
quality,

comprehensive

points
-

and

map

server,

a

virtual

worldwide

marketplace,

a

search

and

services

platform
.

The

user

can

search

for

information

or

he

can

visualize

his

own

collected

information
.

The

download

of

selected

blue

data

onto

the

mobile

phone

is

possible
.



Endoxon

has

been

awarded

with

the

‘Excellence

in

Cartography’

award

by

the

International

Cartographic

Association

for

its

innovations
.


Innovations & Technology


Google, Microsoft Corp., Yahoo Inc. and AOL LLC are all
working feverishly to continually update and improve their
online mapping services, which have become an essential
part of local search Web sites, whose advertising revenue
is expected to grow from US$3.4 billion in 2005 to $13
billion in 2010, according to The Kelsey Group Inc.


While Google and its rivals have focused their initial efforts
mostly on the U.S., they all want to provide comprehensive
maps and local
-
business information globally, and Europe
is certainly a priority region for them.


Online maps have become extremely popular, as millions
of people use them every day to obtain driving directions,
find local businesses, read customer reviews, see high
-
definition aerial images of places and even check real
-
time
traffic information.

Future


Stefan

Muff
:

An

HTL

engineer

with

post
-
graduate

degree

as

a

space

planner
.

He

worked

for

two

years

at

the

Federal

Office

for

Spatial

Planning

till

1988
,

when

he

founded

Symplan

Map

AG

together

with

his

brother,

Bruno

Muff
.

He

was

responsible

for

projects

such

as

Bahn

2000
,

and

for

the

development

of

the

internal

EDV

computer

systems
.



Bruno

Muff
:

A

civil

engineer
.

After

completing

his

studies

in

landscape

design

and

garden

architecture

in

Rapperswil,

he

worked

at

the

Swiss

Ornithological

Research

Institute
.

In

1993
,

he

graduated

from

the

HWV

with

a

degree

in

environmental

management
.



Founders’ Profile

dMarc Broadcasting, Inc.



Entity Name:

dMarc Broadcasting


Year Established:

2002


HQ Location:

California, US


Founders:


Chad and Ryan Steelberg


Website:


http://www.dmarc.net/


Acquisition Date:

January 2006


Acquisition Cost:

USD 102M


dMarc

connects

advertisers

directly

to

radio

stations

through

its

automated

advertising

platform
.

The

platform

simplifies

the

sales

process,

scheduling,

delivery

and

reporting

of

radio

advertising,

enabling

advertisers

to

more

efficiently

purchase

and

track

their

campaigns
.

For

broadcasters,

dMarc's

technology

automatically

schedules

and

places

advertising,

helping

to

increase

revenue

and

decrease

the

costs

associated

with

processing

advertisements
.


dMarc

allows

advertisers

to

target

an

ad

campaign

across

multiple

stations

in

its

network

by

market,

station

format,

demographic

and

day

part
.

They

can

manage

the

campaign

from

a

self
-
service

interface,

make

changes

on

the

fly,

and

assemble

an

assortment

of

reports

and

ROI

data
.



dMarc

Broadcasting,

Inc
.

was

a

studio

automation

and

media

company

providing

market
-
leading

digital

solutions

and

media

services

to

the

radio

broadcast

industry
.


In

2004
,

dMarc

broadcasting

acquired

market
-
leading

radio

automation

and

digital

systems

vendors

Scott

Studios

and

Computer

Concepts,

as

well

as

the

broadcast

assets

of

dMarc

Networks,

the

leader

in

broadcast

data

services

in

a

transaction

valued

at

$
29
M
.

The

integrated

company

had

the

largest

installed

customer

base

for

radio

automation

and

digital

systems,

with

more

than

4
,
600

radio

station

clients

and

over

1
,
800

stations
.

This

represented

over

40
%

of

the

stations

in

the

top

50

radio

groups,

including

Cumulus

Broadcasting,

Citadel

Broadcasting,

Cox

Radio,

Infinity

Broadcasting,

Radio

One

and

Mapleton

Communications
.


The

transaction

included

a

$
10

million

financing

into

dMarc

Broadcasting,

led

by

tier
-
one

investors,

including

a

multi
-
billion

dollar

US

investment

firm

and

strategic

corporate

partners
.


dMarc

was

launched

in

2002

by

brothers

Chad

and

Ryan

Steelberg
.

The

duo

started

their

first

company,

an

Internet

advertising

service

called

AdForce,

in

1995
.

They

quickly

developed

AdForce

into

the

world’s

largest

centralized,

independent

ad
-
serving

and

management

solution
.

As

the

primary

competitor

to

DoubleClick,

AdForce

/

2
CAN

Media

controlled

more

than

50
%

of

the

online

ad
-
serving

market

in

the

US,

through

such

clients

as

Netscape,

GeoCities,

AOL

and

Goto
.
com,

the

precursor

to

Overture

Services
.

AdForce

went

public

in

1999

and

was

subsequently

acquired

by

CMGi

in

1999

for

more

than

$
500

million
.


In

2000
,

the

brothers

unveiled

FreeDSL,

renamed

Winfire,

which

offered

consumers

free,

fast

Internet

in

exchange

for

viewing

ads
.

Winfire

shut

down

in

March

2001
.


About The Company

About The Service

Basic Facts


Google

will

integrate

dMarc

technology

into

the

Google

AdWords

platform,

creating

a

new

radio

ad

distribution

channel

for

Google

advertisers
.


A

key

component

of

the

deal

was

the

inclusion

of

dMarc's

wholly

owned

subsidiaries

Scott

Studios

and

Computer

Concepts
.

The

pair

make

it

the

industry's

largest

digital

air

studio

systems

vendor

with

more

than

4
,
600

broadcast

users,

reaching

more

than

40

percent

of

the

stations

within

the

top

50

radio

groups
.

Google

believes

that

this

acquisition

will

bring

new

ad

dollars

and

accountability

to

radio

by

combining

Google’s

expansive

network

of

advertisers

with

dMarc’s

innovative

radio

advertising

technology
.

There

are

three

clear

reasons

which

appear

as

the

rationale

for

the

acquisition

of

dMarc
:




To

broaden

its

online

advertising

mix

and

ad

distribution

channels

beyond

the

paid

search

model,

from

which

Google

derives

most

of

its

revenue





To

measure

the

effectiveness

&

success

of

online

advertising

through

other

media

such

as

radio
.

The

deal

could

be

significant

if

Google

successfully

introduces

to

broadcast

advertising

its

methods

of

tracking

the

effectiveness

of

online

ad

campaigns
.

This

would

be

a

step

ahead

than

traditional

media,

where

evaluating

the

performance

of

ad

campaigns

generally

isn't

done

as

accurately

and

scientifically

as

it

is

in

paid

search

advertising
.




To

foray

into

local

advertising,

which

has

traditionally

been

a

weakness

of

online

advertising,

while

being

a

strength

of

radio

advertising,

as

most

radio

stations

are

vehicles

for

local

advertisers
.

Why dMarc



Google

paid

$
102

million

in

cash

for

all

outstanding

equity

interests

in

dMarc
.

In

addition,

Google

will

be

obligated

to

make

additional

contingent

cash

payments

from

time

to

time

if

certain

product

integration,

net

revenue

and

advertising

inventory

targets

are

met

over

the

next

three

years
.

The

maximum

amount

of

potential

contingent

payments

is

$
1
.
136

billion

over

the

next

three

years
.



Since

these

contingent

payments

are

based

on

the

achievement

of

performance

targets,

actual

payments

may

be

substantially

lower
.

The

acquisition

is

subject

to

customary

closing

conditions
.

Substantially

all

of

the

payments

will

be

accounted

for

as

part

of

the

purchase

price

for

the

transaction
.

Acquisition Financials



Chad

Steelburg
:

Chad

was

the

CEO

and

CTO

of

AdForce
.

Chad

attended

the

University

of

Southern

California
.

He

is

the

recipient

of

numerous

technical

and

business

awards,

including

the

Smithsonian

Award

in

2000

for

developing

the

best

technology

in

information

services
.


Ryan

Steelburg
:

Ryan

was

responsible

for

sales

&

marketing

at

AdForce
.

He

later

founded

2
CAN

Media

(AdSmart)

and

served

as

its

CEO
;

the

company

grew

to

become

the

third

largest

Internet

advertising

sales

organization

and

was

sold

to

CMGi

in

1999

for

over

$
50

million
.


Ryan

was

named

by

the

Orange

County

Business

Journal

as

one

of

the

county's

"
50

Most

Influential

Businesspeople,"

and

was

also

a

finalist

for

Ernst

&

Young's

"Entrepreneur

of

the

Year"

in

2000
.

