Red Herring confirms that the deal is happening (for $23 million). Sub-$20 to $30 million (with a few exceptions) is Google’s acquisition “sweet spot.” Once a valuation exceeds that amount Google is less inclined to acquire. Google buys companies for their engineers/talent and their technology. Here it’s clearly the technology and related capabilities.
In 2006, Microsoft bought Massive, which also provides in-game ad insertion.
This acquisition of course makes sense for Google as it seeks to expand its reach beyond paid search. According to the Entertainment Software Assn., about 60% of the US population plays video games. It skews about 60% male (not as high as one might think perhaps) and the average age of game players is 33 (I’ve seen conflicting data on this point). The point here is that gaming is a multi-billion dollar market with lots of users.
In the larger context of Google’s “expansion” plans, it now has in-game, print newspapers, radio, video/TV (YouTube) and mobile. Even though the company may have stumbled a bit with the high profile departure of the dMarc founders, as well as the Viacom squabble, this is an impressive portfolio of ad distribution.
Of course it still has to prove itself in areas beyond search. But these others areas are keys to Google’s long-term growth.