Google Apps for business: 0.5 percent of Google's revenue, says Gartner

Gartner takes a stab at Google's Apps for Business revenue and what it means for the search giant.
Written by Larry Dignan, Contributor

Google's Apps for Business effort generates less than 1 percent of the search giant's revenue, but is critical if only to keep Microsoft off balance, according to Gartner estimates.

Specifically, Google Apps is 0.5 percent of Google's total revenue. Based on that figure, Google Apps had sales of $136.6 million for the nine months ended Sept. 30. That figure is probably inflated a bit since Google's total revenue includes traffic acquisition costs. "We think Apps is growing, the question is how much it grows from there," said Gartner analyst Tom Austin.

How did Gartner arrive at its figure? A footnote to a presentation delivered at the Gartner Symposium in Orlando noted:

We derived the size of Google Apps by identifying all the items contained in "other" in Google's U.S. SEC 10K reports and by coming up with estimates for its size based on a number of different lines of research.

The question for IT buyers about Google revolves around commitment. Will Google stay focused on Apps if it is only a small portion of overall revenue?

Austin said the Google Apps effort is really about defense. "Launching Google Docs is asymmetric warfare to keep competitors off balance," said Austin. Indeed, Google has forced Microsoft to defend its Office juggernaut---and therefore stay away from search. "Google will throw more spaghetti against the wall and iterate," said Austin.

Gartner analyst David Mitchell Smith said Google is really about protecting its existing advertising business. "Google is doing things to maximize their existing business and protecting it," said Smith.

Regarding the cloud email and collaboration market, Austin said:

  • Small businesses are running to Google.
  • Large companies with more than 50,000 are saying no way to Google.
  • Microsoft's advantage is an installed base and esy move to cloud email. "It's Microsoft's game to lose," said Austin.
  • The email seat race will take decades to play out and Google appears to be a long-term player.

For IT buyers, Austin said that companies should evaluate both Google Apps and Microsoft 365 and pit them against each other.

As for Google, the company has become relatively quiet about Apps of late. Google didn't say much about Google Apps and enterprise traction on its most recent earnings conference call. Nikesh Arora, chief business officer at Google, said:

We see continued revenue acceleration in our enterprise business, more companies are fundamentally going Google. Our apps products continue strong growth with the recent app wins with people like Goodyear and SoftBank of Japan. We're particularly excited obviously, also, that we've just deployed apps to 450,000 teachers in Morocco. Finally, Chromebooks have been available for purchase since mid-June and we're beginning to see lots of interest and good uptake, both from the businesses and educational institutions.

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