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Google (GOOG) Rages Ahead In Social Ads With Wildfire Buy

 August 04, 2012 01:01 PM
 


(By Mani) Google, Inc. (NASDAQ:GOOG) has its extended its foothold in social media advertising by acquiring Wildfire, which helps firms deploy marketing campaigns on social networking sites such as Twitter and Facebook (NASDAQ:FB).

The deal comes as the proliferation of social media, and an increased demand by consumers to engage with brands across multiple social channels is driving chief marketing officers (CMOs) to look for an integrated social marketing platform. These platforms helps them to publish their ads and marketing campaigns on social networking sites but also helps in monitoring their campaigns.

[Related -Facebook Inc (FB) Q4 Earnings Preview: What To Watch?]

The four-year old Wildfire powers social media marketing for over 16,000 businesses, including 30 of the top 50 global brands. Selected as the two-time winner of Facebook's fbFund, Wildfire now offers a complete Social Marketing Suite.

In early 2012, it became the first social media marketing company to have a software platform that integrates directly with Facebook, Twitter, YouTube, and LinkedIn (NASDAQ:LNKD).

The acquisition is timely for Google as businesses around the world are embracing social media to share information and forge stronger relationships with their fans and customers.

[Related -Google Inc (GOOG) Q4 Earnings Preview: What To Watch?]

Google could integrate Wildfire's social presence to complement all marketing campaigns in search, display, video, mobile, offline ads and more. In other words, Google could Wildfire's technology to boost targeted ads in Google Search, Google Plus and YouTube, while completing its acquisition of DoubleClick.

On the strategic perspective, the deal makes sense for Google as it generates about 90 percent of its revenue from advertisements. Google makes most of its money from keyword advertising that is shown based on the type of search a user conducts. Advertisers on Google bid for keywords to display their advertisements on the Google search page.

Google AdWords allow advertisers to display advertisements in Google's search results and the Google Content Network through cost-per-click – a key metric for investors' focus.

The pricing of keywords, the inventory of keywords available, and the frequency of user search impact how much money Google makes on search.

If Google manages to club Wildfire with its social platform Google+, the acquisition should help the search giant to boost its targeted ads and increase revenues for the company's search platform, thereby making Wildfire as another revenue generating machine for Google.

Google should be able to reap the above benefits of the deal pretty quickly as it integrated Google+ with the Google search engine earlier this year. This means that if a person in a user's circle has +1'ed a search result, the same would shown as one of the top results in new searches.

Meanwhile, the current advertising environment also favors the economics of the deal. Advertisers are cutting ad dollars from Facebook and Microsoft Bing, and increasing the advertisement spend in Google search. In a tough macro environment, advertisers are cutting advertisement dollars in experimental category and increasing the advertisement spend in Google search.

The search giant will continue to benefit from a strong secular shift towards more accountable advertising spending, which should help insulate the company from the economic downturn. Google's long-term fundamentals continue to remain strong with YouTube, Android, Chrome and Google Analytics continue to gain customer traction.

As a result, the Wildfire deal has the potential of not only generating revenues on Google+, but also would improve the Search product.

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