Google, despite its privacy and image struggles, continue to crank out extraordinary profits. Still, 97% of the company's revenues in 2009 were from of its advertising business, making diversification and both horizontal and vertical expansion key strategic goals. To that end, Google has acquired 40 companies this year in areas from mobile advertising to social gaming. While the company has more than enough cash to keep on buying, one has to wonder if it has the management moxie to manage the integration of all of those businesses.
Remember the early days of Google Apps? Way back in 2006, Google bought Upstartle and the XL2Web product from 2Web Technologies and slowly brought Upstartle's Writely (which became Google Docs) and the XL2Web-based Google Spreadsheets to Google Apps over the next year (thanks, Wikipedia!). The interfaces were disjointed and it took a while for Writely to stop feeling like Writely and start feeling like Google Docs. 2006 was hardly a big acquisition year for Google either, but anyone who has ever been through a merger or acquisition knows how incredibly difficult integration of systems, technologies, and staff can be.
Now, with 40 acquisitions this year alone (and still counting), one has to wonder how long it will take for these purchases to bear fruit and contribute to a growing, diversifying Google brand. Google is young with a lot of very talented but very young managers, buying a lot of very young companies. While you don't get much more 21st Century than that, eventually the confluence of these companies will either create a Google that is more than the sum of its parts or a business so bogged down in management issues that it can neither innovate nor make use of its newly bought capabilities.
Wall Street seems just ducky with the push for diversification. The Wall Street Journal posted a brief piece from the Dow Jones Newswire yesterday with this note:
The number of deals reflects Google's commitment to invest heavily in top-level talent and new technologies that will enable the company to maintain its lead in the search market and push into new emerging opportunities, such as display and mobile advertising.
And if Wall Street, with Google idling along at well over $600 a share, is just ducky, then I probably should be too. However, as someone heavily vested in Google Apps and Android, both as an end user and as an advocate and consultant, it concerns me that Google could so easily lose its focus or its ability to push these platforms forward as it tries to figure out how to get the next Farmville on your Google start page.
2010 is almost over and 2011 is just around the corner. But with Google pledging to maintain its current pace of acquisitions, 2011 will be a make or break year in terms of integrating and monetizing all of these new investments.