Sources: Google parent company Alphabet drops HubSpot acquisition, seeks Wiz

Google’s parent company Alphabet has abandoned plans to acquire CRM giant HubSpot, Bloomberg and Reuters sources say.

A previous publication, citing people with knowledge of the matter, noted that initial talks never reached the point of “detailed due diligence discussions.”

HubSpot’s stock price fell 12 percent following the revelation. Alphabet, meanwhile, rose 1.2 percent.

CX Today reported on initial discussions in May. But the regulatory fog engulfing big tech always made a deal unlikely.

After all, if Google could control not only the search engine that generates traffic, but also the popular CRM solution used to manage customer relationships, it could develop an anti-competitive customer experience (CX) mechanism.

Deciphering such a vision would require the involvement of multiple regulators, who have been trying for more than a year to determine whether Figma is a direct competitor to Photoshop.

There are also questions about whether Google could have made the coordinated effort necessary to develop such a workflow mechanism.

How Rebecca Wetteman, CEO and Principal Analyst at Valoir, told CX Today, discussing initial talks: “They’ve had a number of partnerships and acquisitions that haven’t panned out as expected.”

In the customer experience space, the best example is probably the partnership with Salesforce, which never gained the momentum that the AWS-Salesforce collaboration did – even though it existed even before that.

Noting this, Wetteman suggested, “Google needs to continue to transform itself toward serving enterprise customers and building their trust.

Google has historically not done a good job of executing on enterprise product plans. Enterprises want to make sure the roadmaps they receive are being followed.

Since hiring Thomas Kurian as Google Cloud CEO in 2019, Alphabet has clearly been interested in solving this problem.

However, the HubSpot acquisition may have discouraged users from using the enterprise database that Google is trying to acquire, given that the CRM market leader prioritizes small and medium-sized businesses.

Such concerns are compounded by worries about regulatory approvals, with Alphabet already under investigation by the European Commission for anti-competitive practices.

But it’s not just Google. Apple, Microsoft, and Meta are also under the scrutiny of the EU regulator.

In such an environment, another lengthy investigation is probably not on Google’s to-do list. But it has the necessary resources to fund it.

Indeed, the search engine giant is reported to have $110.9 billion in cash as of January 1, 2024. In theory, that gives Google the funds to acquire HubSpot — which has a market capitalization of $24.26 billion (as of July 15, 2024) — fourfold.

Showing that financial muscle could have been a significant driver for Google in exploring a takeover of HubSpot. As Wetteman said:

This doesn’t seem like a move to directly push competition away from them. It’s more about showcasing Google’s financial strength and strategic vision.

But regardless of the circumstances, Alphabet wasted no time in regrouping and finding its next acquisition target: Wiz.

HubSpot Away, Wiz At Home

Alphabet has reportedly identified cybersecurity startup Wiz as its next acquisition target.

Google’s parent company is considering making a $23 billion takeover bid for the company, which would be the largest startup acquisition in the company’s history, according to a report in The Wall Street Journal.

Wiz provides “isolated security tools and scanners” for enterprises and – fittingly – runs on Google Kubernetes Engine.

What’s more, the company’s scanners can already pull data from native Google services via an API, providing full visibility, precise risk prioritization, and “actionable context” to isolate toxic patterns and mitigate risk.

In advertising the acquisition, Google continues to portray itself as the most secure platform, a notion that has gained traction after Microsoft’s recent string of reputation-damaging security breaches.

Google itself isn’t immune to security issues. Last year, Google Fi customer data was compromised in a T-Mobile security breach. However, the tech giant hasn’t been breached since 2018, when a Google+ bug exposed the data of 52.5 million users.

By comparison, Microsoft has suffered far more breaches. In fact, since the Google+ bug, Microsoft has been breached 13 times, most recently by Russian hackers in January.

Meanwhile, AWS also recorded 13 breaches during that time period. Although the last one came two years ago, when an attack on Pegasus Airlines exposed 23 million files.

Still, this potential acquisition — or just the rumors about it — will help Google reaffirm that security is a key differentiator for its cloud platform, similar to the recent release of a 14-page PDF document detailing Microsoft’s cybersecurity woes.

In 2022, Google used its $5.4 billion acquisition of Mandiant to facilitate this fraud, and later that year, Mandiant discovered the SolarWinds attack.

Given its history, this acquisition appears to have a better chance than the proposed HubSpot acquisition, and the Times reports that the deal “seems likely.”

However, The Verge reports that the deal “may not go through,” citing the risk of intervention and scrutiny from U.S. regulators.