Why Google needs to make machine learning its growth fuel

In 2017 Google outspent Microsoft, Apple, and Facebook on R&D spending with the majority being on AI and machine learning. Google needs new AI- and machine learning-driven businesses that have lower Total Acquisition Costs (TAC) to offset the rising acquisition costs of their ad and search businesses.
One of the company’s initial forays into AI and machine learning was its $600M acquisition of AI startup DeepMind in January 2014. Google has launched two funds dedicated solely to AI: Gradient Ventures and the Google Assistant Investment Program, both of which are accepting pitches from AI and machine learning startups today. On its Q4’17 earnings call, the company announced that its cloud business is now bringing in $1B per quarter. The number of cloud deals worth $1M+ that Google has sold more than tripled between 2016 and 2017. Google’s M&A strategy is concentrating on strengthening their cloud business to better compete against Amazon AWS and Microsoft Azure.