Have you heard about the world's largest AAA battery? If not, its AMAZON - APPLE - ALPHABET. And in this blog, I am focusing on the giant in the search engine space - ALPHABET ( the parent company of GOOGLE). The market cap of Google stands at a staggering 950+ BN Dollars! , that's almost equivalent to the GDP of 40+ African countries. Pre COVID era, GOOGLE did join the big boys' group of 1Trillion $ Market cap on JAN 17th 2020, becoming the 4th company ever after APPLE, MICROSOFT & AMAZON. But do you know one of the major reasons for this success has been the way Google continues to evolve itself every year. If you looked at what Google was a decade ago it was a very different company to what it is as of 2020.
At the heart of this transformation is the pace at it which it acquires companies. They say every 7 years, we become a new person as every cell in our body is replaced by a new one, well we will not debate about the authenticity of that in this blog, but all I can say GOOGLE seems to be replacing their own cell by acquiring all the companies that the world has to offer! A quick check on Wikipedia throws a number of 233 companies that it has acquired over the last 2 decades.
Larry Page the CEO of ALPHABET has this crazy concept when he plans to acquire any company, its called "The Toothbrush Effect". It basically means does the company produces “something you will use once or twice a day.” A careful look at some of the past acquisitions of Google does show that the ubiquitous toothbrush is actually at work!
Let's go back to 2006 when Google acquired Youtube for a whopping 1.65 BN, the tech world ruled it as a big gamble, saying that Google paid a bomb, fast-forward to 2020, YouTube's revenue is 10% of Google's 160BN annual revenue so that's a neat $15 BN just in 2020 itself. The analysts who raised eyebrows in 2006 are nowhere to be seen. Today the platform attracts 2 Billion active monthly users on Youtube. World population now stands at around 7.8 billion, so on an average 1 out of 4 people existing in this world visits Youtube once in a month, do you now hear why they say it is the best platform to advertise anything globally?
Another major acquisition was in 2005 when it acquired ANDROID for just $50 Million from Andy Rubin. Since then, Google has successfully developed Android to become the leading OS in the smartphone world with a global market share of more than 86% as on date. Thank God APPLE exists, otherwise, it would have been 100% :) By the way, I am a Pixel Phone owner and I do love my phone, and yes I switched from APPLE iPhone to Google Pixel.
Larry Page also believes that if you can't build it, just buy it! Let's look at some of the recent acquisitions of Google. Towards the end of 2019, Google acquired FITBIT the wearable fitness technology company, valuing it at a whopping $2.1 BN, well this time around not many analysts are saying that Google paid a bomb. Only time will tell how successful this deal was, for now, I am waiting for a cheaper but better edition of FitBit. Presently it has around 26 mn. users, I won't be surprised if it scales up to 2 bn. users in the next decade. Presently Chinese companies Xiaomi and Huawei were No. 1 and No. 3, Apple was No. 2, let's see how Google changes the world order.
Another acquisition that the Photographer in me loved was NIK Software, the parent company of the now-famous SNAPSEED Photo editing app. I can vouch for this that almost every photographer has this APP on their phones. It's undoubtedly the best photo editing APP. If you haven't tried it, do give it a shot. Facebook claims that 350 million photos & Instagram claim 95 million Photos & Videos get uploaded on their platforms every day, but where do most of them go in case they wish to edit, its SNAPSEED. Well played Google.
However, all of their acquisitions haven't been successful. Look at the deal of MOTOROLA, they paid $ 12.9 BN( Its highest ever for any acquisition) in 2012, only to sell it to LENOVO in 2014 for just $ 2.91 BN, how many companies on earth can afford to take a $ 10 BN hit? It also did fail in acquiring some companies. In 2018, Google tried to buy major companies in the open-source world. It tried its best to acquire GitHub and then RedHat, which would have opened up many additional opportunities in the Cloud but Microsoft & IBM had better Offers, OK GOOGLE, better luck next time.
Coming back to the Toothbrush Effect, I am hoping to see some more acquisitions post COVID era as valuations have taken a hit for many companies, and with the rich cash coffers of Google, they will be ready to lap into the next best company that the world has to offer.
As an entrepreneur, I continue to draw inspiration from the 2 Stanford graduates, who created this tech giant - Larry Page & Sergey Brin. Here is some trivia, did you know both Larry & Sergey had offered to sell out Google for just $1 Million to Yahoo way back in 1998 as they wanted to focus on further studies and David Filo, CoFounder of YAHOO declined it then, probably this was the best deal offered ever in the history of Silicon Valley. Today YAHOO is history. In fact, it was Filo who had introduced Larry & Sergey to one of Google's earliest investors - Michael Moritz of Sequoia Capital.
I remember chatting up a couple of years ago with one of my ex-bosses then, who had the pleasure of working in Google. He mentioned to me about Moon Shots and it was precisely at that point I fell i love with this company. X Development LLC. is a semi-secret research and development facility and organization founded by Google in January 2010. A quick check about Google X reveals the grandeur of a plan Google has for the mankind, in their own words "X is a diverse group of inventors and entrepreneurs who build and launch technologies that aim to improve the lives of millions, even billions, of people". Internet Balloons(Loons), Drones delivering products, Kites used to generate electricity, the list is crazy enough! Google you do continue to inspire humanity across the world!
Signing off for now ..until next time. Goodbye.
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