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If Search Is Google's Castle, Android Is the Moat
Hugh Pickens writes "Warren Buffet once said that the best businesses were economic castles protected by unbreachable moats. Now, Erick Schonfeld writes that if search is Google's economic castle, Android is a moat, Chrome browser is a moat, and Google Apps is a moat — all free products, subsidized by search profits, intended to protect the economic castle that is search. 'Android, as well as Chrome and Chrome OS for that matter, are not "products" in the classic business sense. They have no plan to become their own "economic castles,"' says Benchmark Capital VC Bill Gurley. 'They are not trying to make a profit on Android or Chrome. They want to take any layer that lives between themselves and the consumer and make it free (or even less than free).' So don't measure the success of Google's new businesses by how much revenue or profit they generate directly but measure it by how much they shore up Google's core search business. 'Google is ... scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it. And best I can tell, they are doing a damn good job of it.'"
I think gmail is the drawbridge, crossing the moat from the other kingdoms directly into google's search castle
So a company having a successful business model and dominating the market is evil? Got it. If all markets were dominated by companies like Google, the world would be a much better place. Are they perfect? No. But they're trying dammit.
For the sole reason that MS's target audience can't tell the difference between an OS, a computer and a browser.
Everyone remember: Google promises that they will do no evil, so you know it's true. After all... they say so.
Well, if I had to pick which one of the major software companies is the least evil, it would be Google. They're open source friendly, create innovative products, I've never read of Google patent trolling other companies, they generally have a good reputation.
Lo and behold, for I am a sig!
If it's been said once, it's been said a million times. Search isn't the product. Viewers are the product and they're being sold to advertisers. The moats are there to keep you in, not to keep other people out.
Yeah, I think less than free is meant to imply "them" paying "you" in the sense that Google will pay you to use their products. And frankly, they already do that to some extent. There are folks on YouTube with sponsored, or registered or partnered channels or something like that. Google pays those folks to keep producing YouTube content. Google AdSense is set up in such a way that you can slap it on your own blog or website or whatever and get paid to have random people click on the useless shit you have to spout off into the internet voids. I would even wager, though I am not entirely certain, that Google probably is willing to pay out some cash to Android app developers whose apps are used enough to generate advertising revenue were they to include some kind of embedded ad with the app.
So yes, Google "gives" you stuff for less than free in the same sense that your employer gives you the tools you need to do your job for "less than free." They pay you to utilize the tools they want you to use to produce a product that generates more profit for them.
Motorcycles, Robots, Space Gossip and More!
Besides, I thought Google's main focus was advertising, and search was just a delivery vehicle, just like Android, Docs, and everything else they give away for free.
What impresses me the most about Google is that they, as a company, have consistently taken actions that demonstrate long-term thinking. They will try things that have no short-term profit, just because in the long run they might either make a profit or defend the company's interests.
From the beginning, Google has helped Firefox out financially; more recently, Google made its own web browser. Why? Because it wasn't in Google's best interest for Microsoft to have any kind of leverage over the Internet, or in particular over which search engine is the default on computers. Remember how much market share Internet Explorer used to have? Displacing it once seemed hopeless, but Google went for it.
Google has poured resources into Android and continues to give it away. Why? Because it wasn't in Google's best interest for Apple to have leverage over the cell phone market, or in particular over which search engine is the default on cell phones.
Google spent about $100 million to buy On2, and then gave away the intellectual property they had bought. Why? Because the FSF wrote an open letter... nah, just messing with you to see if you are paying attention. Because, in the long run, Google's YouTube needs a suitable video format. If YouTube's business utterly depends on patented technology such as H.264, Google will have no choice but to comply with any and all demands from the licensing authority. Google is willing to not only spend the $100 million, but to pay more people to keep working on WebM (doing things like free reference designs for hardware decoders). Google doesn't ever expect to make money on WebM; it's purely a defensive move, to control long-term costs in the future. (Well, also, Google has lots of geeks like us who want to help keep web standards open.)
Heck, go all the way back to the early days of Google. They took the time to write a complete vertically integrated software stack, one which allowed them to get reliable performance out of dirt-cheap off-the-shelf hardware. The reason Sun was printing money during the Internet boom was that everybody who wanted a web server would buy an expensive, reliable Sun box to run it on; not Google, they used the High Availability stuff on Linux, and the elegant Google MapReduce, to weld together masses of cheap motherboards into a powerful and reliable server operation.
Remember the news stories about Google buying up the "dark fiber"? Google bought a bunch of optical fiber with no immediate use. Long-term thinking: "the stuff is cheap now; we have the money now; someday we'll have a use for this."
