I’m Not Sure How Long Google Can Keep Picking Up Your Bar Tab

I have always been fascinated by Google's business model. It seems to have two parts. We, the citizens of Earth, create massive amounts of text and video content on the Internet. Then Google charges we, the citizens of Earth, to effectively search through all that.

Given that Google’s advertising revenue for Q3 2010 was just over $7 billion, it seems to be a pretty effective model.

But Google is not just search.

In fact it's kind of mind blowing how many other things Google is involved in. Self-driving cars, scanning every book ever printed, Gmail, Android - Google has all kinds of oars in the water.

Better yet, many of these services are free to both programmers and the public at large. And a large number of programmers are building those free services into their software's DNA. From integrating Google maps to building on the Android platform - Google is hot.

But I've always been curious just how Google can offer all of these additional services for free.

It's pretty simple, the only thing holding Google together are AdWords and display advertising.

Let's take a quick look through Google's financial statements. Look at the last row of the revenues table (other revenues). It tells you just how much money is coming in from Google's non-advertising operations. For the Q3 2010 revenue from non-advertising operations was 3% of total revenue.

3%.....

It’s not really possible to deduce how profitable those 3% of revenues are, but, it’s just 3%.

I only point this out because it means the only thing paying for all of those free services that you are writing your code on top of is Google's search market share.

I’m not going to tell you that Google is toast because of all the challenges that it faces (competitive, privacy, anti-trust etc.) I’m just saying the species that are too well adapted to a specific environment are the ones that go first when things start to change.

And if Google starts to feel the financial heat I wonder how long all those free services are going to remain free.

Twitter @ActivistManager