Google (GOOG) has been buying modest-sized companies for several years. It tries to find firms that have software or products that allow it to diversify out of the firm’s core search business, which has been unusually successful. The biggest transactions the company has made so far are DoubleClick, the online advertising serving company and YouTube, the video sharing operation.

Google has not made money on YouTube. probably because the quality of the user-created content is so poor. DoubleClick does not look like a terribly good deal because the recession has killed online display advertising.

Now would seem like a perfect time for Google to be in the market for more acquisitions. Tech company valuations are unusually low. Some software firms with promising products are running out of money because venture capitalists are pulling out of all but their safest investments.

Despite all the reasons for temptation, Google has cut back its appetite for M&A. According to Reuters, “The Internet giant has not announced an acquisition in six months, a significant slowdown considering its tally of more than 30 deals since 2005.”

Google still has a staff of executives who look for new deals, but they may be idle for a long time. The market has sent Google a message over the last year. The search company in in too many businesses that do not make a dime. Those range from its small “Checkout” service which was supposed to compete with Ebay’s (EBAY) PayPal to Google Earth, a fun but costly product with lots of customers by no apparent revenue plan.

If Google is out of the business of buying businesses, it stock just may begin to move back up.

Douglas A. McIntyre

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