John Paczkowski

Recent Posts by John Paczkowski

Who Will Google Acquire Next?

Google made a record 48 acquisitions last year and hopes to make even more this year, continuing its aggressive M&A pace despite soaring start-up valuations.

And with nearly $35 billion in cash in hand and aggressive new CEO and co-founder Larry Page, it certainly has the means and drive to do it.

As CFO Patrick Pichette said during the company’s first quarter earnings call:

“We have the position to be able to jump and make big acquisitions…In the case of large transformative ones, we look at them all the time, right? If we had one that actually made sense to finally accelerate a big piece of our agenda, we would do it.”

So given those parameters, what makes sense?

Why not consider a few obvious candidates:

Twitter

This is the option that is most obvious and widely talked about in Silicon Valley.

The reasoning: Google needs a strong social networking offering and most of its efforts to create one organically have failed. Miserably, in fact.

The company’s +1 social affinity feature is its best attempt to date, but it’s not nearly enough to plug the company’s gaping social networking hole.

With Facebook emerging as a perceived and perhaps real competitive threat to Google’s core business, the company needs a strong social service. Twitter, with its natural rival positioning against Facebook, would give it that along with loads of real-time search data Google could likely monetize far more easily than Twitter itself.

The problem is that Twitter has said many times that it’s not for sale–despite the $8 billion to $10 billion valuation some say it might command. That could certainly change.

(Note: Despite a recent Fortune article that mentioned it almost offhandedly and at the end, as All Things Digital has reported previously, there was no official $10 billion Google bid for Twitter over the last year. Sources said Google execs told Twitter they were interested, but there was no formal bid. Not that there couldn’t be in the future and for that much!)

PRICE: $8 billion to $10 billion.

LinkedIn

Another way for Google to buy its way into the social networking space and differentiate itself from Facebook in the process. LinkedIn has filed to go public, but it could be mulling other options as well–such as being acquired by Google.

As Liz Gannes explained back in January:

Why would Google be interested in buying LinkedIn?

First, LinkedIn is a social service that’s clearly distinct from Facebook.

But would LinkedIn be the solution to Google’s existential questions about getting social?

That’s unclear, but the company does fit in on a thematic level with the search giant’s cloud-hosted enterprise product line. In addition, LinkedIn has created a central repository for corporate information and business people, which is already quite searchable but could be put to more uses.

PRICE: $2 billion to $3 billion

Groupon

Google offered more than $5 billion to buy Groupon last year but failed to close the deal. Had it managed it pull it off it would have become a leader in local commerce online, added a fast-growing revenue stream and gained a valuable source of consumer and merchant purchasing data.

Google’s reportedly working on an in-house version of Groupon, but who’s to say it won’t circle back and try to buy the real thing again. If it does, it needs to move quickly: the company is reportedly picking bankers for a planned public offering later this year and is expected to value at between $15 billion and $20 billion.

PRICE: Far more than $5 billion

Admeld

Here’s another company which has been linked to Google recently.

In 2010, advertisers spent some $353 million via real-time bidding (RTB), which allows them to evaluate and bid on ad space on an impression-by-impression basis. And in 2011 they’re likely to spend $823 million, according to Forrester.

Admeld is a big player in this increasingly important space and integrating it into Google’s Display Network might be a wise move.

Rumor has it the company tried to do as much earlier this year, making a $150 million to $200 million offer for the company, which was rebuffed.

PRICE: At least $500 million now.

Sprint

If Google wants to make wireless data access ubiquitous and affordable, buying Sprint would be a good start. It would provide the company with a large location-based advertising opportunity; imagine Google subsidizing network access to consumers willing to have ads, daily deals and localized promotions delivered to their phones.

It would also give Google the chance to deliver a true Android experience, one in which it controls the software, the hardware and the network.

Finally, Sprint holds a very large and very valuable chunk of the 2.5GHz spectrum.

That said, Google has shown little interest in becoming a wireless provider. And, given that all the major carriers sell Android devices, would the company want to replace strong positions at all the major carriers by owning No. 3?

PRICE: $14 billion

LightSquared or Clearwire

Google wants a world blanketed in wireless broadband. Acquiring either of these two companies would be a reasonable step toward that. LightSquared is building out a hybrid 4G-satellite mobile network capable of serving even the most rural of areas. It’s running LTE network trials in a number of U.S. cities with plans to launch commercial service before the end of this year.

Google invested $500 million in Clearwire in 2008. But with the company struggling financially, its bold plans to build out a massive nationwide WiMax network have been hamstrung. But this one is more unlikely, since Clearwire would be a pricey acquisition–complicated, too, since Sprint owns 54 percent of it. But it does have valuable spectrum and already has an expansive fourth-generation footprint that unfortunately is built on old technology and would need upgrading to LTE. And this acquisition would also bring Google closer to cable operators, such as Comcast and Time Warner, which also own a chunk of Clearwire.

But again, both raise the question of whether owning and operating a wireless network is something Google is capable of doing or even interested in.

PRICE: Clearwire–$1.4 billion. LightSquared: The big hedge fund Harbinger has put billions of dollars in assets into the company, so it’ll want many more out of it.

WebMD

Here’s one from left field–maybe too far left.

Acquiring the current leader in the online healthcare market would be one way to finally drag Google Health out of beta. A sophisticated health information site and a go-to channel for pharmaceutical and health/CPG advertisers, WebMD is a strong financial performer. Which makes it a compelling takeover target, particularly in a niche where Google does not have a dominant presence but is interested in developing one.

Caveat: Google is rumored to be considering ramping down its support for Google Health, which could be viewed as an indication of a growing disinterest in the sector–or a decision to buy its way into it with a major acquisition. It did it before with Google Video–remember that?–before it bought YouTube.

PRICE: $3.1 billion

IAC/InterActiveCorp

Google says it’s not a media company, but it distributes and monetizes content just like one. If it wanted to produce it as well, acquiring IAC might be a reasonable way to begin.

With the exception of its search engine Ask.com–which has a search deal with Google–and its video-sharing Web site Vimeo–which would likely cause it regulatory woes–IAC’s disparate portfolio of media properties would make for an interesting acquisition.

There are 50 sites to be had here, among them some fairly high-profile ones: local guide Citysearch, online personals site Match.com, CollegeHumor, Newsweek/Daily Beast, and restaurant guide Urban Spoon.

PRICE: $2.7 billion

An Unnamed Alternative Energy Company

When Google won approval from the Federal Energy Regulatory Commission to enter the speculative energy trading business, it insisted that its goal was simply to keep energy costs down by hedging power consumption against market movements.

But that approval also gives Google the ability to “act as a power marketer, purchasing electricity and reselling it to wholesale customers.” And the company does have a Google Energy subsidiary and a smartgrid electricity consumption monitoring service called Google PowerMeter.

Pike Research claims the global market for smartgrid analytics will hit $4.2 billion by 2015.

Google is also an investor, through its Google Ventures arm, in Silver Spring Networks, a leading smart grid solutions provider, and, through Google.org, solar energy outfit BrightSource.

Add to this the company’s interest in plug-in hybrid cars and it’s easy to see it making an investment in this space, particularly with Page intent on making “big bets” as its CEO.

PRICE: ?

Who’s missing? A music company such as Warner Music? A movie studio (hey, Apple’s Steve Jobs–whom Page seems to be trying to mimic in style, though we’ll wait and see on substance–had one!).

Sound off in the comments.

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