Founders’ Profile


In

December

2006
,

Google

integrated

dMarc's

Revenue

Suite

inventory

buying

technology

into

its

AdWords

program,

and

created

new

radio

distribution

channels

for

Google

advertisers
.

Google's

AdWords

platform

allows

advertisers

to

buy

keywords

and

deliver

targeted

ads

based

on

specific

searches
.

Google

says

clickthrough

rates

improve

when

advertising

is

placed

with

specific

topics
.



Google

can

significantly

reduce

the

costs

to

broadcasters

associated

with

processing

broadcast

ads

and

announced

several

agreements

they

say

further

illustrate

the

needs

of

broadcasters

to

fill

unsold

inventory
.


In

August

2006
,

Google

announced

an

advertisement

agreement

with

XM

Satellite

Radio,

a

satellite

radio

services

provider
.

The

partnership

concerns

a

new

Google

strategy

to

sell

online

search

listings

into

a

traditional

media

environment
.

As

a

result,

the

estimated

seven

million

subscribers

of

XM

Satellite

Radio

will

be

introduced

to

Google's

commercial

advertising

inventory

on

non
-
music

channels

while

XM

will

benefit

from

tapping

the

Mountain

View

Company's

advertisers

database
.

This

was

made

possible

once

the

dMarc

platform

was

integrated

into

AdWords

by

the

end

of

2006
.


Future



After

the

acquisition

by

Google,

dMarc's

founders,

Ryan

and

Chad

Steelberg,

remained

with

the

company
;

Chad

Steelberg

became

the

general

manager

of

Google's

radio

division
.

However

in

February

2007
,

both

of

them

resigned

from

their

positions

at

Google,

reportedly

citing

disagreements

with

the

search

engine's

automated

sales

tactics

and

disappointment

in

their

compensation

packages
.

As

part

of

the

deal,

while

over

$
1

billion

in

performance
-
based

dollars

were

offered,

there

were

reports

that

the

brothers

are

more

likely

to

take

about

$
200

million

out

of

the

deal
.


The slow performance of the company since Google's acquisition is one of the reasons being cited as a determining
factor in the brothers' decision to leave. In December 2006, Google rolled out its beta version of Google Audio Ads
using the dMarc integrated technology, and the initiative faced some obstacles.



First, dMarc is affiliated with only around 700 stations
-

too few to provide radio ad inventory on the scale needed to
achieve high revenue targets.



Second, before the Google purchase dMarc mostly trafficked in leftover ad inventory
-

unsold air time that is low
-
value
by definition. Google has struggled to ramp up both the quantity and quality of inventory available through dMarc, with
limited success.


Finally, the two companies apparently differed over the need for a "human touch" in the sales process, and dMarc’s
founders blame Google’s single
-
minded focus on automating everything. Although dMarc was a pioneer in automated
radio ad sales, the company still employed human beings to explain the dMarc system to prospective customers and
tutor those who signed up. In the ad business, while automating has made Google a lot of money on cheap ads, more
expensive ads are typically sold by a sales force, which pitches to companies and gets them to deliver the check. As
Google began integrating dMarc's system into Google AdWords, it pushed to limit the number of product reps. dMarc
believed its sales force could have been extremely successful, but Google wanted everything automated, and prefers to
keep their "representatives" behind computer screens and let the product sell itself. dMarc executives blamed this
policy for their sluggish revenue results.


After their exit, Google issued a brief statement emphasizing its ongoing commitment to the audio business and said
that it will continue to gather feedback during the Audio Ads beta test and was happy with the progress to date.

dMarc debacle

FeedBurner



Entity Name:

FeedBurner


Year Established:

2003


HQ Location:

600 Townsend St., Ste. 242E,


San Francisco, CA, USA


Founder:


Eric Lunt, Steve Olechowski,


Dick Costo & Matt Shobe


Website:


www.feedburner.com



Acquisition Cost:

$100 Million


Mostly cash


FeedBurner is the leading provider of media distribution and
audience engagement services for blogs and RSS feeds. The
companies Web
-
based tools help bloggers, podcasters and
commercial publishers promote, deliver and profit from their
content on the Web. FeedBurner also offers the largest feed
and blog advertising network that brings together an
unprecedented caliber of content aggregated from the world’s
most recognized media companies (e.g. Wall Street Journal
Online, Wired News, Ziff Davis), A
-
list bloggers and blog
networks and individual publishers from around the world.

Before the acquisition FeedBurner managed more than 75,000
feeds for over 50,000 content publishers reaching nearly 3
million combined subscribers, including many of the most
highly subscribed and well
-
known syndicated feeds in the
world. They rely on Java as server
-
side lingua franca and
MySQL as database solution, on various flavors of Linux.


The founders of FeedBurner met at Andersen Consulting
(Now Accenture) in the early 90's and have worked
together through four startups over the last 12 years one of
them being Spyonit, which was sold to 724 Solutions in
2000.

The idea for FeedBurner was an evolution of work they had
been doing at the intersection of meta
-
data and media
since 1996, but they really came up with the idea for
FeedBurner in October of 2003 when they were having
lunch and talking about the future of content distribution
and the need for publisher services. The founders batted
around a bunch of names. They wanted to capture the
notion of distributing content for customers. There were a
lot of rejected names. The final two were FeedBurner and
FeedRunner.

The Company managed to raise $10 million in capital over
two rounds. Portage Ventures funded their $1 million Series
A round in 2004 . The $9 million Series B round was closed
in mid 2005 (second close in 2006), from Mobius Venture
Capital and Union Square Ventures. Matt Shobe said in
one interview “We knew that with success and increased
publisher adoption, we would be likely to shoulder some
significant capital expenditures for equipment, bandwidth,
and the like, and we wanted to also have the freedom to
grow a small, skilled team composed of both newcomers
and trusted accomplices from over 10 years of
entrepreneurial efforts in Chicago. And don’t discount for a
minute the value of engaged, active VC partners..”

About The Company

About The Service

Basic Facts


Feedburner in the early days was promoted by demos conducted by the founders within their lists of contacts and friends
they depended on the word of mouth and that worked for them. The ideology for this “Viral” marketing can be traced from
the excerpt on one of the founders blog:

“When we built FeedBurner, I would tell people about it, and some people would say “hey, that sounds very cool” and
others would reply “uh
-
huh”, which is web2.0
-
speak for “huh?”. It was obvious to us that FeedBurner was a very powerful
concept around which an ecosystem could flourish. It wasn’t obvious to most other people until they actually saw several
examples of people using FeedBurner in powerful ways. What’s the point? The point is that “build it and they will come”
isn’t true. You need to build it, and then show them exactly how it can be used, and then show them several explicit
examples of why it’s powerful, and then they might come.”


Feb, 25, 2004 saw the launch of the pre
-
alpha of FeedBurner. One drawback to FeedBurner was the difficulty in turning it
off and moving your feeds off the network (while retaining your audience). The method for doing this was complicated and
clunky (or required you run your site from your own server) and so many top bloggers stayed away from their service.
However, on June 10, 2005 FeedBurner announced a new feature to allow easy transition away from FeedBurner whilst
retaining the readers.


The company had an early mover advantage but never rested on that they continuously improved and incorporated based
on the suggestions and feedback from their customers (publishers).


In July of 2006 the company acquired “
Blogbeat”
a Raleigh
-
Durham
-
based provider of blog analytics. The combined
services gave FeedBurner’s 200,000 customers powerful tools for comprehensive comparison of feed subscribers and blog
visitors, insight previously not available from a single platform. Gaining a unique advantage of having one foot in the world

of blogging, and one foot in the world of Web 2.0.


AS time passed the company saw publishers like VNU and Reuters join them, cementing the future of the company.


Attached is a brief of Feedburners History:



About The Company
-

contd



It is rumored that Google paid about 10 times FeedBurners revenue to acquire the company. So, why would Google pay
such a high multiple, about 10 times revenues, for the startup? Probably, for the same reason it has developed Google
Analytics: it is another way for Google to tie in independent online publishers.


This would be part of a trend that is likely to continue for a while. Glover Lawrence, a veteran investment banker from
McNamee Lawrence & Co., pointed out that while big buyouts like the $6 billion Microsoft
-
aQuantive deal might get all the
attention, there is a lot of action in the smaller deals. Lawrence pointed out that future advertising
-
related deals would be
around filling out technology holes or start
-
ups that have an area of specialization.


