9.24 Google Services

Google Inc. is an American multinational public corporation offering Internet search, cloud computing, and advertising services. Becoming equally well known are the many services Google provides — maps, tools, — many of them free. Why does it pay Google to provide these services, and what is Google's long-term policy?

Value of Networks

Google seems to increases its network partners as though its global value depended on the volume traffic between all those partners. {3} A little theory.

By Metcalfe's Law, the value or utility of a network is held to be proportional to the square of the number of its members: an approximate, empirical law that was much invoked during the Internet boom by companies going all out for market share. (Metcalfe's intention was to find a cost-value crossover point or 'critical mass', beyond which networks start to pay. The man, incidentally, was well-qualified in networks: he developed the Ethernet protocol, founded the networking company 3Com Corp., and became in turn publisher of the trade periodical InfoWorld, an influential high-tech columnist and venture capitalist.)

Consider a network with 10 members (n=10): there are 90 different possible connections that one member can make to another. Double the membership to 20, and the number of connections grows to 380, i.e. roughly quadruple. Suppose further that, once the network reaches 100,000 members, it generates one dollar per member. If that network now doubles in membership, the total value of the network will be worth $4 million.

But Metcalfe's Law is a rule of thumb, and the value may increase by some other expression, say n log( n ). If that were the case, the value increase of 200,000 member network would be much more modest, only to $2,100,000. In fact the value of a broadcast network is believed to grow linearly, a relationship called Sarnoff's Law after the pioneering RCA television executive and entrepreneur David Sarnoff. An important point made by Briscoe, Odlyzko and Tilly {4} is that members are not all equal, and that traffic between some members will be much heavier than traffic between others. Metcalfe's Law also flies in the face of experience. Were the Law correct, telecom companies would be rapidly merging, and they're not.

So what's the truth of the matter? Google, employing some of the best minds in the business, are not likely to be following a flawed model.

An answer may lie in a paper by Tongia and Tilley, {5} who turn the problem round and look at the costs of exclusion from a network. The treatment is too detailed to be summarized here, but their conclusions are that:

1. Costs of exclusion become exponential in time.
2. Costs are imposed on those within the network as well as those excluded.
3. Those excluded will resort to alternative, parallel networking.
4. These conclusions apply to all networks: populations, transportation, healthcare provision, etc.

Google are therefore not pursuing advantage so much as seeking to avoid disadvantage: they are expanding their services before some other company does. With that in mind, we can look at Google services, which are very extensive.

Google Services

Google currently provides some 50 tools or services. Some of the more important, and the advantages to Google ( besides simply increasing the size of their network):

Service	Nature	Pricing	Advantage to Google
Internet Search	Internet search engine	free	Other side of ' two-sided matching market' for Google Ads.
Google Analytics	analysis of website traffic	free	Better understanding of potential customers.
Google Apps	business services	commercial	Part of cloud computing service and increasing source of revenue.
Google Earth	global topographic 3-d coverage	free	Loss-leader for commercial service.
Gmail	email service	free	Increases market for Google Ads.
Google Books	access to sections of in- print books and entire out-of-print books	free	Paid $125 million for rights to sell out-of- print books and place ads. Probably commissions to booksellers & publishers. {13}
Google Translate	view a web page in any language	free	Public image
Google Cloud	cloud computer services	commercial	Increasing source of revenue.
Google AdWords	advertising	commercial	Google's prime source of income.
AdSense	affiliate advertising	Google takes share	Increases market for Google Ads: second most important source of income.
Google Mobile	provides add-ons for Android smartphones	free	Access to mobile phone market
Orkut	social media platform	free	Competition to Facebook and MySpace
Blogger	blogging platform	free	Increases market for Google Ads
Google Scholar	locates paper or article fast	search free	Public image
Google News	news summary and mash-up	free	Public image
Google Youtube	photo-sharing service	free	Increases market for Google Ads
Google Patents	access to 7 million US patents	free	Public image
Google Chrome	browser	free	Improves Google services.
Google Plus	Google's Facebook	free	Increases market for Google Ads.
Google Checkout	ecommerce tool	from 1.9% + $0.30	Sales commissions

Google Acquisitions

Google is often seen as an innovative company, but its skills lie in search engine technology. Its expansion into other markets has been by aggressive acquisition. The larger/more significant acquisitions: {8}

