“Starting today, we’re no longer accepting new sign-ups for the free version of Google Apps (the version you’re currently using).”
-from Google’s email to potentially millions of free users.
For the first time ever Google has removed a free option from one of its products. This says a lot about what we can expect in the future:
1) Sergey Brinn and Larry Page are retiring and with that the fundamental vision that was driving Google may change
2) If free is not an option, it means that Goolge is struggling to grow profits at the same rate as it used to
3) What else, that used to be free, may become pay only
Before I go too far, I should mention that the $5/month paid version of Google Apps does have a free trial. So you can still ease your way into it. But you just cant keep it free forever.
I doubt that defining Google Vision from outside of Goolge is easy. But here are some hints – watch their conference. In the last years Google has put a lot of effort in mounting it’s OS business. Controlling the operating system is the natural way that Google could improve its overall ad revenue. In case you didn’t know, Google’s primary source of income is from ad revenue. Controlling the OS allows Google to gather data from users who are not browsing the web. The first step was the browser – now Google was able to gather data when you are not on a Google site. To get even more data you need to be in the OS.
Google’s primary method of gathering passive data was by providing free services such as Blogger and Google Apps. Google Apps emails allowed google to scan emails and even provide conversation relevant ads on the side. Google’s desire was always to stay relevant. For as long as you are relevant you are “nice” and not actually obtrusive.
Combing the OS with the mobile market allowed Goolge to get real data – combining physical activity data with online presence data. This is a level of intimacy unheard of until now. You search on your phone for the next burger place, map it and then end up buying a burger using Google Wallet on your phone. The last part isn’t there, yet, but using your mobile phone as a payment tool is something on the horizon. After the burger you can leave a review on Google Local – and since Google knows that you have been there, they can send you a rating email the way Amazon does for your purchases. This is complete integration of all consumer activity relating to an individual – and so far I don’t mind.
However, for ads to work really well they need to tell us stuff that we would want but didn’t know. For that Google needs to build a complex history of me as a person. It will be far more thorough than Homeland Security or the FBI could ever hope for and it wouldn’t be illegal either – you would be consenting every time you use their service. Now, combing all kinds of data Google would potentially serve my wife ads that would allow her to buy me the gift I wanted. It’s a stretch – but that’s where we are heading. Ads drive consumerism and good ads drive your choices.
Coming back to the vision – “Do no Evil” and while the founders are on the forefront I am confident that Google will not abuse their knowledge about me to create seeds of addiction in me in order to serve ads with a higher click through ratio (i.e. higher profit ratio). But, once the founders are gone and we have MBA’s running the show, profit becomes a number and the company becomes a vehicle and the consumer just fuel. I for one will be cautiously watching the changes over the next 2-3 years.
No more Free
Admittedly, Google Apps was a tool designed for businesses. It is a reasonable thought by a business educated manager to believe that we deserve to ask for money from people who make money of us. While it disregards any thought of long term goals and vision, it definitely makes financial sense.
However, from experience, financial prudence becomes necessary when financial exuberance slows down. Google Ads were the key to Google’s money making success. In recent years, things have changed:
1) Amazon’s product search took out a large chunk of Google searches that lead to click throughs
2) Facebook and social sharing dug into Google Ads
When Google Ads came around they were ingenious - as ingenious as Google Search. They allowed businessed to market with an extremely low budget. In the past that had been impossible. If you want to put out a classified ad in the local newspaper you’d have to pay upwards of $50 just for a few days. Google’s promise was that you don’t pay unless someone actually clicks on it. And what’s better, the whole thing was combined with search. So a person looking for headphones would potentially click through an ad that was talking about specials on headphones. When Google combined this with Google Local everyone won.
Now, 10 years later, we have low cost digital display networks serving ads at physical locations. We have free social sharing (all you need to have is a good incentive). We have blogging, social media, youtube (also owned by Google) and more. The advertising choices have multiplied and people who have poor web design or keyword analysis skills lost a lot of money in a short time with Google Ads. Google AdWords are cheap if you understand keyword analysis and landing page design. If your keywords are too broad you will bleed money too quickly – even with a modest budget you will loose all the money in a matter of minutes at the beginning of the day. If you don’t know how to design a effective landing page even interested leads will turn away after clicking through. And if you don’t know how to use web analytics tools you wouldn’t even know that this was happening.
As a result people have stepped away from Google Adwords and in varying degrees embraced some of the newcomers. Of course Google just introduced AdWords Express to address some of these concerns – but more about that in another post.
What’s worse only some of Google’s searches lead to meaningful ads – product and service searches. Informational queries rarely would lead to Google ads and click throughs. In recent years Amazon has expanded its product search by being an online storefront for small businesses around the world, in addition to supplying its own merchandise. Amazon’s algorithm rivals Google’s when it comes to product search, and searching for a product on Amazon puts us one-click away from purchasing it. It gives as seller ratings, product photos, customer reviews, price variants, shipping costs etc. More and more people are skipping their product search on Google and go directly to Amazon. This means that Google is loosing about 50% off their most juiciest ad revenue stream.
So the combination of reduced advertising and rapid erosion of the most profitable advertising segment has forced Google into action. While Google was designing the inter-connected world of the future (let’s imagine for altruistic reasons despite what I’ve written above) they ran into an erosion of cashflow.
What else will stop being free?
The first wave will be products that were completely free may offer paid options – like Google Analytics. Google Maps may synchronize more closely with Google Earth and provide building information and geo-spatial survey data to paid subscribers. Tools such as Blogger may develop paid alternatives that allow more creative design options. Google may even charge money for GMail in exchange for no ads, and no email scanning.
Most likely Google Apps and Google App Engine will remain the only products with no free option for some time. But new products may be released without free options and Google may seek to offset the balance when it comes to where the Android App store money goes.
Google is entering its twilight years. Yahoo entered about 8 or 9 years ago and never came out. IBM entered 25 years ago and had to re-invent itself. Microsoft entered 15 years ago. Only Apple that entered 25 years ago came out shining (although Apple will be facing a renewed entry shortly) – all the other companies survived with varying degrees of success but never experienced the same type of optimism and growth that they had experienced before. Google has a lot going for itself and it has been the most innovative and creative company in the last 10 years. But it remains to be seen if they will have a second wind.