Google Buys Jaiku/You Can Send Your Friends Your Thoughts/Very Poetic

Google (Nasdaq: GOOG) has reached a deal to buy a Swedish firm that makes a social networking application that lets users blast their extended networks of friends with micro-blogs whether they're on a PC or a mobile phone.

Google did not disclose the terms of its acquisition of Jaiku, which is based in Helsinki; neither company said exactly how the firm's technology would be integrated into the Google product lineup.

Jaiku's service is similar to that of Twitter, a U.S.-based firm that enables users to post so-called micro-blogs, short blasts of information about what they're doing at any given moment. With Twitter, those posts are displayed on the Twitter home page and can be sent to desktops and mobile devices of members in a user's network of friends.

'Hard at Work'

Not surprisingly, the move renewed speculation in some quarters about Google's mobile phone plans, especially since it was announced just hours after analysts from Lehman Brothers published a research note predicting the Gphone could launch as soon as February of 2008.

The purchase also underscores Google's desires to become a player in the social networking space, where its homegrown Orkut has gained relatively little traction in the U.S. and other key markets.

"Although we don't have definite plans to announce at this time, we're excited about helping drive the next round of developments in Web and mobile technology," Google Product Manager Tony Hsieh wrote in a blog posting announcing the deal.

Google plans to use "the ideas and technology behind Jaiku to make compelling and useful products," Hsieh wrote, adding that Jaiku has been "hard at work" on ways to keep people connected whether they are on their computers or their mobile devices.

Crossing Platforms

Both companies' engineers are excited about the possibilities, Jaiku's cofounders, Jyri Engeström and Petteri Koponen, said in a blog post of their own. "Enthusiastic developers lead to great innovation," they wrote.

Jaiku will not accept new customer sign-ups for the time being "in order to focus on innovation instead of scaling," it said, but will continue to support existing customers. Jaiku's service went live last year. The company did not disclose how many users have signed up since for the free service.

The purchase is the type of acquisition that has become routine for Google in recent years as it buys up firms with strong technology but relatively little market presence -- the exceptions being its massive investments in YouTube and DoubleClick (Nasdaq: DCLK).

The move comes as Google's stock has soared to new heights on optimism about its future prospects, including a mounting sense that its acquisition of DoubleClick may win regulatory approval soon. Google shares smashed through the US$600 barrier recently and on Wednesday morning traded up another 1.2 percent to $622.91.

Plenty of Competition

Other firms working on social networking applications have been targets during Google's recent buying spree. In 2005, it bought DodgeBall.com, a firm that used messaging technology to enable users to blast friends with quick updates on their plans and movements, messages that could be sent to mobile phones.

Google will have plenty of competition as it seeks to leverage those assets to build a social network that spans platforms, Sterling Market Intelligence Principal Analyst Greg Sterling told the E-Commerce Times.

MySpace is actively developing its own mobile applications, Facebook is leveraging outside developers to build its own features for going wireless and some mobile phone companies are also eying the space, Sterling noted.

The idea is to leverage information about people's whereabouts and their networks of friends to enable highly focused ads -- such as for local entertainment events -- to be delivered alongside those micro-blog posts, he added.

"This is almost exclusively a phenomenon among the young, under-30 age group right now," Sterling said. "But this could be a significant early effort in monetizing social networking in the mobile space."

Raising Eyebrows

The fact that Google chose not to go after Twitter will likely raise some eyebrows. Twitter founder Evan Williams also cofounded Pyra Labs, the firm that developed Blogger, which Google purchased in 2003. Williams worked at Google for a time before leaving and founding Twitter.

Twitter would have been the logical move as the best known firm the space and though it likely would have commanded a higher price, deep-pocketed Google could certainly afford it.

"Twitter is the poster child for this type of technology," JupiterResearch analyst Michael Gartenberg told the E-Commerce Times.

Google's decision to buy Jaiku leaves Twitter with one obvious possible partner for a major buy, he added, referring to Google rival Yahoo (Nasdaq: YHOO), which is well known to be seeking its own social networking mojo -- including making numerous overtures to acquire Facebook, offers that have all been rebuffed to date.

As for the Gphone, the Gphone will likely be a free, ad-supported device, Lehman analyst Doug Anmuth wrote in the research note, suggesting that Google may have already signed up a Taiwanese company to make the device. The upside created for Google with the device -- allowing it to tap into a $127 billion a year mobile phone market -- could take Google's stock above the $700 level within 12 months, Anmuth said.