As per the press release by officials at Google: “Google believes that feed
-
based content and advertising is a developing
space where we can add value for users, advertisers and publishers. FeedBurner's technology and talented team are a
great addition to Google's current solutions for advertisers and publishers.”


Susan Wojcicki, vice president of product management at Google, said in a conference call:


“The move means Google advertisers will have another, new avenue for their marketing and FeedBurner 's more than
430,000 publishers will be able to join the Google AdSense publisher network”


With this acquisition, you can see Feedburner and its management team running a group that includes Blogger, Google
Analytics and Google Reader to make a powerful blogging suite. Feedburner’s acquisition is especially important because
of its add network. They have figured how to get ads place inside of blog entries, on blog sites and through feed readers.
This could be a HUGE revenue boost for Google to leverage this channel with the leader in the space.


Why FeedBurner


Initially FeedBurner offered two services
-

a free version
and a Pro version that costs between $5
-
$16 per month
depending on the number of feeds managed. The stats for
the free version were great, and the pro version also showed
more detail and a “who’s syndicating me” feature. The Pro
version has a 15 day free trial.


According to Neilson/Net Ratings, FeedBurner is growing
faster than MySpace and Digg with 385% traffic growth year
over year. They deliver 50 million daily subscriptions to 190
countries and serve 600,000 different feeds for 350,000
publishers including Wall Street Journal, USA Today and
Newsweek.


However post the acquisition FeedBurner announced its
going completely free, something that many expected as
soon as Google acquired it. Google now it seems is looking
at monetizing this deal by creating revenue streams out of
advertising, which stays the companies mainstay focus.


By making the service free Google is trying to attract people
for whom the paid subscription was a disincentive, in turn
generating a potentially larger number base for the
advertising income.

Business/Revenue Model


November last year, in an interview Dick Costolo was asked
what does he think would be the next big thing online, his
response which may soon be a reality was : “ I'm going to
make up a word: the next big thing online will be the
'widgetisation' of media. I think there will be a universal
widget library that somebody will create that will allow both
content creators and technology creators to say, 'Here are
ways of marrying this content and this tool so that it can be
distributed anywhere.” This could soon be a possibility with
now that they are on the same team as Google.

Future

DoubleClick Inc.



Entity Name:

DoubleClick Inc.


Year Established:

1995


HQ Location:

111 Eighth Avenue, 10th Floor




New York, NY, USA


Founders:


Kevin O'Connor & Dwight Merriman


CEO:


David Rosenblatt


Website:


www.doubleclick.com



Acquisition Cost:

$3.1 billion


All cash


DoubleClick offers technology products and services that
are sold primarily to advertising agencies and media
companies to allow clients to traffic, target, deliver, and
report on their interactive advertising campaigns. The
company's main product line is known as DART, which is
designed for advertisers and publishers.

DART automates the administration effort in the ad buying
cycle for advertisers (Media Visor) and the management
of ad inventory for publishers (Sales Manager). It is
intended to increase the purchasing efficiency of
advertisers and to minimise unsold inventory for
publishers.

For PPC or SEM, DART Search provides a 3rd party tool
to help consolidate the complexity of Paid Search
Marketing. This tool uses the same infrastructure that has
enabled Doubleclick's SEM services arm Performics to
manage SEM.

Doubleclick Advertising Exchange (released Q2 2007)
attempts to go even further by connecting both media
buyers and sellers on an exchange much like a traditional
stock exchange (NYSE, LSE or NASDAQ)

About The Service


DoubleClick
targets

along various criteria. Targeting can be
accomplished using IP addresses, business rules set by the
client or by reference to information about users stored within
cookies on their machines. Some of the types of information
collected are:

IP address , Browser, Operating System, ISP, Bandwidth and
Time of day


In addition, the cookie information may be used to target ads
based on the number of times the user has been exposed to any
given message. This is known as "frequency capping".

Basic Facts

About the Technology



Internet Advertising Network was started by Kevin O'Connor and Dwight Merriman in 1995. IAN was acquired by Poppe
-
Tyson (a division of Bozell, Jacobs, Kenyon & Eckhardt advertising) and named DoubleClick in 1996. In late 1995
O'Connor began DoubleClick with Dwight Merriman in O'Connor's basement in Alpharetta, Georgia (a northern suburb
outside Atlanta), eventually moving the company to New York City to be closer to media companies and advertising
agencies.


DoubleClick was first in the online media rep business
--

that is, representing websites to sell advertising space to
marketers. In 1997 it began offering the online ad serving and management technology they had developed to other
publishers as the DART services. During the dot
-
com downturn, DoubleClick divested its media business, and today
focuses on uploading ads and reporting their performance. DoubleClick went public on Nasdaq in 1998.


In 1999, at a cost of US $1.7 billion, DoubleClick merged with the data
-
collection agency, Abacus Direct, which works with
offline catalog companies. This raised fears that the combined company would link anonymous Web
-
surfing profiles with
personally identifiable information (name, address, telephone number, e
-
mail, address, etc.) collected by Abacus. This
merger made waves and was heavily criticized by privacy organizations. Controversy grew when it was discovered that
sensitive financial information users entered on a popular Web site that offered financial software was being sent to
DoubleClick, which delivered the ads. Much of this controversy was generated by statements made by Jason Catlett of
Junkbusters, claiming that DoubleClick was or intended to do things that it had never mentioned or included in any
planned or announced service. Due to the negative press, DoubleClick dropped any integration of their services with
those of Abacus, and instigated stronger privacy policies and oversight.


DoubleClick grew to over 2,400 employees in 25 countries though in the great "dot com bust" in 2000/2001 the company
downsized to about 1,200 employees and in the process became very profitable.


In April 2005, Hellman & Friedman, a San Francisco
-
based private equity firm, announced its intent to acquire the
company and operate it as two separate divisions with two separate CEOs for TechSolutions and Data Marketing. The
deal was closed in July 2005. Hellman & Friedman announced in December 2006 the sale of Abacus to Epsilon
Interactive.

About The Company



On Apr. 13, Google announced that it would pay $3.1 billion for the advertising outfit DoubleClick. Just two weeks ago,
reports surfaced that the company could go for $2 billion, the price was considered lofty but justifiable. Now, Google
(GOOG) has forked out over 20 times DoubleClick's estimated revenues of $150 million. And it's paying triple the amount
that private equity firm Hellman & Friedman spent when it purchased DoubleClick in 2005

before selling off a couple of
pieces of the business.


So why the sky
-
high price? It may be less a function of DoubleClick's current worth and more about what it can
strategically provide for Google

and what it could have done for Microsoft, a rival bidder.


DoubleClick has something that Google, for all its money and smarts, doesn't: a vibrant advertising business for banners,
videos, and other so
-
called display ads often intended more to promote brands than to generate immediate sales.
"DoubleClick currently has relationships with virtually every major online publisher and more than half of the online ad
agencies," says Dave Morgan, chairman of TACODA, a targeted advertising network. DoubleClick counts Time Warner's
(TWX) Sports Illustrated, Friendster, and Viacom's (VIA.B) MTV Networks among its customers. Google, on the other
hand, has made much of its billions by serving tiny text ads related to searches for relatively smaller businesses hoping
for some kind of immediate interaction with a customer.


Forrester analyst Charlene Li described the deal as a must
-
have for Google. "It's a lot of money, but who cares? This is
one of the things they had to buy," she says. "They were not making any headway" on display ads.


In a call following the acquisition announcement, CEO Eric Schmidt characterized the deal as helping Google gain a
greater foothold in the display advertising market. "It is accelerating our display advertising business," said Schmidt. So
far, search rival Yahoo! has been the main player in display advertising on the Web. Google's display efforts to date, like
its attempts to expand outside of search in general, have been marginally successful at best. "Google has been a one
-
trick pony for a long time focusing on just search," says Bill Gossman, CEO of targeted advertising network Revenue
Science. "This is a way to give them another trick."

Why DoubleClick



Rosenblatt, , DoubleClick's CEO, says that DoubleClick will gradually start to leverage Google's targeting capabilities with
its

customers. Google's ability to match ads with consumers will be particularly helpful for publishers that have inventory they
can't sell through their in
-
house sales force.


The other big benefit of buying DoubleClick for Google is keeping it out of Microsoft's hands. At the moment, Microsoft poses

little threat to Google's search advertising business. Its share of Internet searches has been on the decline and dropped to
less than 10% in March, according to an Apr. 11 Hitwise report as a result, advertisers looking for the biggest potential
audience go to Google, not Microsoft.


