Google Buys Mobile Startup, Steps Up Facebook Advertising - Analyst Blog
Search giant Google Inc. (GOOGL) recently acquired Toro, a mobile marketing startup that allows developers to promote their apps on Facebook (FB). Financial details pertaining to the deal have been kept under wraps.
Toro, originally known as Red Hot Labs, was founded in 2012. The company offers app-marketing solutions for developers willing to advertise their apps on Facebook. Toro is headed by Amitt Mahajan and Joel Poloney, who are also the co-founders of MyMiniLife – one of the key companies that conceptualized FarmVille.
Toro received $1.5 million in funding from investors including Andreessen Horowitz, Greylock Partners, SV Angel, General Catalyst, Keith Rabois, Chris Dixon, Bill Tai and Guitar Hero co-creators Charles Huang and Kai Huang.
Following the buyout, Toro will be incorporated into Google’s mobile ad team. Also, Google will gain access to Toro’s resources campaign optimization tools. Meanwhile, Toro will continue with its operations, that is, optimize campaigns and provide reports to existing clients. However, the company will cease designing of new advertisements.
The digital advertising market has witnessed substantial growth over the past few years, such that the discussion has shifted to its most effective channel, mobile. Meanwhile, the Internet ad segment is experiencing unprecedented growth and now offers a multi-billion dollar market.
While digital advertising has been moving to non-search portals, such as Facebook, search is likely to remain relevant and important. Google enjoys a leading position in this market and is using other technologies (YouTube, maps, voice, devices) to enhance the value of its services.
The company has also forayed into the Internet of Things, with wearables, TV and home automation products. The growing popularity of Android is poised to further enhance its prospects in the advertising arena.
Google generates revenues primarily from the sale of advertising space on its online properties. It has therefore focused on protecting and growing its position in the search market through continued innovation and quality improvement.
Google is presently focusing on foraying beyond its desktop-based tools to help companies campaign on smartphones, tablets and other mobile Internet devices as consumers today increasingly access digital services through mobile devices. Meanwhile, Google’s advertising business is facing considerable hurdles owing to intensifying competition in the sphere of mobile gadget advertising.
Google’s relentless focus has earned it the leading position in the search market even after the unprecedented mobile revolution. And the latest acquisition is likely to bring new capabilities to strengthen its position and relevance in the space. This is all the more important because of the increasing competition from Yahoo (YHOO) and particularly Facebook, which is growing digital ad market share in leaps and bounds.
Google currently carries a Zacks Rank #3 (Hold). LivePerson Inc. (LPSN), carrying a Zacks Rank #1 (Strong Buy), is a better-ranked stock from the same space.
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