On the surface, this looks like a straightforward story. Google is tightening its grip on text advertising with the acquisition of Feedburner. We've confirmed yesterday's speculation on the Mountain View search engine's latest deal, from Sam Sethi, and can add one fact: the rumored purchase price for the Chicago-based startup is of the order of $100m. Google, with its goal to monopolize classifieds on the web, always seemed the natural buyer for Feedburner, which pioneered text links in syndicated news feeds. But we'd question that logic.
Text ads in feeds receive so little attention from readers that Google, which pursued its own trial, abandoned the experiment. Feed readers, the applications and sites on which geeky internet users scan news items, often do not support the graphical ads which brands prefer, closing off that avenue for a broker such as Feedburner.
So, why would Google pay such a high multiple, about 10 times revenues, for the startup? Probably, for the same reason it has developed Google Analytics: it is another way for Google to tie in independent online publishers. Feedburner provides an array of services to sites, such as email newsletter publishing, and the integration of external news and photos. It is more valuable as a publishing service than an ad broker.