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Case Studies: "Google, Inc." - Potential Acquisition Targets
In determining a future strategic direction for Google, it is important to look at Google's past strategy. When determining a potential acquisition, we can analyze past acquisitions, for example, YouTube. While it may have seemed like a good idea at the time, and could potentially turn out to be an excellent decision, acquiring such high-profile and expensive companies as YouTube may not be necessary to ensure Google's long-term growth. To ensure good performance in the long-term, it is important to take a step back and focus on Google's well-cultivated talents, such as online advertising. We have identified an online advertising agent, Turn.com, that has developed a new automated ad targeting system that would fit in very well with Google's business model and would be a relatively inexpensive and low-risk acquisition.
If eMarketer's estimation is correct, Google accounted for one quarter of the entire US online ad revenues for the year 2006 (1).
Adsense, Google's mammoth contextual advertising network, took nearly half of the entire revenue and therefore is considered to be driving Google's growth (1). Currently, Adsense's revenue is administrated and generated based on either cost "per-click" or "per-thousand-impressions" models. Under these models, Adsense serves ads according to the cached page's "high value keywords", which are selected by advertisers. Although Google provides software that helps advertisers optimize their keywords selecting, it is still very complicated for advertisers to manually analyze and choose the right set of keywords (1).
Aiming to solve this weakness of current ad networks, Jim Barnett launched TURN.com in Nov, 2006, with more sophisticated contextual advertising technology. The brand new "Automated Targeting Ad Network" is unique in the following three aspects (4) (see Exhibit 1):
Automatic targeting: The...