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Google Acquires Nik Software

Google Inc. (GOOG) recently announced its acquisition of Nik Software, a 17 year old company, which specializes in advanced photo editing. The terms of the deal were not disclosed.

San Diego-based Nik Software develops digital image editing tools. It offers a variety of photo editing software for Windows and Mac OS X computers. Its popular mobile app Snapseed is currently available only on Apple devices but will be available on Android devices soon.

Google is a market leader in online advertising and it has been trying to explore various ways to increase its advertising revenue and fight competition. The company had stepped up its efforts in social media with its social network Google+, a service started in 2011 competing directly with Facebook.

The addition of Nik will likely bolster Google+ by bringing in online photo editing tools. Google also owns Picnik, the online photo editor, which has incorporated its high-end tools into Google+, including light and pixel size adjustments, color patterns and filters.

The Nik acquisition will allow Google to provide advanced photo editing features, hence enhancing the already-robust suite. By acquiring Nik Software, Google might be better positioned to compete against Facebook and others in the social media space.

The acquisition comes soon after the web giant Facebook (FB) completed its own purchase of the photo-sharing app Instagram, which further strengthened its dominance in photo uploading and sharing. Like Instagram, Snapseed also has comprehensive in-app photo editing functions and photo-altering filters including tilt-shift effects, which make the photos more attractive. Instagram has more than 100 million users, while Snapseed has approximately only 9 million users.

Google continues to pick up smaller companies with specialized technology to boost its different offerings. Just last month, the company acquired marketing start-up Wildfire that provides software to help businesses place ads on social-media sites, strengthening its foothold in the world of social media. In June, the company bought Meebo for about $100 million that makes mobile applications for consumers as well as publishers, designed to enable online communication.

Google has done very well in the second quarter, with its gross revenue touching a record $12.21 billion. Revenues from both Google-owned and partner sites continued to grow double digits on a year-over-year basis. Historically, Google has always fared better than Yahoo Inc (YHOO), which has been struggling, and Microsoft (MSFT), which is yet to gain critical mass.

However, other legal entanglements related to competitive matters or patent infringements remain an overhang. Google retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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