Acquisition & Date	Acquired Company Business	Price ( US$ million)	Merged with/became
Applied Semantics. April 2003	Online advertising	102	AdWords & AdSense
Current Communications Group. July 2005	Broadband Internet access	100	Internet Backbone
5% AOL	Broadband Internet access	1000	AOL's White Label search engine
dMarc Broadcasting. January 2007	Advertising	102	AdSense
YouTube. October 2006	Video sharing	1,650	YouTube
Endoxon. December 2006.	Mapping	28	Google Earth
Marratech. April 2007	Video Conferencing	15	Google Talk
DoubleClick. April 2007	Online advertising	3,100	AdSense
FeedBurner. June 2007	Web feed	100	FeedBurner
Grand Central. July 2007	Voice over Internet Protocol	45	Google Voice
Postini. July 2007	Communications security	625	Gmail
On2. August 2009	Video compression	l07	WebM & YouTube
Admob. November 2009	Mobile advertising	750	-
Picnik. March 2010	Photo editing	5	Picasa
BumpTop. April 2010.	Desktop Environment	30	Android
Invite Media. June 2010	Advertising	81	DoubleClick
TA Software. July 2010	Travel technology	700	-
Slide. August 2010	Social gaming	182	-
Jambol. August 2010.	Social gold payment	70	-
Like. August 2010	Visual Search Engine	100	Boutiques.com
BeatThatQuote. March 2011	Price comparison service	38	Google Adviser
PushLife. April 2011	Service provider	25	-
Admeld. June 2011	Online advertising	400	DoubleClick, Invite Media
Motorola Mobility. August 2011	Mobile phones	12,500	Android
Zagat. September 2011	Restaurant reviews	151	Google Maps
DailyDeal September 2011	Deal a Day	114	Google Offers
Meebo. June 2012	Instant messaging	100	Google +
Sparrow. Jukly 2012	Mobile apps	25	Gmail
Wildfire Interactive. August 2012	Social media marketing	450	Google +
Viewdle. October 2012	Facial Recognition	45	Android
Buffer Box. November 2012	Package delivery	17	Android
Channel Intelligence. February 2013	Ecommerce	125	Google Shopping
Wavvii . .April 2013	Natural language processing	30	Google knowledge graph

Google Traffic

Similarly, contrary to appearances, Google buys in much of its traffic. {3}

Firefox. Google finances 85% of Firefox in exchange for having its search engine embedded in its browser. (60 million users in 2006.)

Dell. By a 2006 partnership agreement, the Google search engine appears by default on Dell computers.

iPhones. By a 2008 partnership agreement, the Google search engine appears by default on Apple iPhones. (13 million units sold by October 2008).

Adobe. By a 2006 agreement, the Google toolbar is installed as part of Adobe's Shockwave package.

Sun. Sun have been installing the Google toolbar on Java packages since 2005. (20 million downloads monthly.)

AOL. Google acquired 5% of AOL in 2005. Google became AOL's White Label search engine. (20 million subscribers at time of purchase.)

Threats to Google

Threats to Google lie in: {9}

Antitrust suits

1. In 2007 Microsoft called for regulator action to stop Google acquiring DoubleClick
2. In November 2008 regulator action stopped negotiations between Google and Yahoo.
3. In February 2009, Sourcetool, a B2B search engine, filed an antitrust suit against Google, accusing it of unfair pricing.
4. Google has settled antitrust issues with Federal Trade Commission, but the matter is not entirely closed. {15}

Copyright infringement suits

1. In May 2007, Viacom sued Google for 'intentional copyright infringement', asking US $1 billion.
2. In May 2008 a group of Belgian newspapers sued Google for making copyrighted material available free: they asked €49 million.
3. In October 2008, Google paid US$125 million to settle various publishers suits arising out of its Google Books service.

Privacy concerns

1. Google's widespread acquisition of data on all Internet users is raising concern in libertarian groups.

Points to Note

1. Google's dominance in the search engine and online advertising markets.
2. Large advertising profits invested to a. expand networks and b. diversify into other markets.
3. Increasing concern about Google's antitrust and privacy violations.

Questions

1. What is Metcalfe's Law, and what has it been superseded by? What is their importance to Google services?
2. Briefly describe ten Google services and explain how Google benefits from them.
3. How does Google get its traffic?
4. Give a reasoned history of Google acquisitions, suggesting the underlying strategy and commenting on the acquisition price.
5. What are the current threats to Google, and how seriously should the company take them?
6. Do you agree with Google's Library Project? Who are the main beneficiaries?

Sources and Further Reading

1. Google. Funding Universe. Extensive article with short list of references.
2. The History of Google. WebHostingReport. One of many IT company histories.
3. Everything you wanted to know about Google. . . But were afraid to ask. December 2008. Slideshare. Detailed PDF presentation.
4. Metcalfe's Law is Wrong. Communications networks increase in value as they add members —but by how much? The devil is in the details by Bob Briscoe, Andrew Odlyzko and Benjamin Tilly. Spectrum July 2006.
5. The Dark Side of Metcalfe's Law: Multiple and Growing Cost of Network Exclusion by R Tongia and E.J Wilson, III. cstep. Undated: about 2008.
6. Top 50 Google Tools for Business. Brad Andersohn Blog. Listing, service and link.
7. 30+ Google Cloud Computing Services for You by Basant Narayan Singh. Technopulse. April 2011. Shorter listing but more detail.
8. List of acquisitions by Google. Wikipedia. 100 listed, with good references. Accessed May 2013.
9. Why could Google die. Slideshare. March 2009. Threats to Google operations.
10. Google. WikInvest. Extensive information for investors.
11. Google Investor Relations. Google. Google's own site for investors.
12. Cloudy outlook as Google steps up push to rule web by Richard Waters. FT. December 2010. Google eBooks and TV.
13. Google Book Search Library Project. Association of Research Libraries. 2011. Papers and articles on Google's contentious project.
14. How Google Dominates Us by James Gleick. NYT. August 2011. How Google transformed the information industry.
15. Google in 2013: Five things to watch for by Casey Newton. CNET. December 2012.