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Cheap IT: The Google Model

If I told you to list Google's most successful products, you'd probably mention the search itself, Gmail, Google Maps, Earth, Docs/Drive, YouTube, Blogger, News, Translate and perhaps Google+. The company does put out an impressive amount of digital services, but it wouldn't really be right to say that these are products, at least not commercially.

Google's only real product is AdWords, which brings in more than 19 of every 20 dollars the company earns; Google's true consumers are not the people who use its web services, but the those who buy their valuable advertising space. Google users are really on the supply-side of the equation, creating new web territories on which to advertise.

It's a strange model; as a analogy, it would be like a grocery store giving away all their food free because every can of beans has an advertisement for someone else's products. It is a socially admirable model for any business, but it's hard to imagine anything like this happening outside the range of information technology.

IT is an idiosyncratic industry. One of the reasons that Google is able to offer so many absolutely free web services is simply because of the nature of information technology. The free online storage that any Google user can receive is an absolutely negligible cost for a firm of Google's size; data storage and processing are becoming more and more economical with the number of servers at Google now approaching 1 million with developing tech goods becoming more efficient and cheaper every week. This combined with Google's intimidating economies of scale causes the cost of adding more servers and more data space is puny compared to the revenues that can be made on them.

It's also the nature of programing that development of code for new products isn't like designing a traditional physical good. The only real raw materials required are the coder and his canvas; to build a building, one has to design a product and then buy materials to assemble it, to design new code one need only do the former.

If a grocer could do what Google does, design and create a product often at an ignorable cost, we may see give-away stores funded totally by rentable advertising place.

It may not have been the original intention, but Google has room for nearly infinite expansion, well, at least as far as demand will take them. So long as their services are sufficiently speckled with profitable ads, the negligible cost of expansion should be worth it. What the public gets out of an organization like Google is technological aid to help organize their friends, calender, email, to help tell them where's best to drive, and to help them be aware of good deals around them. Google's products are more spillover effects than anything.

Of course it's best if we pretend that we are indeed the apple of Google's eye. In essence, however, Google is a company that attracts people to come to their sites to look at their ads by bribing users with helpful information technology. But it works out for everybody.

What's more is that the model of actually selling products seems to be unfounded on the modern internet. It used to be, in the netherdays of the nascent web that nearly every piece of code, even web browsers themselves came with significant price tags. We can all reminisce and laugh at the age of AOL and their pay-to-use services; but AOL tried the same gimmicks that any other business would try in the real world (still imagine a tech company, say Mozilla or Apple sending you a free trail disc of Firefox or iTunes nowadays).

To me the only wonder is why people buy software at all anymore; with a significant open-source treasure trove of programs and OSs one has to think that the only reason Windows and Mac OSs exist is their cultural penetration or a general technological ignorance. Office and financial analysis software are copious and free as well.

Buy-for-use software may still exist, but it seems as though there is a one-way street linking them to the open-source "market." It would be hard to conceive of a media sharing site or a social media site ever requiring a membership ever again. If a site like Facebook ever imposed a usership fee, it would nearly certainly loose its critical mass and evaporate; as it is now, the only way these businesses can subsist is by advertising.

The only real tweaking involved in a site like Facebook or YouTube or anything else is what the profit maximizing amount of advertising is that does not scare away too many users. Social media sites typically overflow in anguish every time a new ad bar finds itself onto their screen, but this rarely scares away significant numbers of users from giant sites.

Google has of course come up with the brilliant idea of sharing ad revenues with users themselves. Users can how receive revenue for allowing ads at the beginning of their YouTube videos or on the sides of their Google Sites (you should be glad my taste for simplicity on this site exceeds my greed). Not only does it count for revenue for Google, but it hushes up users in the process.

Google's services, and the services of most online companies consist in a healthy number of advertisements that offset their relatively small production costs. These small costs for development and expansion enable a wide supply of programing to a wider audience without much burden. Or to make a longer story short: click on as many ads as possible so the internet can stay free...