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Comment by elblanco | Hacker News Reader

I think that you can. To date, Google really only has one successful product (success meaning "makes money for Google") and that's Ad-sense.

Sure it's wildly successful. But if that stopped making money for Google tomorrow (for example, I automatically mentally filter out all advertisements in my search results, how long before everybody does that), what would their revenue and profitability picture look like? In almost every other product area outside of web search and perhaps email, where Google competes against another company, they haven't done well at all -- both in terms of users and in terms of dollars.

In other words, Google's first product, designed by a couple of grad students, is the loss leader that drives people to their one and only money making product that supplies 99% (not 30%, or 60% or even 80%, 99%!) of their operating capital.

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AdWords, not AdSense. AdSense is their second successful product.

And Search exists basically to supply inventory for AdWords. They wouldn't have anything to run ads on without search (okay, not quite true, there's AdSense, but they wouldn't have developed either...)

Thanks for the correction.

But yeah, that merely proves my point. If click-throughs started to drop, what other money making products does Google have in its portfolio?

(don't get me wrong, I love and use Google products as much as the next fella, but I also understand that their search/ad revenue is what's subsidizing my use of Google Earth or Picassa or whatever)

There're some, but if they're not in the 10-K I'm not allowed to comment on the profitability of other products.

Well, it's not hard to just go through the list of products Google offers, and subtract the ones that don't have a business model around them.

For example, Google Earth does some actual business business, and probably makes a bit of cash selling pro versions and geospatial servers and services (haven't looked at the 10-k to be honest). Orkut, Sites, Knol, Chat, Wave, Scholar, etc. does not.

Some things like SketchUp are designed as loss leaders like Search to provide content to things that might have a decent revenue stream like Google Earth (except most of the paying users are probably not using the Sketchup Data).

But other, more expensive things like Chrome and Android have a link to making money that's very tenuous at best.

And we also already know that Search Ads account for 99% of Google's revenue stream. Subtract that out and we have a very good idea of where Google's other offerings are.

A lot of that is because Google doesn't define success that way. Their view is that anything that stimulates the internet will indirectly benefit them, so that makes products like gmail or chrome clear winners. Gmail brought us threaded emailing, ajax (and good javascript-supported interfaces in general), etc. Chrome brought us tear off tabs, fast javascript execution, etc. I think if the focus was stand alone profit generators the products they put out would be very different - what would Android look like?

*brought us = made popular, not necessarily invented.

Although I mentioned business strategy, by 'blown away' I mostly mean engineering enginuity.

But as far as business is concerned, they are still in a good spot, what with basically owning the internet, even though they haven't monetized it much.

It is fairly obvious that they care more about engineering solutions, with monetization as an afterthought. This means their solutions are extremely dominant in many fields (maps anyone?) - turning that into revenue at some point seems inevitable.

> turning that into revenue at some point seems inevitable.

A true statement, they at least have the foundational technologies for doing better, but so far all of the profitable business ideas seem to center around advertising (youtube anyone?). I'm just not sure how much further that idea can stretch...do I really want to see advertisements while building my house in Sketchup?

This is correct, but it's not that the other ventures are all losers. It's that AdWords is this supernova that outshines the entire galaxy.

Gmail, Google Enterprise, Google Docs, Google Apps, Google Checkout, Google Earth, Google Maps -- these would all be highly interesting startups, some of them profitable, were they not inside Google. As it is, now they are more part of Google's long-term strategic plans.

I think one thing that people definitely forget is that many of those were startups at one time. Lots of the peripheral technology offerings Google has were not developed originally in-house -- they were acquired with ad-revenue from their flagship.

And as I posted in another comment (http://news.ycombinator.com/item?id=1093455), outside of Apps for business, really don't make any money for anybody. A quick analysis shows that subtract search/ad revenue and Google Apps for business, and all other offerings have to fit within about $100mil/yr revenue stream. This makes me think that most of the acquisitions have failed to grow much since being purchased.

Again, Google may be full of smart people, and I love using Google products, but money makers they are not.

You're missing something obvious. When Google buys something they tend to put ads on it and let people use it for free. That means that any revenue that web property brings in is counted as ad revenue, and is not counted as coming from that web property. Therefore looking at the SEC statement gives you no way to figure out how much revenue Google is or is not getting from a lot of their acquisitions.

That's true I suppose. But it still means that any products and services Google actually sells still accounts for about $200mil/yr and about $100mil/yr of that is purely Google Apps for businesses.

