GOOG Starts to Monetize Google Apps, "Brutal" Timing for Microsoft

Google is set to announce a $50 subscription-based version of Google Apps for corporations today, similar to the free version it launched last year, but more reliable with 99.9% uptime, more storage space and 24x7 tech support. Google executives claim it is not taking on Microsoft, but CEO Eric Schmidt comments, "Our product is so cheap that it's sort of no-brainer to try it out." GE and Procter & Gamble are two early-adopting blue chips. Google said over 100,000 small business and hundreds of universities already use the free Google Apps. An analyst at Nucleus Research says the timing of Google's service "is just brutal for Microsoft" since its low cost could delay corporate purchases of Office 2007. Microsoft's director of the Office suite, meanwhile, says his company welcomes the competition because "It helps keep us on our toes." Microsoft is also expanding online with Windows Live, building online services around its desktop Office software suite.

Sources: Associated Press, InformationWeek, The Wall Street Journal, New York Times, TechCrunch, GigaOM
Commentary: Google Gets More Search Share, Again • The Great Vista-Inspired PC Boom? • Ballmer Says Some Analysts' Vista Estimates 'Overly Aggressive' -- Street Reacts
Stocks/ETFs to watch: Google (GOOG), Microsoft (MSFT). Competitors: Salesforce.com (CRM), IBM (IBM). ETFs: Software HOLDRs (SWH), Technology Select Sector SPDR (XLK), iShares Goldman Sachs Technology (IGM)
Related: Google Apps homepage

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Comments

[David Jackson:]

A single data point to illustrate what's going on in this market: We at Seeking Alpha starting using Google Docs and have become totally addicted to them. We never expected this, but they’ve revolutionized our business:

- we’re moving all our employees to web based aps to cut our IT requirements. Our main publishing system (financial content) is web based, so everyone needs to be online all the time anyway. We now don’t need to purchase MS Office for most employees, and that saves us a ton of money.

- The collaboration of Google Docs has massively raised our efficiency. We just uploaded our phone directory as a Google spreadsheet, and everyone updates their own info themselves. We just worked collaboratively in a Google doc on a press release announcing our China coverage, and it saved us hours.

- Integration with Gmail is key. We get articles submitted to us via email, and instead of having to download an attachment and then open it, gmail plus Google docs allows our editors to open it immediately.

- We’re even sharing docs with customers (people who sponsor our free conference call transcripts). We put together a pricing spreadsheet containing various customized purchase options, and they can play with it.

We’ve also noticed many drawbacks (see Top Ten Things That Suck About Google Docs), and we’d like to see them fixed. But even now, Google apps are providing a huge productivity boost and cost saving to us.

2007 Feb 22 08:40 AM

[David Jackson:]

One further thought: $50 per year per firm won’t generate much money for Google now, but what’s the chance that Google raises the price as users become locked in, and raises it further by moving to per seat pricing?

2007 Feb 22 08:49 AM

[James Cullen:]

One idle thought regarding David's comment about the potential for Google to have some serious play with Apps prices to get people switching from Office: wouldn't that be the potential source of an anti-trust lawsuit against Google? Overlooking the irony of Microsoft possibly benefitting one day from an anti-trust lawsuit, I think the case law on predatory pricing involves operating at a loss (which Google is doing on Apps) with the intention of recovering profits after removing competition.

I believe the case law is Brooke Group v. Brown & Williamson Tobacco.

2007 Feb 28 03:11 AM