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Comment by bushbaba | Hacker News Reader

Google still is an ads company. It’s not as well diversified as apple (hardware, services, ads) and amazon (cloud, retail, consumer electronics, logistics, healthcare,…etc)

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Is Google trying to be anything other than an ads company?

If so, what? I know they are famous for spinning up projects and killing them super quickly.

If not, what are they doing? They have 140k+ employees worldwide. Is that what is needed to maintain their core ad business without focusing on growth of any kind (ad related or not)? If not... how many engineers/managers/whatever positions could they afford to "layoff" if we were to see US recessionary pressures/consumer spending pullback?

Google is putting a lot of resources into enterprise productivity software with gsuite. Google's strategy there largely revolves around letting students use the software for free and giving away chromebooks to school districts so that ten years from now every college graduate will be more comfortable with gsuite than microsoft office, so a bit of a long game there. This is basically microsoft's entire business, so there's definitely a huge market there. They also have GCP which is chugging along I guess.

To some extent, that was Microsoft's strategy in the 90s and 00s.

They sure missed boat with Teams / Slack.

MS also famously has lots and lots of pretty decent re-sellers all around the world, which re-sellers have their own very deep lists of business contacts.

Afaik Google has tried to get something out of the enterprise space for a good 5 years now (I'd say), ever since they launched GCP, but it's just not in their DNA to do and especially to maintain business sales.

What enterprise would want to buy products from a company infamously known to cancel products left and right?

Google has tried at least since 2002. So it's been 20 years. https://en.wikipedia.org/wiki/Google_Search_Appliance

The Google Search Appliance was a respectable business in of itself. They deprecated it as it wasn't large enough for "Google". It would have been in the ranks of peer unicorn startups given the revenue prior to being killed off.

It was also a business for which the writing was very clearly on the wall. How many companies are left that still sell a SaaS/PaaS that requires you to install bespoke on-prem server hardware? I'm guessing its a much smaller list than it was 2002. For crawling/indexing, I can't even imagine convincing IT we need a dedicated appliance today! For the problem GSA solved, its just not needed anymore and subsumed by other google products/services that don't need me to install a rack-device like:

https://workspace.google.com/products/cloud-search/

As someone else has pointed out, GSuite has seen success in the enterprise space, so their enterprise efforts aren't a total write-off. With so many students now on GSuite at their school or colleges and a generation effectively raised on Google Docs... I certainly wouldn't bet against it today.

I can imagine on prem hw being a benefit if a company didn't want a 3rd party to index material. But yeah, I wouldn't want to manage an on-prem setup unless it was necessary.

GSuite (now Google Workspace) is actually chugging along nicely and continuously improved. I bet it becomes one of their reliable long term products.

I also see decent Google Workspace resellers.

1/3 of Microsoft's revenues and operating income come from their cloud business, which has done much better than Google's.

Azure has largely been propelled by microsoft's strong business relationships. I think it's likely that google sees gsuite and GCP as synergies given how successful msft has been at parlaying their office contracts into azure signups.

You assume that Google has any competencies in dealing with the enterprise or anything that requires high-touch.

And then they hired an Oracle veteran to head GCP. What could possibly go wrong?

https://www.crn.com/news/cloud/google-cloud-ceo-thomas-kuria...

Oracle is probably the most competent enterprise software sales organization other than microsoft, seems like that's a pretty reasonable decision if they focus on building out the sales team. And Google probably realizes enterprise sales is a huge problem for them which is why they're investing in these products to make it easier to grow the organization. Selling to enterprises is something Google needs to get good at if they want to grow long term, having strong products to sell helps attract talent and close sales which gives their team experience.

I have never in 25 years - most of that in the enterprise - has dealt with Oracle enterprise sales and came out feeling good about it.

The measure of success here isn't how good you feel. It's the amount of money they make relative to the quality of their product. Feels indisputable to me that oracle is at the top of the charts with respect to that ratio in enterprise software.

Companies are doing their best to get away from Oracle. I don’t see too many IT people who have been so scarred by MS like they have with Oracle.

That's because their software sucks and their sales team was amazing. Their software always sucked so the reason why companies are on Oracle to begin with is in large part due to very effective sales.

Another justification people give for Google staffing levels is keeping talent locked up/not competing with Google. To the extent that's the case, thinking wouldn't be along the lines of "could we get by with fewer workers?"

Google also makes the most popular mobile OS in the world, the most popular web browser in the world, runs a major cloud provider, runs an app store, and provides services in hundreds of countries which requires a large amount of employees to do all the legal, compliance, localization, and support work.

