Google yesterday underscored its ambition to expand beyond its core internet-search business and into traditional media when it announced a deal to acquire a radio-advertising group for up to $1.2bn (£680m). The agreement follows a deal struck last year when Google bought up space in technology magazines to resell to its online advertising clients.

With about $6bn in cash on its books, Google is rapidly expanding into new areas of business and new geographies. The company allows its engineers one day a week to work on their own projects to provide a pipeline of potential money-spinning ideas. The company said it is buying the privately held dMarc Broadcasting for an initial $102m in cash. If certain performance targets are hit over the next three years, Google could pay an additional $1.14bn, the company said.

"Google is committed to exploring new ways to extend targeted, measurable advertising to other forms of media," said Tim Armstrong, vice-president of advertising sales at the search engine.

DMarc uses an automated advertising platform designed to simplify the sales, scheduling, delivery and tracking of radio advertising. Broadcasters are able to use the technology to manage the scheduling and placing of advertising to minimise radio station costs as well. The company, based in Newport Beach, California, is run by brothers Chad and Ryan Steelberg.

Google aims to integrate the business with its AdWords platform. AdWords places relevant advertising on Google search results pages as well as on partner sites, such as the New York Times online and Earthlink. The company said the addition of dMarc would provide AdWords advertisers with an additional outlet to promote their goods or services.

Google confirmed in September that it had dipped its toes into print advertising sales. The company bought space in specialist titles such as PC Magazine and Maximum PC to resell to its existing advertising base. The company at the time said the scheme was a test and would not elaborate further. But it is clearly not satisfied with sitting on the rapidly growing market for search-related advertising. In November it provided advertisers with another service, trialling "click-to-call" sales, where web users can phone an advertiser using a voice-over-IP connection.

Shares in Google keep marching higher - they are now five times the $85 offer price when the company joined the market 18 months ago. The brokerage firm Bear Stearns earlier this month lifted its price target for the next year from $360 to $550. Piper Jaffray expects the shares to hit $600 this year. One analyst at the brokerage Caris & Company speculated that the shares could reach as much as $2,000 apiece. The market currently values the business at more than $130bn.

But doubts could creep in on Wall Street if Google strays too far from the internet search-related advertising business. Radio in the United States has been in a slump. The company had investors guessing when it raised an additional $4bn in a secondary share offering last August, adding to the $3bn of cash it already had in the bank.

At the time, Google said the money was for "general corporate purposes" including potential acquisitions. Last month it used $1bn of that money to take a 5% stake in the internet service provider America Online. The deal with dMarc Broadcasting will have analysts widening their lenses to work out what Google might buy next. "Don't be surprised," the firm warned at the IPO "if we place smaller bets in areas that seem very speculative or even strange."

Google has been throwing off new ideas and products at such a rapid rate that the firm last year launched an internal project called "fusion" aimed at trying to bring some of the technologies together.

One result of that effort has been the launch of a personalised Google home page, including news feeds, local cinema listings, stock prices and ultimately advertising. The firm has in effect created an internet portal that could eventually rival Yahoo or MSN. The company's revenue last year was around $4bn. Among other recent launches from Google, the firm earlier this month announced the Google Video Store, allowing consumers to buy and rent content from the likes of CBS, ITN and Sony BMG.