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Inside Google's Shopping List

Last week, I walked a city block in Google's (Nasdaq: GOOG  ) shoes. After the company completed a secondary offering back in September that propped up its cash balance to a whopping $7.6 billion, I began to wonder about where Google would go shopping.

It's a wide, wide acquisitive dot-com world these days. I went over five of the potential buyout candidates last week. This time, I'll dig into a few more public companies that might be worthy of a Google nibble.

Hollywood Media (Nasdaq: HOLL  )
Getting into the show is what Hollywood Media is all about. The company owns various celluloid reference periodicals, the movie information site, and a minority interest in online theater ticket vendor However, a whopping 85% of the company's revenue over the past few quarters has come from its site. There, visitors can buy tickets to popular live theater venue events on Broadway and beyond.

So why does Google -- the ultimate producer -- want in on someone selling tickets to The Producers? Why wouldn't it? Google could cash in on Hollywood Media's active yet poorly monetized sites while becoming a major player in online ticketing. As Google is trying to broaden its reach beyond the Internet, having access to theatergoers would provide the company with even more lucrative advertising channels.

Napster (Nasdaq: NAPS  )
All of the major search portals have an interest in a subscription-based digital music service -- except Google. With Napster, it can scoop up an edgy brand and an upstart legal digital music service that is now 448,000 subscribers strong. It would also be buying a cash-rich company. With $2.95 a share in Napster's wallet, Google's out-of-pocket price would be closer to a mere $0.50 per share at the prices that Napster was fetching earlier this week.

I'll admit that RealNetworks (Nasdaq: RNWK  ) , given its popular media software platform, would have been a more logical buyout candidate for Google, but that was before Microsoft (Nasdaq: MSFT  ) settled its litigation with RealNetworks and became a partner. Napster would still be a great way for Google to get a foothold with younger music-loving audiences. It would also help stem Napster's red ink with the measured application of paid search throughout the music site.

MIVA (Nasdaq: MIVA  )
Formerly known as, MIVA was one of the pioneers of contextual advertising. It was one of the first to follow Overture into paid search, and it's carved out a profitable living doing just that for years. However, the proliferation of Google -- and Yahoo! -- has forced smaller ad enablers to deal with thinner slices of the revenue pie. That doesn't mean Google won't have real estate to gain by acquiring its smaller rivals, especially since just about any purchase would be accretive to earnings.

MIVA would be a cheap date on that front. After acquiring, MIVA would offer Google some precious virtual real estate in Europe, too. MIVA also introduced an interesting tweak to paid search when it rolled out its Pay-Per-Call concept, where ads feature tagged toll-free numbers. MIVA claims the live interaction is 45% more effective than conventional paid search. MIVA has stumbled in many ways lately -- the name change is just its way of throwing off the scent -- so it may be looking for an exit strategy in the form of a buyout offer.

So, how much are we talking here?
Last week's list included four stocks that added up to $3.1 billion in enterprise value. The new names inch Google's shopping list to a $3.4 billion tab, before adjusting that figure higher to account for modest buyout premiums. Yes, Google's good for it. It might even leave enough to make a run at a minority stake in

Company Enterprise Value
Hollywood Media $135 million
Napster $20 million
MIVA $120 million

Will Google really target any of the companies that I've singled out over the past week? Perhaps. The company already has a history of acquiring smaller privately held firms. However, it has to start thinking bigger. With Google's market cap approaching $120 billion, expectations have never been higher for the company's future performance. Yes, Google will grow quite nicely in organic terms, but with every uptick in the stock's price making the secondary offering that much more dilutive, the company will have to put at least some of that money to work sooner rather than later.

Just as Skype's buyout by unlikely suitor eBay (Nasdaq: EBAY  ) showed us, it's not as if online companies have all the time in the world to map out their shopping strategies. Opportunity isn't so much knocking as banging the door down, as rival online companies and traditional media players dangle cash in front of the industry's promising upstarts. If Google spends too much time in the corner counting its cash, it's going to miss the party. Quality players like Skype,, and social networking giant MySpace have all answered the dinner bell this year. Will Google be the next one to set it ringing?

In the Rule Breakers newsletter service, we have recommended various companies that are making waves online, revolutionizing their once-moribund industries. Many of those would also make savory buyout targets for a cash-rich, expansion-hungry company like Google.

It's time for the company to embark on one heck of a shopping spree. Let's hope it brings a really big cart.

Longtime Fool contributor Rick Munarriz is a huge fan of Google and will be carefully watching how Google spends its newfound money. He does not own shares in any of the companies mentioned in this story.eBay is a Motley Fool Stock Advisor pick. The Fool has adisclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

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