Thursday, March 30, 2006

Google Gears Up Capital for Acquisitions: Personal Content, Finance, or Others?

Business Week notes along with other majors Google's readying a stock offering that's expected to yield about USD 2 Billion at it's current prices - about enough to purchase the Facebook.com personal content portal, by perhaps no small coincidence. Facebook is about on par with Google's Orkut personal portal in traffic, but both are trailing News Corporation's Myspace.com personal content portal by a long shot: Myspace comes up number 8 in Alexa's latest Web site rankings. This can only warm Rupert Murdoch's heart, as noted by Forbes, who raised quite a few eyebrows when he bought the upstart portal for USD 580 million last July. With Myspace's surging growth - tripling traffic since last July - this now begins to look like a bargain. So perhaps 2 Billion is not too much to ask for a Facebook, the thinking goes.

But looking at the historical traffic, it's not clear that Facebook adds up to a 2 Billion solution for Google. Although it came on strong in the past few months, Facebook's overall traffic has leveled off, according to Alexa, and still remains below Myspace's level of last July when they were acquired. Facebook may be a good acquisition, but it's doubtful that it's going to command the top line price they're seeking. Google could instead get a more reasonable price for Facebook and spread investments into other lucrative areas. Certainly their financial portal is a good start on offering more information to adults that can command valuable advertising, so expanding relationships with vendors such as Reuters in finance and other sectors may yield a broader demographic for advertisers keen for more valuable outlets for ad inventory. It's important to keep apace with the younger generations growing up on the Web, but the greatest gains in margins may be in servicing graying but affluent surfers effectively. We'll see where this goes but I am betting on some surprises in how Google puts these new funds to work.
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