DoubleClick could have changed that for Microsoft. DoubleClick serves ads on both Time Warner's AOL and News Corp.'s
(NWS) MySpace, two of the Web's most popular properties. Google has the rights to provide search ads on both those
sites

it bid aggressively to do so, agreeing to pay nearly $2 billion to both companies. But if Microsoft had acquired
DoubleClick, it could have had a competitive position at the two companies, jeopardizing Google's expensive search
agreements. It could also have given Microsoft a much greater search share. "Microsoft definitely needs agreements for
search advertising," says Matt Rosoff, an analyst at Directions on Microsoft.


In the end, however, getting a greater search share just wasn't worth $3 billion
-
plus for the software giant. "Maybe they would
have looked at the acquisition at a lower price, but you have to look at Microsoft's overall business and what they could hav
e
spent that money on," says Rosoff. "It is much more important for Google

advertising is their core business."


To advertising industry executives, such as Gossman and Morgan, Microsoft's unwillingness to pay such a price showed that
the company isn't as serious about the market as Google. "Google is really serious they want to dominate digital advertising
and they don't want to lose," says Morgan. "Google has no intention of losing."

Why DoubleClick
-

contd.



Google clearly thinks that the acquisition could be a multibillion
-
dollar one in the near future. During the call, Schmidt and
Google co
-
founder and Technology President Sergey Brin emphasized the importance of display advertising. "I think we have
thought that display advertising has been important for several years," said Brin. David Rosenblatt, DoubleClick's CEO, told
BusinessWeek.com that the market could be equal to

or even bigger

than paid search. "We could see a similar kind of
growth rate as search had," says Rosenblatt.


Paid search advertising will account for more than 40% of the $19.5 billion expected to go to online advertising this year,
according to an
eMarketer

report. Google grabs about two
-
thirds of the search advertising market. Much of that growth has
stemmed from the ability of search engines to find consumers who have demonstrated an interest in a certain product.


Display advertising, which is often broken up by the medium, has not been as vibrant as search in recent years. In an October

report, eMarketer put the display advertising number at $3.34 billion for 2006 and expected it to grow to $4.5 billion by 201
0.
Meanwhile, paid search advertising accounted for $6.76 billion of online ad spending in 2006 and was projected to grow to
$10.3 billion by 2010.


Bill Gossman CEO of targeted advertising network Revenue Science believes that display will grow faster than expected
because of increased targeting capability. Display advertisers have typically sought to place their ads on pages where the
content is related and thus likely to attract interested consumers. For example, an SUV marketer would stick a banner on an
autos site. Ad networks and search engines such as Google can now target banner ads to customers who have demonstrated
an interest in content related to the ad, even if the page has nothing to do with the advertiser's product, says Gossman. As
a
result, brand advertisers are becoming increasingly interested in display ads, says Gossman. In fact, Gossman and others
believe that display ads are poised to begin taking advertising dollars away from the television advertising market.


Rosenblatt, , DoubleClick's CEO, says that he is excited about the prospect of using DoubleClick's relationships and Google's

targeting to sell offline ads in the future. He also believes that DoubleClick clients will see the deal not as a threat, but

as

a tool
that makes advertising easier. "I think they will see this as a best
-
of
-
breed combination

the leading platform technology
provider and the leading monetization engine."

Future


Kevin O'Connor :

Received his bachelor's degree in 1983 from the
University of Michigan and co
-
founded Cincinnati
-
based Intercomputer Communications Corporation, a
microcomputer to mainframe inter
-
connectivity
company which achieved annual revenues of $35
million. When ICC was acquired by DCA in 1992,
O'Connor eventually became its Chief Technology
Officer and a Vice President of Research and
Development.

Due to the growth of the nascent World Wide Web, O'
Connor quit DCA in 1995. During 1995 O'Connor met
Chris Klaus who had just started Internet Security
Systems (ISS). O'Connor was the initial investor and
recruited Tom Noonan to be CEO. ISS went public in
1999 and was sold to IBM Corp. for $1.4billion in
2006.

In late 1995 O'Connor began DoubleClick with Dwight
Merriman. In 2005 the company was sold to private
equity firm Hellman Friedman for about $1.2billion.

Today, Kevin O'Connor runs the venture capital firm
O'Connor Ventures (www.oconnorventures.com)
where he invests in early stage companies which
include 9star (www.9star.com), Travidia
(www.travidia.com), Procore (www.procore.com) and
CampusExplorer.

Founders’ Profile


Dwight Merriman
:

Dwight is also the Chairman and Co
-
Founder of
ShopWiki and Panther Express, and a director at web
photo/video sharing company Phanfare. He co
-
founded DoubleClick in 1995 and served as its CTO
for ten years.


Dwight is an investor in ShopWiki, Panther Express,
First Look, Music Nation, Silicon Alley Insider,
phanfare, 9star, and foundvalue, and a Director of
phanfare. He owns many blue
-
chip technology
stocks, including Dell, Cisco, Microsoft, Intuit, HP, and
Intel (and others). He has positions in hedge funds,
private equity funds, and equity index funds.


Founders’ Profile



Entity Name:

YouTube, Inc.


Year Established:

2005


HQ Location:

1000 Cherry Ave. Second Floor




San Bruno, CA , USA


Founders:


Chad Hurley, Steve Chen &


Jawed Karim


Website:


www.youtube.com


Acquisition Cost:

$1.65 billion


Google Stock

Basic Facts

YouTube, Inc.


YouTube is a video sharing website where users can upload,
view and share video clips. The San Bruno
-
based service uses
Adobe Flash technology to display a wide variety of video
content, including movie clips, TV clips and music videos, as
well as amateur content such as videoblogging and short
original videos.

Unregistered users can watch most videos on the site, while
registered users are permitted to upload an unlimited number of
videos. Some videos are available only to users of age 18 or
older (e.g. videos containing potentially offensive content). The
uploading of pornography or videos containing nudity is
prohibited. Related videos, determined by title and tags, appear
onscreen to the right of a given video. In YouTube's second
year, functions were added to enhance user ability to post video
'responses' and subscribe to content feeds.

YouTube policy does not give permission for anyone to upload
content not permitted by United States copyright law, and the
company frequently removes uploaded infringing content.
Nonetheless, a large amount of potentially infringing content
continues to be uploaded Generally speaking, unless a
copyright holder reports them, YouTube only discovers these
videos via indications within the YouTube community through
self
-
policing. YouTube generally identifies video content through
search terms that uploaders associate with clips.

Starting October 2007, YouTube is allowing media companies to
block their copyrighted video content that was loaded onto
YouTube without seeking any prior permission.

About The Service

.

Few statistics are publicly available regarding the number
of videos on YouTube. However, in July 2006, the company
revealed that more than 100 million videos were being
watched every day, and 2.5 billion videos were watched in
June 2006. 50,000 videos were being added per day in
May 2006, and this increased to 65,000 by July.

In August 2006, The Wall Street Journal published an
article revealing that YouTube was hosting about 6.1 million
videos (requiring about 45 terabytes of storage space), and
had about 500,000 user accounts. As of December 14th
2007, a YouTube search for "*" returns about 59,500,000
(mostly likely more) videos (the asterisk is a commonly
-
used wildcard character in search engines, therefore
showing all videos).

About The Services

contd.


As of November 2007 YouTube plays back videos limited in both size and quality. The size is limited to pixel dimensions of
320 by 240 and the quality is limited to a bitrate of around 314kbit/s with a frame rate dependent on the uploaded
video.[58]YouTube limits the playback size and quality by re
-
encoding the user's uploaded video at the time of upload. In
2006 YouTube permitted playback at higher quality, larger sizes, and in stereo, but some time after January 2007 YouTube
applied quality reductions to new uploads.

YouTube's video playback technology is based on Macromedia's Flash Player 7 and uses the Sorenson Spark H.263 video
codec. This technology allows the site to display videos with quality comparable to more established video playback
technologies (such as Windows Media Player, QuickTime and RealPlayer) that generally require the user to download and
install a web browser plugin in order to view video. Flash also requires a plug
-
in, but Adobe considers the Flash 7 plug
-
in to
be present on approximately 90% of online computers. The video can also be played back with third
-
party media players
such as GOM Player, gnash or VLC.

YouTube converts videos into .FLV (Adobe Flash Video) format after uploading. The extension is then stripped from the file
(Extension can be found again with TrID[citation needed]). The different files are stored in obscurely named subdomains.
YouTube also converts content to other formats so that it can be viewed outside of the website.

YouTube officially accepts uploaded videos in .WMV, .AVI, .MOV, MPEG and .MP4, formats. Users can view videos in
windowed mode or full screen mode and it is possible to switch modes during playback without reloading it due to the full
-
screen function of Adobe Flash Player 9.

