Google Acquires Wildfire

Google Inc. (GOOG - Analyst Report) is looking for permanent ways to grow and expand. Recently, Google announced that it has acquired marketing start-up Wildfire for an undisclosed amount, strengthening its foothold in the world of social media.

Though not publicly disclosed, sources have indicated that Google will pay about $250 million for the acquisition.

Wildfire provides software that helps businesses to place ads on social-media sites like Facebook, Inc. (FB - Analyst Report), Twitter, LinkedIn (LNKD - Analyst Report) and Pinterest. It has roughly 16,000 customers, including Spotify, Virgin, Amazon.com Inc. (AMZN - Analyst Report) and Unilever (UL - Analyst Report).

Google is a market leader in online advertising and it has been trying to explore various ways to increase its advertising revenue and fight competition. The company had stepped up its efforts in social media with its social network Google+, a service started in 2011 that competes directly with Facebook.

The addition of Wildfire may bolster Google’s own social network, Google+, and provide insights about rival platforms such as Facebook. The acquisition will allow Google to provide advanced software and services to brands that want to run contests, branded games and more on Google+. By acquiring Wildfire, Google might be better positioned to compete against Facebook and others in the social media space.

This is Google's second purchase specifically related to social media expansion. Recently, Google bought Meebo for about $100 million, a social media start-up that makes mobile applications for consumers as well as publishers, designed to enable online communication.

In fact, the Internet search engine is on an acquisition spree. In May, Google closed its acquisition of cell phone maker Motorola Mobility Holdings, Inc. () for $12.5 billion ($40 a share). In 2011, Google bought at least 26 companies.

Google has done very well in the second quarter, with its gross revenue touching a record $12.21 billion. Revenues from both Google-owned and partner sites continued to grow in double digits on a year-over-year basis. Historically, Google has always fared better than Yahoo Inc (YHOO - Analyst Report), which has been struggling to uphold itself, and Microsoft (MSFT - Analyst Report), which is yet to gain critical mass.

However, legal entanglements related to competitive matters or patent infringements remain an overhang. Google retains a Zacks #3 Rank, which translates into a short-term Hold recommendation.