Google to Acquire Postini for $625 Million

Augmenting its catalog of hosted applications for businesses of all sizes, Google has agreed to acquire Postini, an on-demand communications security and compliance solutions company that was one of its first enterprise partners.

Google said it will pay $625 million for the company in a deal likely to close in the third-quarter.

Postini, which offers security and compliance for e-mail, instant messaging and other Internet communication, will become a wholly-owned subsidiary of Google. Its services include spam and virus filtering at the enterprise level. Postini says it has about 300 employees, more than 35,000 business customers and 10 million users.

In a conference call Monday, executives from Google and Postini said the two companies are a good match as they both believe strongly in the future of Web-hosted, software-as-a-service.

“It really does reaffirm our commitment to delivering hosted apps to businesses,” said Dave Girouard, VP and general manager of Google Enterprise. He noted the history of Google Apps “goes back to the launch of Gmail in April 2004” but it wasn’t until this February that Google launched Google Apps Premier Edition for businesses.

In addition to Gmail, Google Apps includes Calendar, Talk, Docs & Spreadsheets and Personal Start Page. Google said the software has been adopted by more than 100,000 businesses already. Postini solutions include e-mail security, IM security, Web security, message archiving and message encryption.

Google Apps for consumers is free, with only Gmail drawing revenue from advertising, but Google charges $50 per user yearly for the Premier Edition.

Asked during the conference call yesterday if Google plans to move toward a more advertising-driven model for its business-oriented products, including the Postini solutions, Girouard said time will tell.

“We have a free version of Google Apps and a subscription version,” he said. “We would anticipate having both in perpetuity. There are certainly businesses who will happily use the free product and there are ads in the Gmail product today… We’re not here telling everybody they should accept ads in our business applications and we’re not here saying it won’t work either. We’re going to let the market decide whether they’d rather have a subscription type product or ads.”

In a posting on the Postini Web site, Google explained why they think the acquisition makes sense. “We realized we needed a more complete solution that addresses the information security and compliance issues facing larger businesses,” it said. While enterprises want to deliver to employees simple, useful hosted applications such as e-mail and IM, they are required to support “complex business rules, information security mandates and an array of legal and corporate compliance issues,” said Google.

Google said it will continue to support Postini customers and invest in Postini products.