YouTube files contain an MP3 audio stream. By default, it is mono
-
encoding with a 65kbit/s rate at 22050 Hz. However, it is
possible to get a stereo audio track if the movie file is manually converted to FLV format using a program such as ffmpeg for

Linux, ffmpegX for Macintosh or the commercial Riva FLV Encoder for Windows.

On June 18, 2007, YouTube launched its online video editing tool, YouTube Remixer. The tool allows users to edit their
YouTube videos online, although the editing tools are very limited.

About The Technology


Before being purchased by Google, YouTube declared that its business model was advertisement
-
based, making 15 million dollars pe
r month.
Some industry commentators have speculated that YouTube's running costs


specifically the bandwidth required


may be as high a
s 5 to 6
million USD per month, thereby fueling criticisms that the company, like many Internet startups, did not have a viably implem
ent
ed business
model. Advertisements were launched on the site beginning in March 2006. In April, YouTube started using Google AdSense. YouT
ube

subsequently stopped using AdSense but has resumed in local regions.


Advertising is YouTube's central mechanism for gaining revenue. This issue has also been taken up in scientific analysis. Don

Ta
pscott and
Anthony D. Williams argue in their book Wikinomics that YouTube is an example for an economy that is based on mass collaborat
ion

and makes
use of the Internet. "Whether your business is closer to Boeing or P&G, or more like YouTube or flickr, there are vast pools
of
external talent that
you can tap with the right approach. Companies that adopt these models can drive important changes in their industries and re
wri
te the rules of
competition" "new business models for open content will not come from traditional media establishments, but from companies s
uch

as Google,
Yahoo, and YouTube. This new generation of companies is not burned by the legacies that inhibit the publishing incumbents, so

th
ey can be much
more agile in responding to customer demands. More important, they understand that you don't need to control the quantity and

de
stiny of bits if
they can provide compelling venues in which people build communities around sharing and remixing content. Free content is jus
t t
he lure on which
they layer revenue from advertising and premium services".


Tapscott and Williams argue that it is important for new media companies to find ways of how to make profit with the help of
pee
r
-
produced
content. The new Internet economy that they term Wikinomics would be based on the principles of openness, peering, sharing, a
nd
acting globally.
Companies could make use of these principles in order to gain profit with the help of Web 2.0 applications: “Companies can de
sig
n and assemble
products with their customers, and in some cases customers can do the majority of the value creation”. Tapscott and Williams
arg
ue that the
outcome will be an economic democracy.


There are other views in the scientific debate that agree with Tapscott and Williams that value creation is increasingly base
d o
n harnessing open
source/content, networking, sharing, and peering, but that argue that the result is not an economic democracy, but a subtle f
orm

and deepening of
exploitation, in which labour costs are reduced by Internet
-
based global outsourcing.


The second view is an example taken by Christian Fuchs in his book "Internet and Society". He argues that YouTube is an examp
le
of a business
model that is based on combining the gift with the commodity. The first is free, the second yields profit. The novel aspect o
f t
his business strategy
is that it combines what seems at first to be different, the gift and the commodity. YouTube would give free access to its us
ers
, the more users, the
more profit it can potentially make because it can in principle increase advertisement rates and will gain further interest o
f a
dvertisers. YouTube
would sell its audience that it gains by free access to its advertising customers.

"Commodified Internet spaces are always profit oriented, but the goods they provide are not necessarily exchange value and ma
rke
t oriented; in
some cases (such as Google, Yahoo, MySpace, YouTube, Netscape), free goods or platforms are provided as gifts in order to dri
ve
up the number
of users so that high advertisement rates can be charged in order to achieve profit."

Business/Revenue Model


YouTube was founded by Chad Hurley, Steve Chen and Jawed Karim, who were all early employees of PayPal. Prior to
PayPal, Hurley studied design at Indiana University of Pennsylvania. Chen and Karim studied computer science together at
the University of Illinois at Urbana
-
Champaign. The domain name "YouTube.com" was activated on February 15, 2005, and
the website was developed over the subsequent months. The creators offered the public a preview of the site in May 2005, six
months before YouTube made its official debut. Like many technology startups, YouTube was started as an angel
-
funded
enterprise from a makeshift office in a garage. In November 2005, venture firm Sequoia Capital invested an initial $3.5 milli
on;

additionally, Roelof Botha, partner of the firm and former CFO of PayPal, joined the YouTube board of directors. In April 200
6,
Sequoia put an additional $8 million into the company, which had experienced huge popular growth within its first few months.


During the summer of 2006, YouTube was one of the fastest growing websites on the Web and was ranked the 5th most
popular website on Alexa, far out pacing even MySpace's rate of growth. According to a July 16, 2006 survey, 100 million
video clips are viewed daily on YouTube, with an additional 65,000 new videos uploaded every 24 hours. The website
averages nearly 20 million visitors per month, according to Nielsen/NetRatings, where around 44% are female, 56% male, and
the 12
-

to 17
-
year
-
old age group is dominant. YouTube's pre
-
eminence in the online video market is substantial. According to
the website Hitwise.com, YouTube commands up to 64% of the UK online video market.


On October 9, 2006, it was announced that the company would be purchased by Google for US$1.65 billion in stock. The
purchase agreement between Google and YouTube came after YouTube presented three agreements with media companies
in an attempt to escape the threat of copyright
-
infringement lawsuits. YouTube will continue operating independently, with its
co
-
founders and 67 employees working within the company. The deal to acquire YouTube closed on November 13, and was,
at the time, Google's second largest acquisition.


Within a relatively short time, YouTube has experienced much well
-
publicized growth, fueled primarily by online word
-
of
-
mouth. The website received an early surge of publicity when it hosted the popular Saturday Night Live short Lazy Sunday.
However, YouTube's official policy prohibits submission of copyrighted material, and NBC Universal, owners of SNL, soon
decided to take action. In February 2006, NBC asked for the removal of some of its copyrighted content from YouTube,
including Lazy Sunday and 2006 Olympics clips. The following month, in an attempt to strengthen its policy against copyright
infringement, YouTube set a 10
-
minute maximum limit on video runtime. Although earlier users were grandfathered in, new
members cannot upload videos over 10 minutes long. Established content creators can apply to have this restriction lifted. Th
e
restriction can easily be circumvented by uploaders, who simply split the video.

About The Company


In August 2006, YouTube announced its goal, within 18 months, to offer every music video ever made, while remaining free of
charge. Warner Music Group and EMI have confirmed that they are among the companies in talks to implement the plan. In
September 2006, Warner Music and YouTube signed a deal, in which the website will be allowed to host every Warner music
video while sharing a portion of the advertisement income. Moreover, user
-
created videos on YouTube will be allowed to use
Warner songs in their soundtracks.


On October 9, 2006, CBS, Universal Music Group, and Sony BMG Music Entertainment announced an agreement to provide
content to YouTube. On January 29, 2007, YouTube co
-
founder Chad Hurley announced that the online video service will pay
its active user
-
contributors (who should actually be the true copyright owners) a portion of the website's advertising revenue.
However, at the World Economic Forum, Hurley did not mention an exact amount of money that YouTube will pay the
contributors.

Time featured a YouTube screen with a foil mirror as its annual 'Person of the Year', citing user
-
created media such as
YouTube's, and featuring the site's originators along with several content creators. The Wall Street Journal and New York
Times have also reviewed posted content on YouTube, and its effects upon corporate communications and recruitment in
2006. PC World Magazine named YouTube the 9th of the Top 10 Best Products of 2006.



YouTube was founded by three former PayPal employees, who, witnessing the boom of online grassroots video, realized the
need for a decent service that made the process of uploading, watching and sharing videos hassle
-
free. They registered the
domain YouTube.com on February 15th, 2005 and developed the site over the following months from a garage in Menlo Park.
In May 2005 they launched in a public beta, and in November, YouTube made its debut with an $3.5 million of funding from
Sequoia Capital.


To get a decent start and attract the initial crowd they were looking for


teenagers, college students, hobbyists, film
-
makers


they came out with a contest that promised to give out one iPod Nano to a random member each day, which ran for two
months. This contest worked on a point
-
based system, for example one point was rewarded for signing up, one for inviting
others, another one for posting a video, etc. The more the points you gained, the higher the chance of winning you had. This
was a significant action that got YouTube noticed by the masses and gave it a headstart as per the signups. After all, if you

knew you had a chance to winning a $250 iPod Nano just by signing up and posting that Uncle Bob's funny biking incident clip
you've had on your hard
-
drive for the past few years, wouldn't you?

