Google acquires Postini for $625 million

Google has agreed to buy Postini, which offers a service to help companies protect and control their e-mail , for $625 million in cash. Postini started out with a service to identify and eliminate spam, and it expanded to offer other services as well, such as the monitoring of communication for brokerage firms to insure […]

Google has agreed to buy Postini, which offers a service to help companies protect and control their e-mail , for $625 million in cash.

Postini started out with a service to identify and eliminate spam, and it expanded to offer other services as well, such as the monitoring of communication for brokerage firms to insure regulatory compliance. Postini doesn’t sell software, rather it has messages routed through its own computers, which filter the spam, and then send them off to its client companies.

This move marks Google’s entry into what is an entirely new line of business: offering services to businesses through its enormous network of data centers. This concept of software as a service, of course, is one of the hottest fads in technology, promoted tirelessly by Salesforce.com, which offers online customer relations management.

Eric Schmidt, Google’s chief executive, doesn’t mince words about this in Google’s press release, and there's more detail in our FAQ and on the Enterprise blog. “With this transaction, we’re reinforcing our commitment to delivering compelling hosted applications to businesses of all sizes,” he said.

Google has already taken several steps in this direction. DoubleClick, the big advertising firm that Google has agreed to buy, is essentially a provider of software and services to online publishers and advertising agencies.

Moreover, Google created versions of several of its services–its e-mail, online word processor, and such–for use by businesses as their internal systems. It claims 100,000 business customers for what it calls Google Apps. These services are offered in free versions that have advertising, and paid versions that come with extra features.

Google can be expected to have a bias toward offering its new services aimed at corporations free with advertising. It has already done that with several of its smaller acquisitions. For example, it recently eliminated fees for some of the services offered by Feedburner, a company it bought that helps Internet publishers create automated feeds of their content for newsreaders. Many advertising industry executives expect that many of Doubleclick’s services will be offered free as well when that acquisition is completed.

So Google’s entry into the corporate software business promises to exponentially disrupt an industry that was already in turmoil, because of the prospect of a shift from selling software to software as a service. Now Google may well offer software free or at very low cost because it can insert advertising. Even if some companies would pay to offer their employees ad-free tools, Google’s global network of services may be able to help it underbid smaller rivals.

As an aside, if Google does succeed in convincing companies to accept advertising on their internal systems, it may become the replacement for trade journalism. Instead of advertising your widget maker in Widgets Today, you could simply buy an ad on Google that will appear every time someone reads an e-mail or writes a presentation about making widgets.

That’s several steps down the road, of course, but Google is playing this game for the long term.

Source:→ The New York Times

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