Traffick - The Business of Search Engines & Web Portals
Blog Categories (aka Tags) Archive of Traffick Articles Our Internet Marketing Consulting Services Contact the Traffickers Traffick RSS Feed

Saturday, March 27, 2004

The Case for Infospace + Google

Infospace's seemingly innocuous acquisition of a local online search provider called Switchboard for $160 million in cash may be a harbinger of an impending domino sequence in the local search market and the search engine industry in general.

Along with CitySearch, MSN, AOL, Yahoo, Google, various yellow-pages companies (plus some hangers-on and wannabes), Infospace is one of a short list of real powers in local search. That its recent acquisition was for cash suggests that Infospace believes its stock to be currently undervalued, something you couldn't say for too many Internet companies today.

Google is an emerging player in local search and is attempting to hang on to its status as the #1 search provider in the world. But meanwhile, companies like Yahoo are bulking up and waging battle; and one of the biggest economic powers in the world, Microsoft, is getting ready with its own strategy. There is going to be no tougher area to consolidate than local search; it will likely remain a fractured affair. But the company that sees the opportunity to roll up undervalued properties in this area will reap significant capital gains in the future. Thus far, Google's main idea seems to be to build their own products and expect that users will like them and growth will ensue. Maybe so, but going up against major competition, it probably wouldn't hurt to buy a little insurance.

The disadvantages of Google's slow march to an IPO, coupled with an understandable "we'd rather build than buy" mentality (though Google has certainly snapped up some cool assets for cheap), may now be growing more apparent. Every time Yahoo takes another key revenue generator off the table, such as Kelkoo, it consolidates its position. This month's issue of Fortune magazine cites Yahoo as #831 on the Fortune list, but with just one or two more Kelkoo-scale acquisitions, and continued growth, it will crack #500 far ahead of the schedule Fortune projects.

Google, therefore, needs to consider whether size does indeed matter, particularly in the hotly contested local search market. Infospace could offer some insurance. Instead of Google (post-IPO) acquiring small pieces of Infospace (unlikely since it is going to be difficult to pry prime local listings assets from any of their owners, Infospace included), Google could acquire the whole company. Infospace has an impressive list of valuable assets in search and other areas, some of them arguably underutilized or forgotten. These include, of course, popular metasearch properties which could potentially be reinvigorated under Google's watch. (There are also wireless technologies and lines of business that could be either deemed valuable to the business of a global search leader, or simply sold off.)

Consider Metacrawler and Dogpile. Currently, these metasearch properties are significant sources of revenue for several of Google's competitors, including LookSmart, FindWhat, and Overture. By acquiring these, Google could reduce the number of paid links in Metacrawler results, especially those emanating from competitors' keyword ad networks, while taking out a bigger share of that ad revenue pie for itself. This was the same strategy used when Google acquired Applied Semantics, whose DomainSense keyword listings were a major source of revenue for Overture and FindWhat.

If ballpark valuations of Google in the range of $14 billion are accurate, then Google is worth about a dozen times more than Infospace, at least on paper. Sure, Google could raise some IPO cash and then offer Infospace a cash-plus-stock deal they couldn't refuse. But I like the idea of Google and Infospace throwing us a curveball and cooking up a reverse-takeover scheme, leaving Infospace shareholders with a fair but relatively small proportion of shares in a new public company called Google. I'm not sure a reverse takeover on that scale is even legal. But Google taking the back-door route to going public would certainly confound and infuriate the bankers, the press, and the public, who have already speculated to the nth degree about a traditional IPO for Google. Some have even dreamt up bizarro scenarios such as a "Dutch auction."

The suspense is killing me.

Posted by Andrew Goodman




View Posts by Category

 

Speaking Engagement

I am speaking at SMX West

Need Solid Advice?        

Google AdWords book


Andrew's book, Winning Results With Google AdWords, (McGraw-Hill, 2nd ed.), is still helping tens of thousands of advertisers cut through the noise and set a solid course for campaign ROI.

And for a glowing review of the pioneering 1st ed. of the book, check out this review, by none other than Google's Matt Cutts.


Posts from 2002 to 2010


07/2002
08/2002
09/2002
10/2002
11/2002
12/2002
01/2003
02/2003
03/2003
04/2003
05/2003
06/2003
07/2003
08/2003
09/2003
10/2003
11/2003
12/2003
01/2004
02/2004
03/2004
04/2004
05/2004
06/2004
07/2004
08/2004
09/2004
10/2004
11/2004
12/2004
01/2005
02/2005
03/2005
04/2005
05/2005
06/2005
07/2005
08/2005
09/2005
10/2005
11/2005
12/2005
01/2006
02/2006
03/2006
04/2006
05/2006
06/2006
07/2006
08/2006
09/2006
10/2006
11/2006
12/2006
01/2007
02/2007
03/2007
04/2007
05/2007
06/2007
07/2007
08/2007
09/2007
10/2007
11/2007
12/2007
01/2008
02/2008
03/2008
04/2008
05/2008
06/2008
07/2008
08/2008
09/2008
10/2008
11/2008
12/2008
01/2009
02/2009
03/2009
04/2009
05/2009
06/2009
07/2009
08/2009
09/2009
10/2009
11/2009
12/2009
01/2010
02/2010
03/2010
04/2010

Recent Posts


Yahoo Continues Acquisition Blitz, Gobbles Up Kelk...

Microsoft Regrets Outsourcing Search CEO Steve ...

Click Fraudsters: Be Very, Very Careful ClickZ ...

Citizen MSN According to CBS Marketwatch, Micro...

Overture's Site Match is a Bit Too Revealing In...

Newsweek Gets Google Happy I used to get a bit ...

Google Local is Shear Inspiration Looks like Go...

See No Evil: Norton Blocking Paid Search Ads I ...

Want to Add Your URL to Yahoo? As promised, Yah...

SES World Tour Notes ClickZ Executive Editor Re...

 


Traffick - The Business of Search Engines & Web Portals

 


Home | Categories | Archive | About Us | Internet Marketing Consulting | Contact Us
© 1999 - 2013 Traffick.com. All Rights Reserved