The most popular mobile OS in the world that according to evidence that came out in the Oracle trial, only made Google $27 billion in profit from inception until then.

For reference, Google pays Apple a reported $14 billion a year to be the default search engine on Apple devices. It’s highly likely that Apple makes more from Google in mobile than Google makes from Android.

Chrome is just another gateway to advertising.

Google’s Play store game revenue is $48 billion a year. But if they count revenue like Apple does, they are counting the gross amount people pay net after they give developers their cut is 30% of that excluding other expenses.

https://www.businessofapps.com/data/app-revenues/

Those things are why Google has a lot of employees. It doesn't mean they are successful business ideas.

>the most popular mobile OS in the world

... which is free for consumers, and also for manufacturers to license ...

>the most popular web browser in the world

... which is free ...

>runs a major cloud provider

... which is unprofitable ...

Android Open Source Project may be free but check out any Android phone sold in the west at least and it will be loaded with closed source Google software.

What about the google play store? Don’t they get x% of every in-app purchase?

That is a good business. But the point is still pretty clear that Google seems to make very large investments into products that are then given away for free to many/most users (Search, Chrome, Gmail, the whole Google Workspace product suite, YouTube) with the no obvious business plan other than to drive ad revenue, sometimes in ways as indirect as just having people spend more time on the Internet.

Google Cloud by now brings in almost as much as YouTube ads.[1] Notably up 39.4% year-on-year for 6 months ending 2022-06-30.

Google Advertising is up "only" 15% the same period.

Assuming consistent growth rate (big BIG assumption, but Google has not reported a broken out Cloud revenue forever) then Google Cloud revenue will exceed their ads revenue in ~11 years.

And I believe that the market is there for the trend to continue, even if AWS and Azure continue taking most of the pie. In fact it's possible that ads revenue could decrease.

[1] https://abc.xyz/investor/static/pdf/20220726_alphabet_10Q.pd..., page 11.

Google is in all of those areas as well, they're just minor plays.

Last quarter, ~10% of Google's revenue came from non-advertising Services and ~7% came from Google Cloud. The ~82% that comes from ads is split between Search, YouTube, and the Network.

Amazon by comparison is 83% dependent on Amazon retail. Cloud fills the remaining 17%. They're not any better diversified, by revenue.

I don't think you can look at Amazon's "dependency" on revenue through that simplistic of a lens. AWS is purported to be much more profitable than their retail operations.

What are the margins on Amazon's retail revenue after all logistics costs versus the margins on Google's advertising?

I'm going to take a guess and say retail probably breaks even (almost by design by Amazon but not sure if it'll ever be more than a 10-20% margin business because by design they are offering traditionally expensive services like fast shipping, very lenient returns at very low cost/price to the end user) whereas advertising is probably... 80% margin?

I know there are server costs, engineers to maintain them, but if Google stopped investing in growth as far as diversifying/expanding advertising services goes engineer/developer/management wise... how lean could they run?

Could they support Google's current ad offerings with a core team of... 1000 engineers? 500? 200?

Amazon doesn't want to show profit in retail. It instead re-invents much of the profit into their logistics and technology. Buying all those 747s for prime air these past few years wasn't cheap. Amazon go wasn't cheap. Alexa sure ain't cheap. That all comes out of the margin of retail.

Amazon retail isn't just getting revenue from e-commerce sales. There's multiple diversified business units part of that division. For example people pay for amazon logistics, amazon warehousing, etc.

This completely misses the importance of the cloud to Amazon.

AWS profit margin is around 30% whereas retail is probably hovering in the low to high single digits (5-8%). AWS makes profit for Amazon, and retail offers free cash flow to Amazon. Both are important and to say Amazon isn’t diversified due to revenue is simplistic.

iPhone hardware sales account for 50% of Apple's revenue, and that number goes up significantly when you allocate revenue from Apple Care, services, ads, App Store and more that are directly driven by iPhone. The entire company is reliant on that one device, so not quite as diversified as people think.

True. I think it's also fair to say it's more of an ecosystem than a single product. The switching costs to another similar ecosystem are high.

It's better to say Apple is becoming less reliant on selling every iPhone user a new iPhone every year.

Apple can deploy several levers to increase non-iPhone revenue which they haven't yet.

First party games. Ads. Increase first party paid app costs (final cut pro goes back to being a pro service). Developer services. All on the mac side. They also have cloud infrastructure they haven't focused on yet, but can potentially be a major source of revenue with the right hires and focus.

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