Tuesday, February 9, 2010

Mobile Takeovers: What's Next? Geolocation Companies

Google's got billions in cash. So does Microsoft. Outside of stock buybacks and dividends, the these huge piles of cash simply sit in banks and short-term investments. Or, they can be used for buyouts of tech startups in an attempt of one-upsmanship among the tech giants.

A high profile battle in this version of corporate takeover (of startups) is the Apple-Google land grab of Admob by Google for a dirty cheap $750 million. Okay, I don't know if that was a good deal or not but weeks later, Apple countered with Quattro for about $250. In fact, Businessweek surmised that this was going to be a hot sector in terms of buyouts.

I think there's gonna be another sector that is going to see some activities in 2010: Geolocation companies. Heard of Foursquare. Yup. How about Yelp? That's right. Well, there was rumblings late that year that Google was looking to acquire Yelp for half a billion while Microsoft offered $700 million. Yelp rejected both offers. I'll leave that up to you to decide if it's a decision or not.

However, there are plenty of other location-based services with a lot of momentum in the market such as Foursquare who recently made headlines with a plethora of high profile deals. Because of the potential in this segment of the mobile service market, I am going to predict many of these companies may be snatched off the market.

But why? Isn't Foursquare fine if left to its volition? On its own now, FS can serve as many platforms across the market as long as there is demand. It's huge in the iPhone and is doing well on others with each passing day. Well, there are two reasons for this that I can see.

One, it's about integration. Another way to put it, plugging holes in your mobile offering. For instance, Google wants Yelp so that it can integrate it into its profilio of webapps in hopes of selling us location-based ads and services like search. The second reason is about taking the company off the market so that your competitors can't get to them.

In my opinion, FS has the momentum in the market. There are also other high profile targets. Loopt was one of the pioneers but it largely has not gained in the mindshare of late as FS has with its deals. But Loopt, like Gowalla and MyTown does have a large following, making these three companies in the running as potential targets for cash rich companies.

This could be the beginning of a new mobile and social phenonmenon. Or it maybe Internet Bubble 2.0. The safe bet is that Google, Microsoft, and Apple will be spending a lot of their cash in the coming year on these kinds of buys. But there are others. Remember Nokia? It's also got about $11 billion and it can make a play as well.

So, for you smart energetic folks out there. Go-getter types. Now's your chance.

Note: Yelp. Guys. An ad company that built itself up because of the iPhone app store got $750 million from Google. You ought to hold out and ask for at least just as much if not more.

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