About The Company
-

contd.


Google paid YouTube in Google stock meaning that the owners could have a Google stock portfolio worth a lot more than $1.6
billion in a few years time. YouTube investors Sequoia are rumored to take $480 million of this stock portfolio.


Despite recent criticisms , the overall feeling is that the acquisition is a good thing for both companies.

According to the Google press release the two companies will continue to work independently and maintain their own brands.
"Following the acquisition, YouTube will operate independently to preserve its successful brand and passionate community."


Putting criticisms aside you need only look a the amount of users and growth of YouTube to see why Google bought them. 20
million regular users, the Top 10 site on the net, and 100 million video views a day. Google itself is already the 3rd busies
t s
ite
on the internet, and now that it owns YouTube the company has control over a tremendous number of internet users, probably
a higher percentage than anyone else!


YouTube has previously received a lot of criticism. In summary the criticisms are:



Lack of a business model


the company has not proven to be profitable and has huge bandwidth costs.



Copyright issues


with so much copyrighted content appearing on the site it is considered just a matter of time before


YouTube gets sued.



Censorship


it is questioned whether YouTube is responsible enough about what it allows, and more importantly doesn't


allow, on its site. It has received accusations of double standards with regards to freedom of speech.

What Google can do for YouTube

1. Lack of a Profitable Business Model:

Google has the experience to make YouTube profitable without being too greedy and sacrificing the user experience.
Monetization possibilities include:

a) Video adverts in YouTube videos:

I don't know if you noticed but Google has also started introducing video adverts into AdSense adverts using the same
contextual system they use for the text based adverts. Google could possibly integrate these adverts to be shown every now
and then at the end of a YouTube video. Not in all videos but just in say 1 in 5 videos and also make sure the adverts match
the theme of the video. Google has a reputation for acting responsibly with adverts. They don't overwhelm the consumer. Just
compare its search engine to MSN and Yahoo as an example. I'm sure Google could integrate ads into YouTube without
sacrificing userbility. Given that advertisers are becoming increasingly annoyed with ad skipping PVRs and are looking for
other more effective ways to advertise, YouTube could become a popular platform for advertisers.

Why YouTube



b) Selling premium video:

Google already sells premium video on video.google.com and it could attempt to do the same on YouTube or somehow
integrate the premium Google Videos with YouTube.

c) Licensing content:

There is a possibility that Google and YouTube could license the content on YouTube to TV networks in a similar way to
Blip.TV.


2. Copyright Issues:

The company that bought YouTube had to be impartial to content producers. For example if Disney bought YouTube then
every other content producer would be giving the company hassle in an attempt to knock out the competition.

Google fits the bill perfectly and provides a non
-
biased distribution system for large content producers which will somewhat
help douse any fiery copyright concerns.

Google has had its fair share of legal battles and has a very strong legal team. Google has won and fended off a growing
number of copyright cases. If anyone can fight a legal battle for YouTube it is Google.

Additionally both Google and YouTube have struck a series of deals with content owners Universal Music, Sony BMG and
CBS which helps the copyright situation somewhat.


3. Censorship:

Google has done well to organize the world's websites while maintaining fair censorship that doesn't forfeit freedom of speec
h
(although I'm sure some won't agree with me on this one). In fact Google has tended to stand up for freedom of speech. When
MSN and Yahoo sucked up to China's censorship laws Google tried to fight it. Of course Google eventually gave into China,
but at least they tried. Google could effectively channel its vision and expertise on "managing" freedom of speech towards
YouTube allowing YouTube to manage its video library more responsibly.


With such a huge video library and more video viewers than anyone, Google and YouTube could monopolize the
video sharing market. Although there is some healthy competition around, there is still a potential threat of a
monopoly.

Why YouTube


contd.

Acquisition Strategy

Google's past conquests have been varied, but they have all been smallish Internet companies that are doing cool stuff. List
ed

below is a brief about how they were acquired, and what has changed in the post
-
Google era.


Deja News (Google Groups)

-

This web
-
based Usenet archive started life in 1995. Between 1999 and 2000, Deja

overexpanded into a comparison shopping portal. Losing money, Deja sold the shopping component to eBay in late 2000, and it

became part of Half.com.

In February 2001, the big G entered the game and snatched up the Usenet archives, reintroducing them as Google Groups and

extending them back to 1981 with the help of private collections. Today, Google Groups features Deja's Usenet, mailing lists,

and Yahoo! Groups
-
esque features with a Gmail
-
like interface. Outride
-

Outride, Inc. was an information retrieval spin
-
off from

Xerox Palo Alto Research Center (PARC). Google acquired certain technology assets in September 2001 and quickly

integrated them into its search engine. Outride.net currently forwards to Google. Applied Semantics
-

Google bought up this

contextual advertising company in April 2003 and used it for its AdSense/AdWords services, allowing it to compete with

Yahoo!'s Overture.


Kaltix
-

This 3
-
person personalized search startup company was quickly picked up by Google in September 2003. Kaltix

formed the foundation of Google Personalized Search. Kaltix.com currently forwards to Google.


Blogger
-

Blogger was the flagship product of Pyra Labs. For a long time, Blogger was free of fees and ads, but it wasn't

making money. After the original capital for Pyra dried up, a number of employees resigned, including the co
-
founder. In an

effort to become profitable, Pyra introduced the ad
-
powered Blogspot hosting and the pay Blogger Pro service. It wasn't quite

enough, and Pyra needed more resources, so Google stepped in during 2003. Blogger was redesigned by professional web

designers in May 2004, and is now one of the most
-
used blogging tools.


Picasa
-

Picasa, a $30 photo organizer program, was first released in October 2001. In May 2004, Picasa announced

integration with the Google
-
owned Blogger, and in July 2004, Google bought the company. Soon, Picasa was free, and it

featured Google trademarks like an "I'm Feeling Lucky" button. The software routinely wins awards from

leading PC publications.


Keyhole
-

Keyhole is a digital mapping company founded in 2001. Presumably to cut out the middleman for the not
-
yet

released Google Maps, Google bought them in October 2004. Since then, there has been an immediate price reduction for the

Keyhole software (from $69.95 to $29.95), and integrated satellite photos in Google Maps.


Google : Acquisition History (1/2)



Zipdash
-

Google acquired this traffic/mapping company in 2004 and put it to work in Google Maps. Although the acquisition

was not publicized, Zipdash is mentioned in Google's 2004 annual report.


Where2
-

This Australian mapping company was also mentioned in the 2004 annual report, but not much is known about it. It

also had something to do with Google Maps.


Urchin
-

In March 2005, Google acquired Urchin, a web analytics and statistics company. Though we haven't yet seen what

they're up to with it, it will probably be used with AdWords/AdSense, with statistics about clickthroughs and such.


Dodgeball
-

Google acquired this two
-
person cell phone social networking company in May 2005. The company was looking

for investors, and Google apparently fit the bill. So far, nothing has happened with this company, but it will probably have

something to do with Google Mobile. So those are the companies Google has acquired.


A common misconception is that Google has only been acquisitive since its (in)famous IPO. As shown here, however, the IPO

has only made it easier for Google to buy companies it likes. Pre
-
IPO, from 2001 to August 2004, Google acquired 6

companies.

Google : Acquisition History (2/2)

Google : Acquisition Analysis (1/2)


Most acquisitions fall into a well
-
defined set of groups. Initially those groups were search, advertising, maps and a general
Internet/Social Networks/Blogging category. More recently, they have added mobile, enterprise and security acquisitions
while continuing to build the other categories.


Internet/Social Networking/Blogging:

Google has done a good job of stitching these properties together. E.g how Blogger, Feedburner,
Picasa and AdSense are all integrated together.


Search
: Google was not too proud to acquire technology it didn't already have. In their quest to become the search leader, there wa
s
willingness to augment internal development with astute acquisitions from the earliest days


Advertising:Google

has added to advertising capabilities as needed and has built a juggernaut. Now that the contextual and search
advertising sectors are dominated by Google, they are working on developing leadership in display advertising via the DoubleC
lic
k purchase.
Radio, newspapers and cell phones are next on the agenda


Mapping
: Google wasn't the first to introduce mapping but they have become practically the standard against which others are measure
d.
These acquisitions helped along the way.


Enterprise
: With Google Apps, Google wants to challenge Microsoft in business productivity software. They have essentially bought the a
bil
ity
to compete against Microsoft Word and PowerPoint. Now, via the Postini acquisition, they are adding security features, a must

ha
ve for most
corporations. Another example of building out a full
-
featured solution.


