Google Mulls HubSpot Acquisition

Google has engaged bankers about a possible acquisition of HubSpot, a popular online marketing software company valued at $32 billion.

Photo of employees sitting around a table in a HubSpot office
Photo by RebeccaChurt via CC BY-SA 3.0

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

Has Alphabet heard of Lina Khan? If not, Google her now.

On Thursday, Reuters reported that the search giant’s parent company Alphabet has engaged bankers about a possible acquisition of HubSpot, a popular online marketing software company valued at $32 billion. 

Spot Check

At HubSpot’s current market cap, even without a purchase premium, any acquisition would mark the largest in Alphabet’s history. And the company has more than enough firepower to get a deal done; at the end of December, Google reported a war chest stuffed with $111 billion. HubSpot primarily serves smaller companies with 2,000 employees or fewer, offering customer relationship management (CRM) software crucial to marketing tasks — making it a logical target for Google if it intends to crack a market mostly dominated by Salesforce, Oracle, and Microsoft. 

A HubSpot acquisition “could help Google’s position in digital advertising with greater ability to leverage first-party data,” Oppenheimer analysts wrote in a note, pointing out the obvious potential synergies. Of course, Google is already facing steep regulatory scrutiny over its rather large position in digital advertising:

  • In January 2023, the Justice Department and a coalition of states filed an antitrust lawsuit against Google, arguing that the company monopolized multiple products in the digital advertising industry by way of serial acquisitions and anticompetitive manipulation. The trial is set to begin in September.
  • That’s in addition to a broader antitrust lawsuit brought by the DoJ alleging Google has abused its dominant market position in the search engine industry; the final verdict for that case will be handed out in May. So what’s another acquisition? Right?

Alphabet has discussed making an offer — as well as the likelihood of regulatory roadblocks — with bankers at Morgan Stanley, sources told Reuters. One anti-antitrust argument Google could theoretically make: Its entry into the CRM space could actually shake the dominant position of Salesforce, which owns about a 40% market share. Like, we’re on your side here, Ms. Khan.

Pay-I Search: In non-antitrust Alphabet news, on Wednesday, the Financial Times reported that the company might place some of its new AI-powered search tools behind a paywall, which would mark one of its first paywallings of a core service. And the timing makes sense: Analysts have long warned that generative AI responses from chatbots like ChatGPT and Google’s Gemini could supplant consumers’ standard search habits, devouring traditional search ad revenue. Meanwhile, the new tech has trapped Google in an unwinnable cat-and-mouse fight against spammy AI-generated content designed to float to the top of search results, one recent study found. It’s approaching a hostage scenario: Pay for the good AI search engine, or get stuck sifting through the free version now ruined by AI.