Google buys its first Israeli startup in $25 million deal

Sergey Brin promised during his last visit to Israel in 2008 that Google would buy local companies - and now it has. On Tuesday, the Internet giant announced the acquisition of its first Israeli startup: LabPixies. Though no price was announced, estimates are that Google paid $25 million for LabPixies, which develops software gadgets ranging from calendars, news feeds and to-do lists to entertainment and games.

LabPixies was one of the first developers of customizable Web gadgets for Google's iGoogle personalized home pages and Android cell phone operating system, and for Apple's iPhone.

LabPixies, founded in 2006, was not financed by venture capital. It did have backing of private U.S. investors.

The money will be going mostly to the founders and entrepreneurs behind the firm: CEO Ran Ben-Yair, vice president of research and development Oded Poncz, creative director Udi Graff and Nir Tzemah, the vice president of business development.

The company financed its development mostly from its own revenues, and the outside investors have put in only about $1 million.

The firm employs only 10 people, who have developed more than 60 widgets so far - and has 50 million registered users. Together, these users rack up about 1.3 billion views a month.

In an earlier interview with TheMarker, Ben-Yair refused to divulge financial information, but did say the company had millions of dollars in revenues. This means Google is paying more for the technology, the employees and the products than it is for the business side.

When it started out, LabPixies focused on gadgets for computers, such as weather applications, which would be installed on the desktop and updated constantly via the Internet. They also developed applications for task management, calculators, Suduko and other games.

Despite the fierce competition, LabPixies widgets were a big hit on sites that allowed users to create their own homepages, such as Google and My Yahoo!.

Over the past two years, the company decided to use its success to move into the smart phone market. Now it focuses on the iPhone as well as phones using Google's Android phone operating system.

One of the company's biggest hits is FloodIt, its first app for the iPhone, which was the No. 3 on the list of top free applications in Apple's App Store. .

LabPixies released a statement saying: "We started LabPixies to create a truly personalized online experience and develop fun widgets that people find useful every day. Working at Google will help us scale to more users as well as giving our team greater opportunities. Google and LabPixies teams have worked on many projects together, including the launch of global OpenSocial based gadgets."

Google released an announcement, too: "The team will be based in our ever-growing Tel Aviv office and will anchor our iGoogle efforts across Europe, the Middle East and Africa. We are looking forward to working with LabPixies to develop great web apps and leverage their knowledge and expertise to help developers and improve the ecosystem overall."

Google and LabPixies both declined to comment beyond their statements.