Ambitious Google not setting any limits on business deals, acquisitions

Is there any business Google won’t get into?

The planned acquisition of e-mail security service provider Postini is just the latest example of Google expanding beyond its core business of selling advertising related to online search. Last month, Google bought GrandCentral Communications, which makes a voice-messaging service that provides users a single phone number. Google struck a partnership in April to sell advertising for Dish Network satellite television, and is building an engineering team to bring Google technology to television worldwide.

The acquisition of YouTube, a $1 billion deal to buy radio ad provider dMarc Broadcasting, the introduction of a set of business tools known as Google Apps, and an 8-month-old program to sell advertising in newspapers are still more examples of Google’s varied and unpredictable business model.

“I don’t think they set any particular limits on themselves, especially if they think there’s ability for them to do advertising in an area,” says Danny Sullivan, editor in chief of Search Engine Land.

Google must continue expanding beyond its traditional boundaries because the search advertising market is going to lose importance relative to video advertising, predicts Karsten Weide, director of IDC’s digital media and entertainment program.

“While there will be more money flowing into search, even more money will flow into video ads,” Weide says. “Relatively speaking, search will lose importance in the marketplace vs. video ads. That is a strategic challenge to Google because they make more than 99% of their revenue on search ads.”

What might Google get into next? Here’s a hint: Blockbuster might soon have a new competitor.

“One potential line of business is the rental and sales for video content (TV shows first, but later also movies),” Weide writes in an e-mail. “They might rent out videos, Blockbuster-style.”

YouTube gives Google a presence in video, but the site’s advertising opportunities are limited because major brands are reluctant to associate themselves with YouTube and its stolen content, Weide says. To make it work, Google will have to strike distribution deals with names like Viacom, NBC and Walt Disney, but those companies are “hopping mad” at Google because of its cavalier treatment of copyrighted material, Weide says.

“We believe that in the long run, the effectiveness of grainy home videos is going to be very limited,” he says.

Google researchers have looked at whether they can target advertising at specific people by using a PC microphone to “listen” to what is going on in their living rooms, Sullivan notes. Basically, Google wants to be in every part of your life, especially if it helps them sell ads.

“They’re trying to give you more things to do, more basis for a relationship than just ‘I go to Google to look up things,’” says Susan Aldrich of the Patricia Seybold Group. “They’re looking at more ways for us to spend more time with them. … Once they head down that path they can start to see themselves at least in part as your companion, your productivity companion.”