Google: Who needs advertising?

UPDATE: Business Week's "scoop" confirms my scoop I announced last November, straight from the NYC Googleplex: Google Apps for Enterprise, for a fee, is impending. ALSO: Will Google launch Apps for Enterprise soon?
Written by Donna Bogatin, Contributor

UPDATE: Business Week's "scoop" confirms my scoop I announced last November, straight from the NYC Googleplex: Google Apps for Enterprise, for a fee, is impending. ALSO: Will Google launch Apps for Enterprise soon?

November 21, 2006: Google CEO Eric Schmidt is the Internet’s premiere pitch man for Web-based advertising.

I heard Schmidt extol a newfound power of advertising to fund “all of the software innovation” in the cloud at Search Engine Strategies in August. Come the Google New Year, however, Schmidt is to begin funding software on a more down-to-earth basis: fees for services. 

I discuss Schmidt’s Internet advertising vision in “Google CEO’s new paradigm: ‘cloud computing and advertising go hand-in-hand’.” 

Schmidt reminisces about the “old” client/server computing business model, which he characterizes as “largely invented by Oracle”:

It was a direct sales force that would go in and sell complicated software to enterprises that they would integrate and do important business functions.

Schmidt, however, embraces “an emergent new model”: 

It starts with the premise that the data services and architecture should be on servers. We call it cloud computing – they should be in a ‘cloud’ somewhere. And that if you have the right kind of browser or the right kind of access, it doesn’t matter whether you have a PC or a Mac or a mobile phone or a BlackBerry or what have you – or new devices still to be developed – you can get access to the cloud… 

What enables a new cloud computing based paradigm? Schmidt, Ph.D. in computer science, has gotten “advertising religion”:

the analogous thing that happened to make this possible that I certainly didn’t see 10 years ago was the development of advertising in this new forum.

And so what’s interesting is that the two – cloud computing and advertising – go hand-in-hand. There is a new business model that’s funding all of the software innovation to allow people to have platform choice, client choice, data architectures that are interesting, solutions that are new – and that’s being driven by advertising.

Schmidt may have gotten Web-based advertising religion, but he will soon be placing his faith in other monetization practices as well.


INTRODUCING: Google Apps, at a ‘premium’! 

I got a sneak peek at Google’s strategy for its Google Apps Enterprise edition last week when I spent a morning at the spanking new Googleplex in NYC, as I report and analyze in "Google Enterprise strategy: ‘Death to the hierarchy’".

In the company of about 200 technology execs from corporate, government and not-for-profit organizations I saw Michael Lock, Director of North American Sales for Google Enterprise, make the Google Apps for Enterprise case. 

Lock evangelized the Google cloud over Microsoft Office, declaring “Death to the hierarchy,” soon. 

I asked Lock for a timeframe of when Google will succeed in bringing “Death to the hierarchy,” but no specific date for an absolute demise of the "hierarchy" was provided.

The target for the release of Google Apps Enterprise Edition is Q1 2007, I learned from Lock.

Google Enterprise now claims more than 5000 enterprise clients and has a team of about 250 Googlers. All are dedicated to bringing “Death to the (Microsoft) hierarchy,” by convincing organizations around the world that the “old (Microsoft) methods of information management don’t work.”

In “Google battles Microsoft” I discuss the Google Enterprise go-to-market Google Apps “premium” strategy.

As the top sales person for Google in the enterprise, Lock is banking big on a big Google cost advantage of its hosted productivity solutions.

Although pricing for the premium version of Google Apps has not yet been announced, Lock assured that Google intends to aggressively drive down the “price per document” of its enterprise solutions. Lock suggested the days of spending “$300 to $1000 yearly for an email box” are numbered.” 

The Enterprise version of Google Apps for Your Domain will include features, integration options, capacity and support offerings “designed to meet the needs of larger organizations.”

Google’s enterprise message puts forth the same Googley goodness people “have come to expect” from Google.com. Google's enterprise innovations:

can make your job easier, make your employees happier and more productive, and simplify the life of your entire IT department…

there's no complicated hardware or software to worry about. Your users can just go online to start using these hosted services.

The Google best things in cloud life will not be free to Enterprise edition users.

Don’t expect Schmidt to stop evangelizing that “cloud computing and advertising go hand-in-hand,” however. After all, Google’s $150+ billion market cap is dependent upon Internet advertising, as I put forth in “Google’s “1 percent”:

Google proudly declares it does “one thing really, really well”: Search.

Google’s “one thing,” in fact, fuels 99% of the revenues driving its $150 billion market cap: online search and associated advertising services (AdWords, AdSense).

In his Q3 conference call Schmidt confirmed his long-term faith in the advertising religion: 

search advertising will be the majority of our advertising revenue for many, many years…in fact, the vast majority of our revenue is from search and search revenues, advertising revenues.


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