Google Inside

As previously rumored around the mill, Google has officially announced that they are acquiring FeedBurner. Google has even posted a 45-minute phone call with FeedBurner’s CEO Dick Costolo.

So why would Google do this? As with any Google-acquisition, their goal is one-fold: expand AdWords possibilities.

Google has had a strong focus on AdWords and they have continued to build their business model around it.

Google reported revenues of $3.66 billion for the quarter ended March 31, 2007, an increase of 63% compared to the first quarter of 2006 and an increase of 14% compared to the fourth quarter of 2006. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs, or TAC. In the first quarter of 2007, TAC totaled $1.13 billion, or 31% of advertising revenues. Google.com

Wait, Google reported $3.66 billion for just the first quarter? In 2006, they reported a final earnings of a little over $10 billion. At this rate, they are projected to generate nearly $15 billion for 2007 alone.

AdWords plays an integral role in this revenue because that’s the primary source of income. Google does want to continue focusing on that platform. They continue upgrading it and making it easier for people to use.

But why the FeedBurner acquisition? That’s simple: more inventory. With these additional millions of publishers available to Google’s AdWords, they can now expand without limitations. There is nothing in the way of Google now to stop them from offering AdWords-strictly. Publishers will probably run into some issues now, for those not using Google services, but overall it will be a good transition.

The new batch of millions in inventory for AdWords will be a great opportunity for advertisers to start spending more…which means more revenue for Google.

It’s a win-win situation for everyone. Additionally, FeedBurner will become integated into Google Accounts and Services now.