Information industry market researcher Outsell, working together with search guru Stephen Arnold, has been producing some excellent research on Google.
I wanted to highlight one piece, entitled Google as Publisher: Is Google Poised for a New Push into the Information Industry, which looks at how Google’s infrastructure and technology could be leveraged for a major push into the publishing business. In addition to pages of excellent analysis, the report concludes with four action items for publishers in managing this threat/ opportunity:
- Come to grips with the impact. I think many publishers have their heads stuck in the sand when it comes to their “partnerships” with Google. Yes, the relationship is inherently co-opetition and it’s “cutting off your nose to spite your face” to not leverage Google’s spider and search volume. But make no mistake, you’re dancing with a partner who could decide to become the devil in an instant.
- Adopt agile publishing processes, quickly. To me, this includes (1) “agile content” in an XML repositories like MarkLogic (cleaned up using lazy XML enrichment) and (2) agile software development processes. I’m amazed by how many publishers still do waterfall-based product development.
- Use Google technologies in your own products. It’s best to both know and leverage your (potential) enemy.
- Mobilize and modularize content. XML is also a great means for doing this, because of its presentation independence.
This just hit the wires this morning at 8:00 AM Eastern: Google to buy Postini for $625M in cash. Here’s the official press release.
Google will add Postini’s on-demand “security” (nee anti-spam) offering to its stable of Google Apps. Judging by the fact that Dave Girouard, VP and general manager of Google Enterprise, is the spokesperson in this Register story, and given the nature of the following quote, it seems clear that Google is attempting to build a base in small and medium business (SMB) on-demand productivity apps and then work their way up into the enterprise in the much same way that Salesforce.com did with on-demand sales automation apps.
The response to Google Apps has been tremendous, with more than 1,000 small businesses signing up for the service every day. At the same time, large businesses have been reluctant to move to hosted applications due to issues of security and corporate compliance. By adding Postini products to Google’s technology, businesses no longer have to choose,” said Dave Girouard, VP and general manager of Google Enterprise.
My guess is that Postini was tracking towards an IPO within the next 6-12 months, which suggests that they were doing somewhere between $80 and $100M in revenue this year (my take on the new IPO entry bar). This suggests a valuation somewhere between 6-8x sales. Salesforce.com, the king of the on-demand sector, trades for 9x TTM revenues (see here), and the industry and sector trade for 5-6x revenues.
Some simple math (assuming 40% growth and 40%/60% 1H/2H revenue linearity — both are standard assumptions and neither of which I have any specific reason to believe true) says that current year revenue is 1.2x TTM revenue, suggesting a 7.5 to 9.5x valuation for Postini, in-line with the premium you’d expect to pay for snatching the IPO dream from a company that could see it within reach.
Here’s the Google Blog commentary on the deal. Here’s their FAQ. Finally, here’s the Google Enterprise Blog commentary as well.