If Search Is Google's Castle, Android Is the Moat

Hugh Pickens writes "Warren Buffet once said that the best businesses were economic castles protected by unbreachable moats. Now, Erick Schonfeld writes that if search is Google's economic castle, Android is a moat, Chrome browser is a moat, and Google Apps is a moat — all free products, subsidized by search profits, intended to protect the economic castle that is search. 'Android, as well as Chrome and Chrome OS for that matter, are not "products" in the classic business sense. They have no plan to become their own "economic castles,"' says Benchmark Capital VC Bill Gurley. 'They are not trying to make a profit on Android or Chrome. They want to take any layer that lives between themselves and the consumer and make it free (or even less than free).' So don't measure the success of Google's new businesses by how much revenue or profit they generate directly but measure it by how much they shore up Google's core search business. 'Google is ... scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it. And best I can tell, they are doing a damn good job of it.'"

Re:less than free?

[BJ_Covert_Action]

Yeah, I think less than free is meant to imply "them" paying "you" in the sense that Google will pay you to use their products. And frankly, they already do that to some extent. There are folks on YouTube with sponsored, or registered or partnered channels or something like that. Google pays those folks to keep producing YouTube content. Google AdSense is set up in such a way that you can slap it on your own blog or website or whatever and get paid to have random people click on the useless shit you have to spout off into the internet voids. I would even wager, though I am not entirely certain, that Google probably is willing to pay out some cash to Android app developers whose apps are used enough to generate advertising revenue were they to include some kind of embedded ad with the app.

So yes, Google "gives" you stuff for less than free in the same sense that your employer gives you the tools you need to do your job for "less than free." They pay you to utilize the tools they want you to use to produce a product that generates more profit for them.

Re:Someone's mis-identified the castle

[ashvagan]

Search drives Ad sales, which makes it the core of Google. They usually don't link any of their products with ad sales directly. So I believe identifying Search as the castle is still correct. Search is to Ad sales as Castle is to "safe and well-being"

No, this is not what Buffett means by "moats"

[pongo000]

This is not what Buffett meant, and anyone who follows Buffett knows that "moats" are the IP, patents, and low-cost advantages [morningstar.com] (among other things) that protect a company's business assets. Chrome OS, Android, etc. do nothing to "widen the moat" (other than maybe some name recognition). Slashdot editors: Please do your jobs and edit. This is a bad article that deserves to be ignored as worthless drivel by a Google shill.

Never mind the analogy, but the point is true

[steveha]

What impresses me the most about Google is that they, as a company, have consistently taken actions that demonstrate long-term thinking. They will try things that have no short-term profit, just because in the long run they might either make a profit or defend the company's interests.

From the beginning, Google has helped Firefox out financially; more recently, Google made its own web browser. Why? Because it wasn't in Google's best interest for Microsoft to have any kind of leverage over the Internet, or in particular over which search engine is the default on computers. Remember how much market share Internet Explorer used to have? Displacing it once seemed hopeless, but Google went for it.

Google has poured resources into Android and continues to give it away. Why? Because it wasn't in Google's best interest for Apple to have leverage over the cell phone market, or in particular over which search engine is the default on cell phones.

Google spent about $100 million to buy On2, and then gave away the intellectual property they had bought. Why? Because the FSF wrote an open letter... nah, just messing with you to see if you are paying attention. Because, in the long run, Google's YouTube needs a suitable video format. If YouTube's business utterly depends on patented technology such as H.264, Google will have no choice but to comply with any and all demands from the licensing authority. Google is willing to not only spend the $100 million, but to pay more people to keep working on WebM (doing things like free reference designs for hardware decoders). Google doesn't ever expect to make money on WebM; it's purely a defensive move, to control long-term costs in the future. (Well, also, Google has lots of geeks like us who want to help keep web standards open.)

Heck, go all the way back to the early days of Google. They took the time to write a complete vertically integrated software stack, one which allowed them to get reliable performance out of dirt-cheap off-the-shelf hardware. The reason Sun was printing money during the Internet boom was that everybody who wanted a web server would buy an expensive, reliable Sun box to run it on; not Google, they used the High Availability stuff on Linux, and the elegant Google MapReduce, to weld together masses of cheap motherboards into a powerful and reliable server operation.

Remember the news stories about Google buying up the "dark fiber"? Google bought a bunch of optical fiber with no immediate use. Long-term thinking: "the stuff is cheap now; we have the money now; someday we'll have a use for this."

Google has a lot of other products and features, but for the most part those are just fun sidelines. When you are as big as Google, you can afford to do some side projects just for the heck of it, and all the better if they actually turn a profit.

steveha

Re:So they're being anticompetitive

[Nerdfest]

They're very good at ensuring you're not locked in to them as well. You can export your data from pretty much any of their services. I think I read a while back where they have a 'free data team' whose job it is to ensure that's the case. Damn nice to see.

Re:Search isn't the product.

[NoSig]

Google sells two products - it sells search for eyeballs and it sells eyeballs for money.