Not yet 15 and already a full grown force
Rarely a week goes by when Google is not in the news for something or another. As Google gets ready to turn 15 (yes, Google is still a teenager) this September, no doubt they will be in the news even more regularly.
Beyond the technology miracles that make Google the preferred search of most humans, Google’s business model is a thing of beauty. The majority of people that help Google generate value use the services for free. By doing so, they become a free labor pool that makes Google even more attractive to its paying customers. Genius!
A wide variety of services, Google Search, Gmail, Google Docs, and Google Earth chief among them, are 100% free to those who use them. Giving some things away while charging for others isn’t news and this practice, on its own, isn’t really that interesting.
The magic is in the way that Google turns free products, and the corresponding free labor of its software users, into a seemingly perpetual motion money-making machine. Advertising access to all those free users continues to grow at impressive rates. Q1 2013 figures show revenues have increased to just short of $14 billion, up 31% against Q1 of 2012. Even though this significant sales growth was a disappointment to some on Wall Street, it far outpaces anything else happening in the software and search world. Add in the fact that Q1 profits were almost $3.5 billion, which exceeded expectations, and it is fair to say that Google had a great overall quarter.
As I said, giving things away to drive some other type of business is not new. However, the give-away strategy usually focuses on getting the person who got something for free to buy something else. In Google’s case, the free things are not at all intended to drive business from the people using the software. Google’s model is much closer to the phonebook (remember those?) of yesteryear, which provided a truly useful, free service.
Regardless of Google’s size, user base, or cash hoard, it is still a young company. Like many teenage superstars (think Tiger Woods or Taylor Swift), Google is in a position to continue to dominate, some might even say define, how software is written, distributed and used for decades to come.
On balance, history is littered with young superstars who never really reached their full potential. Some of these stories end in tragedy, others in mediocrity. It is my hope that Google will continue to learn, grow and expand as it moves through its teenage years.