Google has a lot of other products and features, but for the most part those are just fun sidelines. When you are as big as Google, you can afford to do some side projects just for the heck of it, and all the better if they actually turn a profit.
steveha
lf(1): it's like ls(1) but sorts filenames by extension, tersely
They're very good at ensuring you're not locked in to them as well. You can export your data from pretty much any of their services. I think I read a while back where they have a 'free data team' whose job it is to ensure that's the case. Damn nice to see.
Or it could be that you missed the entire point of the article. The point of the article is that the only product that Google really cares about is search, and that everything else is just filler that doesn't even have to be bring in any revenue on its own. From that perspective, the analogies are actually quite illuminating.
Those who can, do. Those who can't, sue.
Customers are the people who pay you money, and products are the things that your customers is paying for. People who *don't* pay you are not your customers, and things that you give away for free is not your products.
Web technology companies have more complicated business models because it is usually not just about building something that you call "product" and sell it to your customers. Instead, most web sites use their core technology to build something that is free and give it away to people, who we call the users. When there are enough users, the websites turn the users into products and sell it to their customers.
Google is a typical example of such business model. Almost all of the Google "products" that we know today, including the search engine, Gmail, Google Maps, YouTube, Android, Chrome, etc are NOT Google's products - because Google is giving them away freely. Free services are NOT products because there is no way to get money from it. To understand what is Google's products, we have to see where it's revenues come from - Adsense, that's right, is Google's real product.
But if Google Search et al. are not Google's products, does this mean that they are not important? No, because those are what allows Google to make great products - it's users. Google will continue to provide more free services to it's users as long as the added cost is believed to directly bring more revenue to Google.
Ok but everyone understands that, but what's the point of identifying what is product and what is not? Well, the notion of products and non-products is very important when it comes to competition. When a non-product enters an existing market to compete with other products, it becomes disruptive and can potentially make many competitors out of business. This is because non-product can be given away free but products can't.
This is why Gmail was disruptive to the email market because it was the first email service that do not rely on pro accounts as their product. Google identified that Gmail is not their product and therefore willing to provide so much storage space and features because they believed that doing so allows them to build better products (more users) and get more revenue from their customers (advertisers). When Gmail competed as a non-product, it became almost impossible for competitors to compete unless they changed their business model to something else other than pro accounts.
The same could be say for Microsoft IE vs Netscape. While Microsoft could be partly blamed for their anti-competitive practices, it is also clear that Netscape had a fatal business model of identifying the wrong thing as their product, making it failed to compete with IE when it became a non-product.
I had a hard time to understand how YouTube really works as a business, because it's so hard to understand how to pay for so much bandwidth just for users to watch free videos. But the answer is actually quite simple - YouTube is free because it is NOT Google's product.
If something is not your product, do NOT ever think of getting your money back from your users. Just give up your damn mind and give it away free generously, as long as you can make a product out of it.
You should have also realized that Android is not Google's product. But there is an important distinction on the business model between Android and iPhone - Google do realize that Android users are the product to sell to the App developers, who are the customers; but for Apple it's products are the iPhone and it's apps, and it's customers are the consumers who buy iPhones. The difference in business model makes it obvious how Android is different from iPhone - that Android developers are Google's top priority while Apple treats it's iPhone developers badly; Apple's iPhone is designe
Oh, but there is: Google is better. At least, that's the premise on which Google operates. They do what's necessary to make the Web and the Internet in general more amenable to sharing data, searching, etc. and use their engineering skills to separate themselves from the pack.
Recently, they realised that the only way they could maintain a landscape conducive to their style was to give Microsoft a kick in the pants. Hence the Chrome browser. Likewise, Apple's walled-garden approach was a threat to their long-term survival, so they created Android. The 'scorched earth' phrase is a poor one, because Google is really doing the opposite, they're opening fertile new ground in order to give the population somewhere to move.
If we absolutely need a territory-based analogy, then Microsoft is a slumlord. It didn't set out to be, but all those little ticky-tacky sheds quickly degraded and the poor roads and communications made policing difficult. Apple, on the other hand, is a city planner. It creates gated communities that offer you everything they imagine you could want, all within the perceived safety and comfort of their ivy-covered walls.
Google wants something completely different. They want an Oklahoma Land Rush - rather than seeking to contain and corral people into their own plantation (sorry), they want a generation of homesteaders. They're confident that the homesteaders will keep coming to them for materials because they believe in the quality of their engineering.
Hence the need for Google to move the stakes. They're not interested in fighting over Microsoft's turf; they're interested in creating new territory. Territory that, not coincidentally, they feel confident they can dominate.
Microsoft is playing itself into a holding action. They are on the defensive, trying to hold onto what they have, and all the while people are leaving the slums for an often ragged and imperfect existence, free however from the constraints that once bound them.
None of this should be taken as an endorsement of one tactic over another. The preceding is simply an effort to explain the lay of the land.
Crumb's Corollary: Never bring a knife to a bun fight.