Security
: Google prides itself on being a good Internet citizen. Look for more acquisitions in this space. Google has only scratched
the

surface
with the GreenBorder and Postini acquisitions but they are doing a nice job of integrating Postini with Google Apps. Will the
y b
uy a smaller anti
-
virus company like Panda to round out their offerings? Time will tell but the move would make sense.


Mobile
: Acquisitions have not quite spelled out the direction Google is taking in the mobile space, though it seems they are majorl
y t
argeting
Mobile advertisement, they have not dropped enough hints and leaked enough secrets therefore the blogosphere has started an e
ndl
ess cycle
of speculation especially after the announcement on 4
th

of Decemeber. Google Inc. confirmed its plans to bid for a prized piece of the airwaves
in an upcoming government auction, further underscoring the Internet search leader's determination to shake up the wireless m
ark
et and plumb
more profits from mobile phones. In a mild surprise, Google will enter the competition without a partner more experienced in
the

wireless
industry. The bidding for the swath of 700
-
megahertz spectrum that Google wants will start at $4.6 billion, with analysts predic
ting the final price
will be substantially higher. Building out the network for national coverage might cost an additional $5 billion to $7.5 bill
ion
.


Most acquisitions are very small. 1
-
2
-
3 people and public generally never hears about them.


Hire by buying as the acquisition Modus Operandi.


Google “acquires” people, more often than not, in buying out small tech plays


to leverage innovation


Engineering staffing strategy seemed to be behind Google’s 2005 “acquisition” of Dodgeball, a two
-
person start
-
up based on a gra
d school
project.


The reason to be acquired is that Google gives them

Web entrepreneurs

a platform that they might otherwise not be able
to get.


As markets consolidate these little companies often cannot get enough ‘mindshare,’ even though their technology is really
good. Any one of these people are a reasonable

acquisition

candidate.


Google has been acquiring social networks that work on cell phones. This leads us to believe that the company understands
the basics of what they need to be successful in the mobile arena
--

hardware, phone OS, search, advertising


Google recently announced that they have mobile ads available as part of the AdWords network
-

and the addition of the social ne
tworks is the
last piece needed to roll out a full
-
featured mobile solution.


Google is willing to buy companies as needed, they have been very effective at integrating the acquisitions into Google's
major lines of business.


The mobile sector seems to be a work in progress but it is clear Google won't hesitate to buy whatever they feel will round o
ut
their offering.

Google : Acquisition Analysis (2/2)

Google Inc. looks for ideas that are ``really crazy'' when sizing up potential purchases. The Internet company's top dealmake
r s
aid. ``We

look at everything very carefully,'' Salman Ullah, Google's director of corporate development, said in a speech at a meeting
of
the Los

Angeles Venture Association. ``The really crazy ones do really well.''


Google, owner of the most
-
popular Internet search engine, has about 15 people working on acquisitions that meet with dozens of

companies a week, Ullah said. Mountain View, California
-
based Google responds to every e
-
mail pitching a company, while phone ca
lls

have a 10 percent response rate, he said.


The search engine, which had more than $11 billion in cash at the end of the fourth quarter, last year bought video
-
sharing site

YouTube

Inc. and DMarc Broadcasting Inc. to move into the market for radio advertising. Google also bought smaller startups including

on
line

software company JotSpot Inc.

``The crazy ones mean they ignore the usual restraints of investment levels required or design parameters or `Gee I need more

se
rvers

than anyone ever thought was possible','' Ullah said. ``When you free yourselves from these constraints, you create crazy, co
ol
things.''


Google wants companies that can build revenue streams from their users, instead of buying firms with a lot of users that don'
t b
ring in

much in sales, Ullah said. ``We don't do traffic for traffic's sake,'' he said. ``It has to be highly monetizable.'' In the
pas
t Google has also

used a technique called Monte Carlo analysis to size up a deal, where computer algorithms are used to answer questions.



Google's intention, is to become the largest advertising network on the planet, and the company is not leaving a single stone

un
turned in its

quest to get there. With the billions Google has in the bank, along with marketable securities that it has ready to spend, th
e a
cquisition trail

has not been light to the company. In fact, it's acquiring companies left and right
--

some are high
-
profile deals while others
are significant

but small.


While not all of Google's acquisitions directly point to its goal of an all
-
powerful advertising behemoth, there are peripheral
industries that

produce acquisitions that are meant to help Google keep its stranglehold on the web browser and access to it where it can dis
pla
y its

advertising, help connect buyers and sellers and take its traditional cut of the transaction. In fact, two of Google's larges
t a
cquisitions to

date
--

YouTube and DoubleClick
--

are directly related to allowing the company to maintain its advertising grip while it expand
s its

tentacles into any area that it can to allow for sustainable control over the face of advertising. One thing still slips past

ma
ny: Google still

makes virtually all of its money from web advertising. Make no mistake: protecting that is Google's #1 priority.


While it does that, though, Google's 11 company or technology purchases in the last year have helped the company fill gaps in

it
s product

portfolio for customers from offering web
-
based documents to integrating as many neat features into Google Earth as possible (wh
ich still

makes a pittance in "pro" subscriptions). Interestingly, though, competitor Microsoft has made about 13 acquisitions during t
he
same time

period, with the most recent being aQuantive (a pure
-
play response to Google's huge advertising threat on the web).

Google : Acquisition Strategy
-

Overview

In November this year GOOGLE Inc announced that it is offering $11.4 million in prizes for people who build the best softwar
e

to enhance the company's upcoming mobile phone operating system. The company is developing a free mobile phone software

package it says will make it easier to surf the web on mobile devices. It also will give Google more opportunities to sell ad
s a
nd

services.


The operating system will be based on computer code that can be openly distributed among programmers, which Google

hopes will encourage developers to create software and improvements that could spawn new uses for smart phones.

Winning offerings could encompass simple aesthetic improvements such as personalised home screens or more complicated

social
-
networking programs that merge data from the web
--

such as maps or personal web pages
--

with data from users‘

phones such as contact information or the phones' geographic locations.


As part of the Android Developer Challenge, a panel of judges will pick 50 winners from entries received from January 2 to

March 3. In the first phase of the competition, those winners will each get $28,500 and be eligible for 10 awards of $100,000

and another 10 $275,000 awards.


The second phase of the competition will feature another $5 million in prize money.


Google did not specify how the applications would be judged. The company only said the winning programs would ``provide

consumers with the most compelling experiences''. Google also released a tool kit for working on the new platform, which is t
o

be released in the second half of next year.


Four mobile phone manufacturers
--

Motorola Inc, Samsung Electronics Co, HTC and LG Electronics Inc
--

have agreed to use

Android in some of their phones. Google chief executive Eric Schmidt said he eventually hoped the software would be

integrated into thousands of different devices. Twenty
-
nine other companies have signed on as members of the alliance.


Android will compete with mobile operating systems made by Microsoft Corp, Palm Inc, Research In Motion Ltd, and Symbian,

which is owned by Nokia Corp and several other major phone manufacturers.

Google : Acquisition Strategy
-

The Promoter

Google : Acquisition Strategy
-

The V.C

Just as it has done to companies in the software, publishing, and advertising industries, Google is becoming a thorn in the s
ide

of venture capitalists. The owner of the world's largest Web search engine is scooping up young tech outfits for a relative

pittance, giving itself first dibs on hot
-
growth technologies and in some cases boxing VC funds out of potential big
-
bang

acquisitions and initial public offerings.


Google (GOOG) has begun making VC
-
style investments to the tune of about $500,000 or less in promising startups, often

buying those companies afterward, according to partners at Silicon Valley VC firms who spoke on condition of anonymity. In

an effort to keep spotting promising deals, Google has been hiring a stable of finance pros. And it has invested more than $1

million in a Mumbai
-
based investment firm called Seedfund to gain access to technology such as automatic translation

software that could help spur growth in India.


"Google has easy money," says Pravin Gandhi, a managing partner at Seedfund, which also has raised some of its $15 million

from Motorola (MOT) and VC firm Mayfield Fund. So far, Seedfund has taken $500,000 to $750,000 stakes in four companies,

including an online news site. On the horizon could be investments that help Google add specialized channels, such as

information about autos, to its Web site or cultivate technology that can translate Web content from English into Indian

languages, Gandhi says. "It's a somewhat less risky way to participate in the Indian growth story," he says.