That means,

Google Earth Enterprise Geospatial Servers + Google Earth Pro + Google Products/Checkout (minus advertising revenue from that) + Google Appliances + Google Sketchup Pro + More Picassa Space + Google Voice long distance service fees + whatever else all account for $100mil/yr in revenue. Those aren't ad supported services and nearly all of those were acquisitions.

Google Appliances should be a multi-billion dollar/yr business, supplanting everything from document and content management systems, to Sharepoint, to many types of traditional Oracle installations, yet we know that it's entire business sits at under $100mil/yr. Let's be generous, and in a flight of fancy say it sits at $90mil/yr, that means that all the rest of those products would have to do less than $10mil/yr.

Too much you say! Google voice Long Distance has to do something in the neighborhood of $5mil/yr! And I know personally of at least a dozen or so Google Earth Enterprise Server Installs, at ~$20k a pop (or whatever the pricing is), that's not a whole lot of money. ESRI has a similar business at just under $.75 billion/yr. Assuming there are quite a few more installs than I personally know about, let's say all added up, $2mil/yr in geospatial products (that's about 10x the value of what I've personally seen so I feel I'm being pretty generous here). So the Appliance business couldn't possibly be that "big".

In other words, no matter how you mix the numbers, the performance of these offerings is not very good. I'm currently working in a startup, and we're doing numbers like this and we're considered very under-performing by our investors right now. It would rankle me in all kinds of ways were I in google management that these products are not each at least $20-30mil/yr interests and one or two of them should be $billion+/yr interests.

Again, don't get me wrong, I love Google and their products and services. I probably use most of what I just listed here at least 2-3x a week. But Google is an advertising agency that uses a novel distribution channel for it's advertising clients. It's not really much of a products company in the same way Microsoft of Apple is. Google should be analyzed more in terms of comparison to other ad channels and agencies not in terms of direct competition with technology vendors. This is the flaw analysts, users, employees and competitors make.

How sure are you on Ads being the only money-spinner? Have you seen Google Apps for business with over 2 million users? The Google Search Appliance?

http://www.google.com/apps/intl/en/business/index.html

http://www.google.com/enterprise/search/gsa.html

99% of Google's reported revenue comes from search (or rather advertising programs) according to their 2008 company report (I know a little outdated, the number is probably a bit different now but I can't be bothered to look it up, I'd guess still pretty north of 90%).

Doing some quick arithmetic gives me about $200 million left over from all other products and services combined.

Google Apps for business accounts for around $100 million of that (2 million users * $50/yr), which means that really, all other products in Google make up around $100 million dollars/year. I'm willing to wager that a very significant chunk of that remaining $100mil comes from Google Earth geospatial servers for the military and the rest going to the appliances (which surprisingly are not the big hit everybody thought they would be, the appliances should be a multi-billion/yr business unit alone, what went wrong?).

Now, $200+ million is nothing to sneeze at, but we wouldn't talk about Google with such hushed, excited, reverence if they were a $100 or $200 million/yr company, would we? Salesforce.com, which basically sells one thing, just did a Billion dollar year. We also have no idea if those figures represent profit or not. Google docs for example runs on the same multi-billion dollar infrastructure as does search...would it be nearly as compelling of a service if it really had to pay for itself?

We all conflate their great technology with their market success, but really Google is just a really good advertising conduit that just so happens to have really good technology -- their other technology is not impactful in nearly the same way monetarily to them.

By way of comparison, Google is about the same revenue-size as the top-5 advertising agencies.

But Google's actual technology business is about the size of ClickSoftware Technologies(NASDAQ:CKSW) -- and I don't recall seeing lots of posts on any tech site about their offerings.

None of this is any great mystery. The numbers are out there and it's easy to make some educated guesses. Google knows this too, which is why they are rapidly trying to diversify into other areas. For example, Google Docs was a $0/yr business not that long ago -- I wish I could turn a switch and grow something into a $100mil/yr operation in a couple of years.

On the other hand, if we look at Microsoft, they aren't even interested in an idea unless it has at least a billion/yr revenue opportunity attached to it. So many of the things that Google is doing now, to build up to, and exceed, that kind of revenue target, would never have happened at Microsoft -- and there's something to be said about that.

"The revenue generated by the store is expected to be small, at least by the standards of Google’s $23 billion annual business."

http://bits.blogs.nytimes.com/2010/02/01/google-planning-sto...

i think folks are underestimating the scale of the google apps offering, and thus its money-making scale.

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