The story everyone wanted to talk about–and Eric and Larry didn’t–was Google going into the operating system, deskop computer, and office suite business (let’s call those three things “Google Desktop” for simplicity).
Eric kept saying the Google vision is to index the worlds information, but we all know that is a smoke screen. Google’s business is to make money from targeted advertising (i.e. AdSense).
Let’s look at the facts:
1. 99.9% of Google revenue comes from Adsense.
2. Google search is not necessarily the most efficient carrier of Google Adsense (content based websites and applications are very good at carrying Adsense as well)
3. Google is doing projects like Google Pack, GTalk, Orkut, and GMail that have NOTHING to do with indexing the worlds data–these projects are all carriers for Adsense.
4. Google has built the largest grid computing networking in the world with hundreds of thousands of computers–extending this to a desktop OS would be a cake walk.
5. Google has hired folks who worked on Open Office.
6. GMail’s WYSIWYG is 90% of Microsoft Word. Everyone and their brother is making web-based word processors and spreadsheets today.
7. Google is about to launch a calendar according to reports. That’s a no brainer since they have contacts and email already.
7a. Email, contacts, and calendar=Outlook. Outlook=Microsoft Office. Office=Microsoft’s main revenue stream.
8. Most folks are fine with web-based applications now. AJAX has made web-based email competitive with desktop email–case is closed on that issue.
9. Google’s server network is the only one in existence that could handle a hosted office suite–GMAIL has proven that.
10. Google is getting involved in the light $100 laptop project–which is really close to the Google Desktop concept.
11. Bill Gates himself said that there will be a huge market for advertising-based software, and Microsoft is making a web-based version of Office a major priority.
12. Tech CEOs lie through their teeth all the time–they have to. Steve Jobs said that he would never make a video iPod for two years–then he did. I would task Eric’s comments that they are not interested in making a desktop OS, Office Suite, etc. with a grain of salt. If they were interested–and i know they are–they would never tip their cards.
Now, I don’t think Google will make a PC. I think Google will:
a. launch calendar and office suite in the next six months.
b. by the end of the year they will come out with a Linux-based OS and offer it for free to PC makers. Those PC makers will love Google for giving them a free OS and Google will love extending the reach of their money maker: google Adsense.
The big win: Google can offer PC makers something they have never had: reoccurring revenue. Not only can Google give a free OS and office suite, they could offer them 10% of the Google Adsense revenue of that computer/user–FOR LIFE!
Can you imagine if Dell or Compaq could not only sell a computer for $500 with $50 in profit, but also make another $25-50 a year in Adsense revenue? The person keeps the computer for another two years and Dell makes more from the Adsense than the computer.
The Google Desktop is the greatest growth opportunity for Google right now, and Google needs to find growth if they are going to live up to their valuation. For those reasons I think this is a done deal. Thoughts?
Epilogue: Almost eight years ago Bill Gross pitched me on this idea and started a company called FreePC. Your PC came with a banner fixed to the bottom of the screen. Bill Gross also created Overture–the original version of Google Adsense. When Google launches their free PC or free OS/office suite they will have taken two of Bill Gross’ ideas to the bank. Somewhere Bill Gross is feeling pretty darn good about himself (I always thought the guy was brilliant).