Google Executive Chairman Eric Schmidt sat down and talked to reporters at the Sun Valley conference in Idaho last week, dropping all sorts of science about Google +, Google China and whether or not we are in a tech bubble, among other things. One of the most interesting nuggets of info relayed was the fact that Schmidt could envision startups wanting to build on top of the Google+ platform, which now has 10 million users in its beta but no API in sight.
“You could image the scenario where the social platform is so successful that you’ve got startups that are building on top of Google + that are so incredibly sexy and exciting that we would pay top dollar very fast … That’s a great scenario because then you know you’re winning,” he said.
According to Schmidt, Google M&A made the decision last year to accelerate the acquisitions of companies below the HSR threshold, or the amount that is subject to FTC notification requirements and a waiting period (currently $66 million). Companies like Punchd are being acquired for $10 million, $20 million and $30 million (versus AdMeld’s $400 million) in order to fill out gaps in Google’s strategy, which now includes social.
Earlier in the talk Schmidt also outlined how Google calculated the amount of money it was willing to pay for the company; Namely, the value of a deal equals the value of the team plus the value of the year it would spend a Google team to create the same product. He emphasized that M&A at Google was very bottoms up, “A product manager that has a problem and [needs to] solve that problem” is the raison d’être of a potential acquisition.
You can listen to all of Schmidt’s commentary on Google M&A during the interview in the sound bites clipped together above.