IncrediMail Inks New Two Year Deal With Google, But Are They Too Dependent?

IncrediMail, an Israel-based, NASDAQ-listed company that develops email clients and desktop software, has inked a new 2-year agreement with Google, which will go into effect January 1, 2011. This is good news for the software company – the partnership between the two firms is quite crucial for IncrediMail’s bottom line.

The relationship between Incredimail and Google has always been a little rocky, to say the least. Three years ago, Google terminated its AdSense partnership with the company, sending IncrediMail’s shares down more than 45 percent.

In July of 2009, however, IncrediMail announced that that it had inked a new deal with Google, which was due to expire in July of 2011 – but then the agreement was amended to get terminated six months early (which would be right about now).

With today’s announcement, IncrediMail can thus breathe easy again – or can they?

According to the news release, the terms of the new two year agreement are expected to produce results similar to those achieved under the previous contract.

IncrediMail has been using Google AdSense since the late 2006, enabling it to share in ad revenue generated from users clicking on Google sponsored links, in response to a search query conducted across IncrediMail properties. The Israeli company reported in May 2009 that about 70% of its revenue comes from its “Search business”.

Said Josef Mandelbaum, IncrediMail’s recently appointed CEO:

“We are very pleased and proud to extend our collaboration with Google, the global search market leader. The new agreement provides the basis for a more extended relationship and I am looking forward to working closely with Google to grow our existing business with them and to find other areas of cooperation that will further strengthen our partnership.

This agreement also marks the beginning of a new era of transparency for consumers. As we previously announced, part of our new strategy is to create products that are simple, safe and useful and it starts with building trust with our consumer. As such we fully embrace and support Google’s effort to enhance and protect the user’s experience.”

(Update: for whatever reason, the second part of the quote above was subsequently removed from the press release.)

IncrediMail recently reported financial results for Q3 2010. Revenues rose 13% to $7.5 million, up from $6.6 million in the same quarter last year. Revenues for the first nine months of 2010 were $21.7 million, up 10% compared to $19.7 million in the same period in 2009.

Mandelbaum at the time, however, commented that IncrediMail had “embarked on a new strategic plan for the company” which he said will require a “renewed focus on the consumer” and
investments in certain areas of the company.

Part of the plan: building a portfolio of personal productivity products to try and diversify revenue streams (outside of search, that is).

The company’s future depends much more on its ability to successfully accomplish that than to keep depending on Google to remain a viable business overall, in my opinion.