Google’s revenue plan: Mo screens! Mo eyeballs! Mo MONEY!

by David Spark on November 8, 2007

Last week on the Spark Minute I talked about Google’s plan with OpenSocial, the open application development environment for social networks. Up against Facebook’s growing juggernaut of 50 million users and growing, Google decided to invite all other social networks to be part of its open application development consortium. Facebook’s been invited too, but they probably won’t join. Just a few months ago, in August, Google announced plans to bid up to $4.6 billion for the FCC’s “open” 700 MHz spectrum.  And this week, Google announced the formation of the Open Handset Alliance, an open consortium of 34 chip makers, service providers, and handset makers, to support the open development of the Android operating system for mobile phones.

Is Google a bunch of do-gooders looking to take down the juggernaut of proprietary systems like Microsoft, Verizon, AT&T, and Facebook? Are they truly a “do no evil” company? You could answer yes to both of these questions. Google’s PR and branding department would love it if you would. But Google is a for profit organization. They’ve wisely developed a business model that’s perfectly aligned with the overall development goals of the Internet. Google wants the Internet to grow for everybody. Google’s advertising works well on an open platform that no one has to license to use. Philosophically, its business model runs akin to an Internet consumer’s interest, but Google’s motive is not altruism. The Internet giant simply wants access to more open information that it can organize and monetize.

Let’s isolate a single example. Think about how much more money Google makes when an Internet user jumps from a 56 Kbps connection to a high speed dedicated connection like DSL or cable. A 50K page can take about 10 seconds to load through a slow modem, while on a dedicated fast connection it can load within a second or two—five to ten times faster. That means that same person, with just a fast connection, could load five to ten times more searches and pages with content in the same amount of time (more or less given the time they spend consuming content on those pages). That means with just the adoption of a faster connection, Google was able to serve five to ten times more ads.

The 56 Kbps modem was the first critical gatekeeper to Google’s success. The rest of the communications landscape is filled with even more gatekeepers and Google’s going after each one. Productivity applications like email, word processing, spreadsheets, calendaring, and presentation tools consume a considerable amount of eyeball time. It’s attention that Google used to not get because the market used to be completely controlled by Microsoft. That changed when Google began offering productivity application alternatives. Now they’re getting some productivity app eyeball time and monetizing it with advertisements. Watch that attention increase as Internet connectivity becomes more ubiquitous.

Google’s next two gates to break open are social networks and mobile phones. The social network field looks like an easy nut to crack and they may have already done it as the non-Facebook collective of social networks have signed up to be part of Google’s OpenSocial alliance. Opening up the mobile phone market is not going to be nearly as easy. Google knows this and they’re ready for a climb. But they’ve done something that nobody else has done. They’ve opened up the debate and doing something about giving people open alternatives to the proprietary locked-in environment of carrier-controlled networks.

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