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Google Inc. recently announced that it has acquired an online marketing service Channel Intelligence (CI), a consolidated company owned by ICG Group Inc. (ICGE - Snapshot Report) in a $125 million all cash deal. The transaction is expected to be completed in the first quarter of 2013, subject to customary closing conditions.

Orlando-based Channel Intelligence offers a number of data-driven services that help brands and retailers to boost e-commerce sales. The company’s offerings integrate with other platforms such as Facebook (FB - Analyst Report) and its widgets feature alongside products giving options such as Where to Buy and where to look for specific products. 

CI is already one of the original launch partners for Google Shopping, developing a technology that can help maximize sales and Return On Ad Spend (ROAS) with Product Listing Ads (PLAs). CI operates in 31 countries and works with 850 retailers like Best Buy (BBY - Analyst Report) and Target (TGT - Analyst Report).

The Channel Intelligence deal shows that e-commerce is becoming an important part of Google's strategy. The acquisition will enable Google to better compete with the likes of Amazon.com Inc. (AMZN - Analyst Report) and eBay Inc. (EBAY - Analyst Report) by offering its customers a better shopping experience. The service will save time for customers by helping them find the best product deals on the Google Shopping search engine.

Google is a market leader in online advertising and it has been exploring various ways to increase its revenues and fight competition. The company has stepped up its efforts in the e-commerce space. In Jun last year, the company announced that retailers would have to pay for space on Google Shopping in an attempt to improve ad quality and help merchants maximize sales from ads purchased on Google Shopping.

Google has done well in the fourth quarter, with its gross revenues touching a record $14.4 billion. Revenues from both Google-owned and partner sites, continued to grow in double digits on a year-over-year basis.

Though Google is the No. 1 web-search engine, it lags online retail giants Amazon and eBay in terms of shopping-related searches. So, we believe the CI acquisition is a part of the company’s ongoing efforts to improve on the Google Shopping experience.

However, legal entanglements related to competitive matters or patent infringements remain an overhang. Currently, Google retains a Zacks Rank #3 (Hold).

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