Google is good at acquiring. Sure, they've dabbled in a few markets through organic expansion, such as television, radio, and e-commerce, but this has historically led to limited success. On the other hand, in other markets, Google decided to jump in head-first by making large acquisitions, such as mobile ads with AdMob and most recently online travel with ITA.
These latter two acquisitions were strategically solid. Both moves contained remarkable market characteristics. With AdMob, Google bought its way into a market with an enormous growth trajectory, at a moment when the market was fragmented and consolidation-ready. For a cash-laden, agile firm like Google, the mobile ad market was perfect. Perfect timing and perfect target company.
The online travel market is similar. A large ($80B+) market, online travel will experience solid growth for the long-term. The acquisition, ITA, also brings Google a huge customer advantage. Alaska Airlines, Continental Airlines, Hotwire, Kayak, Orbitz, Southwest Airlines, United Airlines, US Airways, Virgin Atlantic Airways all utilize ITA's core technology. Talk about a golden customer base. That alone made the acquisition worth it.
It appears that Google's market entry strategies are slightly better when they enter a market via an acquisition (as opposed to organically). This, of course, is a generalization and shouldn't be taken across the board. But, I do think it's interesting that Google hasn't hit many home runs with organic innovation.
Look for Google to create value with AdMob and ITA. In an age where 1 in 10 acquisitions actually works, I think Google has chosen wisely here.
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