Google and acquisitions

Lucía Caballero, a journalist at the Spanish edition of Forbes, called me to talk about Google and its policy of buying anything and everything in its way (article in Spanish).

To start with, let’s put things in context: Google has bought a lot of very different types of companies, but this follows a pattern common to other companies in the tech sector. Acquisition-based strategies are very common in high dynamism scenarios, and technology is undoubtedly one of them. Since its first acquisition in February 2001, Google, now Alphabet, has acquired a total of 207 companies, and since 2010 has acquired more than one company a week. But this is on a comparable scale to other companies in its field: Facebook has acquired 62 companies since 2007, Microsoft has acquired 202 since 1987, Amazon, 72 since 1998, and Twitter, despite never having generated any profits, no less than 54 since 2008.

Alphabet is buying more and more companies based on the philosophy of getting what it needs and cannot find through open source development, or that would take it too long to develop internally. Alphabet is fundamentally an engineering company with tremendous development potential, and as such, is enormously pragmatic: if acquiring a certain need or know-how is faster than developing it in house, take the checkbook and carry out the operation.

Alphabet is very much results-focused: it needs something, it buys it, even though there may be no clear integration strategy and often with no interest in what is left of the acquired company or its workforce. It is not unusual for the founders of companies acquired by Alphabet to take the money and run, and in general, few tend to stay on at Mountain View.

Facebook and Twitter have a completely different strategy, and while their operations are also about getting what they need, they also look to incorporate talent, encouraging teams to continue with their plans once the sought-after synergies have been carried out within the company, in effect providing founders with many more resources and development to pursue their goals, and above all, take care to integrate and motivate them to avoid brain drain. Compared to Google, such an approach seems more sustainable over time.

I have written much about what do we search for in corporate acquisitions, on buying as a science and on knowing how to buy, typically associated with other acquisition operations, and this is a subject I consider fundamental to corporate strategy. Is Google, as Forbes says, “voracious”? It certainly is, and the data supports this view conclusively. But does the company get as much from its acquisitions as it could? I would say not, and would say that the acquisition philosophies of other companies in the industry seem much more attractive and seem to generate more inclusive and more enriching work environments and cultures, which is a sustainable advantage.

In a company like Alphabet, with a reputation for being cool and innovative, and that is people focused, its approach to acquisitions is striking, and perhaps something of a blot on its copybook. But it is also true that over the last few years we have also gone from seeing the company as an incredible place to work to seeing it as a company that while it retains much of its appeal, loses valuable workers with a certain regularity: a company that could face problems, if not in attracting talent, but in retaining it.

As with all aspects of a company’s culture, these are subtle, subjective issues, difficult to draw conclusions to, and about perceptions that often respond to market situations or the visibility of those who are acquired by the company or abandon it. It is difficult, even talking to workers or ex-workers of the company, to know if this acquisitions policy is the result of growth and evolution or has always been there, or even if they really exist as such. Either way, these questions provide food for thought about the evolution of companies over time.

(En español, aquí)