By staking startups, Google hopes to avoid paying the higher prices companies can fetch once they take funding from

traditional VCs. It's possible that some of its investments are conditioned on Google having first
-
acquisition rights should a

target opt to sell, some VCs speculate. Google didn't respond to calls requesting comment. Making investments in startups

also can help Google use more of its $4.5 billion in cash to cultivate tools that complement existing products. Google recent
ly

started a program called Gadget Ventures to fund entrepreneurs who build online tools using Google's technology.

The zeal for dealmaking at Googleplex mirrors an increase in corporate venture investing to its highest level in years. "They
're

back, like the swallows returning to Capistrano," says Paul Maeder, a managing general partner at Highland Capital Partners.

"We're in a wave now where corporate venturing is increasing again."


Companies that aren't full
-
time investors pumped $1.3 billion into 390 venture capital deals in the first half of 2007, up 30%

from the $1 billion invested in about 350 deals a year earlier, according to an Aug. 30 report by PricewaterhouseCoopers and

the National Venture Capital Assn. (NVCA), based on data from Thompson Financial (TOC). That's the most invested since

2001, just before the bottom fell out of the tech industry. The big spenders include Intel (INTC), which invested $112 millio
n i
n

U.S. startups in the first half of 2007, vs. $79 million a year earlier, and Motorola, which invested nearly $30 million in t
he
first

half of the year and says its overall 2007 investments should top the record set in 2006.

Google : Possible Acquisition Targets

These companies are tossed around quite a bit by bloggers as possible Google fodder, and they would integrate well with Googl
e's

current

offerings and its future strategy. They're all pretty small companies, but quickly becoming popular among web users in the kn
ow.



Technorati
-

If Google is the average person's homepage, Technorati is the homepage of the underground, tech
-
savvy web User

Technorati is a blog portal whose average visitor enjoys podcasts, Wikipedia, and the Daily Show with Jon Stewart. Providing
mor
e cutting

edge results than a normal search engine, Technorati would integrate well with Google News and/or Blogger, and could perhaps

fe
ature

blogs on the Google Personalized Homepage. Technorati is somewhat similar to Bloglines, which was purchased by Ask Jeeves rec
ent
ly.


Buzznet
-

Yahoo! beat Google to the punch by acquiring Flickr, one of my candidates in the first draft of this article. Like Flickr, Bu
zz
net is

a photo hosting and sharing service that features unique tagging features. It is possible to browse by tag and see all sorts
of
interesting

stuff. Buzznet would probably jibe with Picasa's Hello photo posting service, perhaps include some sort of photo
-
Blogger, and in
tegrate

well with Orkut.


Koders
-

Koders is a search engine for open source code that works remarkably well. With the recent push for plugins for Google Deskto
p

search, Koders would be an interesting addition to Google's software initiatives. It would make sense to combine with Google
Cod
e and

Google Linux Search in some way.


GuruNet (Answers.com)
-

Recently, Google stopped linking to definitions on Dictionary.com, and started linking to Answers.com instead.

Answers features a wealth of information about different topics, and uses Wikipedia for much of it. Since Wikipedia's non
-
profi
t status rules

it out as a potential Google acquisition, Answers.com would be the next best thing. It also would help improve Google Q&A qui
te
a bit.

Interestingly, GuruNet is a publicly traded company (AMEX: GRU) with a market cap of about $100 million.


del.icio.us
-

This social bookmarking and tagging application could be used to improve Google search results, and perhaps integrate with

Orkut in some way. Were Google to buy Buzznet as suggested above, this would work well with it.


StumbleUpon
-

This unique browser plugin and service would probably improve Google results and add a new level to the venerable

search engine. It would probably combine with the Google Toolbar in some fashion, since the two have some similar functions.


Propel
-

Similar to Google Web Accelerator, Propel claims to speed up your browsing experience. The company is run by optical mouse

inventor Steven T. Kirsch, who is no stranger to buyouts: his Frame Technology Corp. was purchased by Adobe, and his Infoseek

wa
s

bought by Disney. This could help Google out with Web Accelerator, which it has been having trouble with.

Key Insights For Startups (1/2)


What makes deals fail?

: Both Microsoft and Google were clear

the biggest obstacle is lack of openness and honesty on
the part of the entrepreneur. Their advice: disclose right up front anything that may be a problem for the deal. Disclose tha
t
you have a contract with a competitor of theirs whose terms you can’t legally disclose, for instance. If they discover
something later, the value of your deal goes immediately from something to zero. Not to half, but to zero. If you disclose
tough issues up front, they can work with you to make the deal happen. If you are not open, the trust is gone.



As might be expected, the most successful deals come in through working together:

At Microsoft, acquisitions
“come from a relationship, then synergy with a market dynamic and customer.” The startup should do its homework,
understand the value of what you have to offer and how that fits the potential acquirer. “We are involved in a large number
of the AlwaysOn 100 companies” in a variety of ways. At Google, the engineering and product people have to champion
the deal. At IAC, introductions through VCs and investment bankers also work. Postini and Zenter are a fine example.



Deal sizes tend to be small:

Google prefers smaller acquisitions though does some larger ones, as does Microsoft.
Even Intel says it’s easier to integrate smaller teams: “We historically have done a lot of larger deals, but they haven’t al
l
worked well for us.” Google is acquiring at the rate of 2 companies per month, Microsoft at 3. All said Google wont hesitate
shelling a billion dollars if it sees the fit and scope for monetization.




Will you get swallowed or will you retain some autonomy?
: The answer depends on the role your company will play
to the acquirer. If you are small, you are more likely to fill a gap and get absorbed into the culture and existing teams. I
f
you are larger, you may retain more autonomy. At IAC, they look for business leaders who will continue to run their
business for some time. “We try to create the right incentives to keep people engaged and motivated” with some pretty
interesting equity structures. Google says it is “geographically agnostic. We don’t insist that people relocated. We are
distributed and we know how to do distributed development. Talent is everywhere in world, we want access that talent.




What types of companies does Google want to acquire?:
Google is an engineering centric company, focused on hiring
the best computer scientists in the world. As per Salman Ullah, Google's director of corporate development “Most of what
we do is about building products internally. Now and then we seek out things to acquire, more efficient to buy in those
cases. In that context M&A is important. We have 3 businesses
--

search, ads, apps. We don’t do many acquisitions in the
search area

we have lots of great search engineers so the bar is very high. Advertising

look beyond just online. Apps
are very broad. We look for strong engineering talent, high IQ and great IP. If the company is related to traffic, we need
high value traffic that can generate money. We are very careful on traffic deals, don’t want to repeat 1999 or 2001.”



Focus on the user
:This is possibly the single most important thing for entrepreneurs to remember. "Every startup
that dies fails to do this," Graham says. "A lot of startups focus on their competitors or lawsuits, but what really kills
startups is if users think it's boring. It's a much quieter and dangerous reason, but if users don't care about your
product, that will just kill a company.“ Paul Graham, a founding partner of Y Combinator, the startup factory that
funded Zenter says "The way to get acquired really fast is to not focus on it. If people get the impression that you
want to get bought, you won't."



Ignoring limitations lets you tackle problems from a different angle:

It's not enough to just build an existing
offline product (ie. Microsoft Word or PowerPoint) and port it onto the web. Zenter looked at how they could build a
slideshow application that really takes advantage of the Internet, like adding community slideshows, delivering
presentations online in real
-
time and dragging and dropping content from the web into a presentation. "Every system
and every platform has limitations. Some people look at a problem and say, You can't do that because a browser
won't let you and proceed to work around those limitations," says Crosby, who spent his first day of orientation at the
Google campus yesterday. "What we did was look at what we wanted to happen and then found a way around the
limitations."



Don't be afraid to tackle the giants:

Big companies like eBay (EBAY) and Microsoft (MSFT) may have more
manpower and financial resources, but they also have disadvantages. "Often times, they're not as driven. They're not
willing to make the sacrifice, like two guys sleeping on air mattresses, to make their product really good," says
Graham. Case in point. Google bought YouTube, which was far superior to Google Video. eBay bought PayPal
because clearly, no one was liking eBay's Billpoint. Big companies also have restrictions that startups don't have to
worry about. Adds Graham, "Microsoft has to think about web
-
based applications that don't threaten Windows. A
company like Zenter doesn't care about hurting Windows. All they want to do is make the best application.“



Pay attention to the details:

When your product is 80% done, that means you have another 80% to go. "To get
something pretty close is easy, but you need to concentration on the little things. That's what will set you apart from
the competition," says Crosby. "You can have the best algorithm in the world and the fastest process, but at the end if
the day, if the user struggles to find out how to click a box or delete something, then you don't succeed."

Key Insights For Startups (2/2)