Almost all of the Google's revenue comes from its search engine, which last quarter accounted for more than $5 billion. New initiatives, such as the Chrome browser, Google Gears, and Google Friend Connect, are focused on building a mostly open-source Internet operating system out of Google technology in order to funnel more user data and targeted advertising opportunities into the Googleplex financial engine.
It's easy to draw parallels to Microsoft, which gradually built the dominant 20th century operating system and applications platform. Bill Gates and company realized that attracting developers to the Windows platform was key. Google is following that advice with its open-source projects and allowing its mad scientists to try to remake the early 21st century software world and take on Microsoft.
Microsoft has led the way with productivity software, gaining a more than 90 percent share of market with Microsoft Office. Google is hoping to replicate Microsoft's office suite success with Google Apps. It's far less feature-rich than Microsoft Office, but Google Apps Premier edition is far cheaper at $50 per user per year.
For some companies, Google Apps is "good enough," and its cloud-based, collaborative core is an advantage--no Microsoft SharePoint server required. Even with a few enterprise wins, Google Apps is a puny business. According to a Fortune article, Google brought in about $4 million with its Google Apps business in 2007, compared with $12.2 billion for Microsoft Office. Google Apps is a profitable business, according to Matthew Glotzbach, enterprise product management director at Google.
Since early this year Google has been touting 500,000 active business customers, primarily small businesses, using at least one of the Google Apps, and more than 10 million active users. In addition, thousands of universities, with more than one million active users, are using Google Apps, the company said. So far, Google's biggest wins are Valeo, a leading automotive suppliers, with 32,000 users, and the District of Columbia, with 38,000 employees.
However, the vast majority of Google Apps users are not paying customers. The company maintains that "hundreds of thousands" of users are paying the $50 annual fee. The $50 per-user-per-year Premier Edition offers several features lacking in the free Standard Edition, including Postini messaging security, APIs for integrating Google Apps with IT infrastructure, 24x7 support, 99.9 percent uptime guarantee for e-mail, Google Video and 25GB of storage per account.
At this point, Google is underplaying the number of Google Apps business customers. The company has been saying that it is adding 3,000 businesses a day, which amounts to over 1 million per year. The reality today is that Google has more than a million Apps business customers. In addition, the Apps suite continues to fill out, most recently with Google Video.
It took Microsoft years to build a base of applications and developer ecosystem for Windows and Office. Google faces the same uphill climb for Apps and its fledgling Web operating system. The company hopes to ride on the backs of the younger generation that has grown up on the Web and identify with the Google brand. As the Google generation moves into positions of purchase authority within businesses, Google is betting that those decision makers will shun Microsoft, especially as Apps product features improve. Of course, the resilient and relentless Microsoft will respond to Google's challenge when it is more than a $4 million or even $20 million blip.
