Picture this: Google Inc. said Tuesday that it had acquired Picasa Inc., a Pasadena-based online photo-sharing service.

Founded in October 2001 by high-tech incubator Idealab, Picasa, which was closely held, sells software that lets users store and manage digital photos, then share them with friends through a peer-to-peer network. Financial terms of the deal were not disclosed.

Analysts said the purchase underscored Google’s effort to create more venues for targeted advertisements, which generated 95% of its revenue in 2003.

At the same time, they said, it indicates that the Mountain View, Calif., company is pressing into new business areas to lessen its reliance on Internet ads.


Google executives are “hedging their bets,” said Whit Andrews, an analyst with market research firm Gartner Inc.

Mark Mahaney, an analyst with American Technology Research, said he expected Google to keep rounding out its portfolio through other small acquisitions.

“It’s the small stuff that builds out the features,” he said.

Adding a photo-hosting service to an online portfolio that already includes Web search, e-mail, social networking and news tracking would make Google look more like Yahoo Inc., Microsoft Corp.'s MSN and Time Warner Inc.'s America Online, the Internet portals with which it increasingly competes.


Google, which is expected to raise as much as $2.7 billion in an initial public offering this summer, declined to give specifics about its long-term plans for Picasa’s technology. Google has a history with Picasa; the two companies in May announced a deal to use the photo-sharing service on Google’s Blogger service, which helps people create Web logs.

“Picasa complements Google’s ongoing mission to organize the world’s information and make it universally accessible and useful,” Google said.

Picasa was founded in Idealab’s Boston office by Michael Herf and Lars Perkins, then relocated to the incubator’s Pasadena headquarters last summer. Its 18 employees will move to Google’s product development center in Santa Monica, the companies said.