Why Google Sought Out GIPS

Publisher's Outlook

Why Google Sought Out GIPS

By Rich Tehrani, CEO, Technology Marketing Corporation  |  August 12, 2010

I first met the company called Global IP Sound around 2002 at TMC's (News - Alert) ITEXPO and Pulvermedia's VON expos. What differentiated the company was its ability to power wireless VoIP calls over PDAs – specifically Compaq iPAQs via a low-bandwidth codec.

As you can imagine, at the time, the codec needed to be not only low-bandwidth due to the slow wireless connections, but also super-optimized because processors in PDAs at the time were not powerful.

Over time, the company supplied technology that allowed Skype to popularize rapidly its Internet telephony software and service. The company's narrowband iLBC codec is widely used, and its newer wideband codecs power HD voice solutions.

A few years back the company broadened its focus to address video, and subsequently changed its name to Global IP Solutions.

The last time I was in the company's headquarters I had a chance to see how Yahoo! Video Messenger used GIPS technology to deliver high-quality video over IP communications.

So, now that I’ve provided some background on GIPS, why the purchase by Google?

A recent article indicated this acquisition is about Google competing with Skype (News - Alert). However, just how this purchase helps the competition with Skype is unclear, other than removing some of the competitive technology in the market.

This purchase, and Google’s move to acquire codec company On2, reminds me of Google's history in the search market. For many years, VCs and many in the media espoused the virtue of building Web portals, while search was relegated to the backseat. It was during these years that Yahoo decided to license search technology from Google while it focused on building out its portal strategy via e-mail, horoscopes, a financial page, etc. In the end, the company with the best search technology won the day.

Collaboration over IP is where the market is heading and as it continues, voice and video technology that optimizes compression regardless of network quality is invaluable. In fact, to compete in the information technology space, collaboration has to be something you are great at. IBM has solutions in this space, as do Microsoft and Cisco (News - Alert). This acquisition actually puts Google in the position of supplying codecs to its competition.

Although the GIPS deal is cheap by tech M&A standards at just over $62 million, I can't see Google picking up the company to make the competition come crawling to them. Then again, GIPS has access to much proprietary technology, which powers some of the leading collaboration players in the market.

And one has to imagine the On2 deal has taught the search leader the value of owning codecs on which major players in the market rely. Remember that companies making codecs often have solid patent portfolios as well, and these assets are useful when getting sued, as you can wield them as a weapon in patent countersuits. Anyone remember the Apple suit in which HTC and Google are embroiled? I think there is some intellectual property here that Google can use to its advantage.

The final reason for this acquisition is simply to help Google in its conquest to maximize its chances in the video over IP space – and by this I mean TV and YouTube on all mobile devices. Advertising on video potentially could be the biggest reason for this deal. The launch of the iPad and the coming wave of Android-based tablets likely have shown the company how big a market entertainment on these devices will be.

Keith Woolcock of the Seeking Alpha blog discusses the premature death of Google. The general idea is social media; apps and entertainment are consuming more and more of our time at the expense of search. If this is the case, and you factor in YouTube's recent news about having 2 billion views per day, you realize there is even more potential for getting video on more platforms and devices.

If I had to bet, I would say Google execs are walking around the company campus with Android-powered tablets with built-in videoconferencing 24x7. Moreover, they are thrilled with what they see, and they feel productivity is skyrocketing. As a result, they realize the value of companies making codecs to enable these devices will skyrocket.

This Google acquisition of GIPS not only allows the company to pick up an asset that will increase in value, it can be used to help defend hardware platforms that use Android and run the risk of being sued by Nokia, Apple (News - Alert) and others. At the end of the day, having healthy operating system competition is crucial for Google to have a viable business. A single dominant player could shun Google's services for an alternative, and from Apple's perspective Google is probably a notch down on the friendship meter from Adobe at the moment.

Apparently when it comes to enabling technology, Google's new mantra is it’s better to be needed than liked.

Rich Tehrani is CEO of TMC. In addition, he is the Chairman of the world’s best-attended communications conference, INTERNET TELEPHONY Conference & EXPO (ITEXPO (News - Alert)). He is also the author of his own communications and technology blog.

Edited by Stefania Viscusi