A number of recent deals announced over the past few months by big Internet players Google and Facebook have been a different kind of acquisition — mainly “acq-hire-sitions.” In other words, these larger companies have been buying up smaller start-ups mainly to make talent hires. Google made two such “acq-hires” in February alone while Facebook boasts one of its own. This is not a new phenomenon – Cisco made headlines back in 2006 for its “spin-ins,” where employees would leave the company for a few years to build their own start-ups, only to be acquired by Cisco in the end.
Google has made three of these types of acquisitions over since the end of 2009: online word processor start-up AppJet in December, and social search engine Aardvark and email app compay ReMail in February. The common thread among these three start-ups is that they were all founded by former Google employees. These acquisitions allow the company to tuck in all the creative brain power it had previously leaked out right back into Google’s ever-expanding umbrella. In the case of Aardvark, Google has kept the service running and integrated it into its Google Labs platform, but both ReMail and AppJet were shut down after the purchase (AppJet’s product EtherPad is still available for the existing users, but only until March 31 and Google has since open sourced ReMail). The few acquired employees from the deals have been put to work for Google’s own ventures.
A similar situation is happening at Facebook. The social networking giant recently acquired Octazen, an address book importer, which met a similar fate. The company, which consisted of a mere two employees, was merged into Facebook’s team and the technology was put to rest. The company previously made two similar acquisitions as well, starting in 2007 with Parakey, a web operating system, and more recently in August with social aggregation and search site FriendFeed. Both companies added behind-the-scenes talent to the Facebook team, though at the cost of the acquired technologies.
These companies are not the first to make acquisitions strictly based on talent, and they certainly will not be the last. There are swaths of start-ups springing up every day run by talented individuals which could potentially be prime candidates for M&A in the near future. Particularly, a handful of startups run by former Googlers, including video analytics and advertising platform Ooyala, customer analytics provider TellApart, and how-to video site Howcast, could see themselves being wrapped up into larger tech firms. The question remains, whether these start-ups will be picked up for their technologies, or simply for the brain power behind them.