At first blush, it sounds crazy. After all, they are in completely different business models. GitHub manages open-source software, via a specific version control system, and makes it money with private versions of those repositories in the cloud. GitHub, in other words, makes its money from small to large enterprises via direct online sales.
Google, on the other hand, sells advertising in a multi-party market. It gives its products away for free (mostly), gets a very large number of users, and then sells access to those users to advertisers via AdWords.
Yet, Google’s lifeblood is massive user engagement. The more users that are engaged more often, the more advertisements they can sell. GitHub has highly active users, many of whom came over from two Google products:
- Project code hosting at http://code.google.com. GitHub’s version is just that much better. A common site on a Google projects page is, “this code is now maintained on GitHub at ______.”
- Owner, maintainer, developer and user discussions at http://groups.google.com. While Google Groups does serve the broader population, for example with local church or synagogue lists or class discussion boards, the highly active developer discussions have moved to GitHub Issues and Pull Requests, which are directly tied to the project, and far easier to work with.
GitHub recently raised a $100MM round from Andreessen Horowitz, valuing the company at around $750MM. Yet with Google’s cash pile of $54.4BN at the end of 2Q2013, a billion or two is not that hard to pay. The questions are what is the value of each highly engaged user to Google? And what is the value to Google of the enterprise customers that are actually paying real money to GitHub to use their services? Are there growth/cross-sell/up-sell opportunities to Google beyond their usage in GitHub?
My instinct is that GitHub would not necessarily be a good acquisition, primarily because of Google’s likely difficulty in servicing the paying customers; it just doesn’t fit with their DNA and the cultures are likely to be quite different.
On the other hand, there is one other service which has pulled a huge amount of user discussion away from Google, and serves as a much better form of Google Groups discussion for those with specific questions that need to be answered (as opposed to general announcements): http://www.stackexchange.com