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Google Capital Splurges $50M on Auction.com

Zacks Equity Research

Google Inc.’s (GOOG) is aggressively building its position in the real estate vertical. Recently, its investment division Google Capital bought a stake in online real estate website Auction.com for $50.0 million.  This deal follows Google Capital’s investments in Renaissance Learning, Survey Monkey, and Lending Club.  

Auction.com raised $91.0 million from previous investments and the recent investment takes its value to $1.2 billion. Google’s interest in the website primarily resulted from the rumor that Aution.com has been preparing for an Initial Public Offering (IPO). We believe that the stake buildup is positive for Google as it will help it to enter the online real-estate market.

Per the deal, a Google Capital executive will be included in Auction.com’s board of directors and another executive will hold the position of a board observer. The investment will also allow Google to access Auction.com’s residential and commercial real estate data, which will help it to attract marketers, thereby driving advertising revenues going forward.

Apart from Google Capital, Auction.com’s other shareholders comprise Starwood Capital Group, Starwood Property Trust, Stone Point Capital and Fortress Investment Group. We believe that Google’s backup will boost Auction.com’s competitive position going forward.

Auctions.com was launched in 2008 for facilitating online deals between real estate vendors and customers. Like real-estate website Zillow (Z) it provides search and other locationary functions. However, the sell process follows an auction pattern, much similar to eBay, Inc. (EBAY), where the highest bidder is the winner. To-date, Auctions.com has sold properties worth more than $26.0 billion.  

Google Capital plans to invest nearly $300.0 million this year to support late growth stage companies. The investments reflect Google’s diversification plans, which will help it to compete with the likes of Facebook (FB) in the advertising market over the long term.  

Currently, Google has a Zacks Rank #3 (Hold).
 

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