Google slashes cloud prices as battle with Amazon continues


Prices for Google's (GOOG - unchanged) Compute Engine cloud computing services and App Engine cloud app platform have respectively seen 32% and 30% across-the-board cuts. Prices for Google's Cloud Storage and BigQuery (big data analytics) services have respectively been cut by 68% and 85%. "We think cloud pricing should track Moore’s Law," the Web giant declares.

TechCrunch notes Google's pricing for on-demand computing instances now undercuts rivals such as Amazon's (AMZN +0.7%) EC2 service, and that its pricing for reserved instances is also often lower than EC2's. Of course, Amazon has been aggressive with its own pricing, and might soon return fire.

Also: As recently hinted, Google has launched a service (Managed Virtual Machines) that meshes the software flexibility of Compute Engine with the management ease of App Engine. Google has also added support for Windows Server, as it tries to narrow Amazon's feature set lead.

Rackspace (RAX +1.7%), whose shares have fallen before in response to price cuts from rivals, spiked lower due to Google's announcement. But shares are still up on the day thanks to Morgan Stanley's upgrade.

Synergy Research estimates Amazon had a 35% cloud infrastructure (IaaS) share in Q3, towering over Google and others. But in the app platform (PaaS) space, its share was close to those of Google, Salesforce, and Microsoft.

Yesterday, Cisco joined a long list of enterprise IT giants to launch a cloud platform. The company plans to rely heavily on carrier partners/resellers to offer its services.

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Comments (17)
  • db313706
    , contributor
    Comments (223) | Send Message
     
    Is Google just going to price everyone out of town?

     

    I know I need to sell my CSCO stake, and now my small ORCL position seems to be dancing on thinner ice every day.
    25 Mar 2014, 01:44 PM Reply Like
  • Zipper0
    , contributor
    Comments (1530) | Send Message
     
    Cloud infrastructure costs (data centers) are exploding with Google's rising to $7.3 billion from $3.3 bil. In the last year alone. $7.3 billion is about 60% of Goog's 2013 net income. Don't be surprised if Goog goes cash flow negative by the end of this year as data center costs exceed its entire net income. Slashing prices to cloud consumers certainly puts Goog in an even bigger hole. Cloud margins are in the low single digits vs. Goog's cash-cow core desktop advertising biz.
    25 Mar 2014, 01:48 PM Reply Like
  • Julian Acosta
    , contributor
    Comments (129) | Send Message
     
    Is GOOG's cloud computing segment profitable? What percentage of their revenue comes from it?
    25 Mar 2014, 02:00 PM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (1214) | Send Message
     
    "Is GOOG's cloud computing segment profitable? What percentage of their revenue comes from it?"

     

    Google is not the type of company to provide this information, and the analysts/media have no problem with the company's lack of transparency.

     

    All we know as of the most recent 10-K is that "other revenues" - which is everything beyond advertising revenues - were less than $5 billion in 2013. To put that into context, that is equal to less than 10% of the company's advertising revenues for the same year.

     

    I would expect that we'll see those figures right after they discuss the financial implications of Docs (mentioned only twice in the 85 page 10-K), Chromebooks, Google Wallet, Nexus products, Google+, Chromecast, Glass - and the list goes on and on...

     

    The one thing they did breakout was Motorola; with some clarity into just how much money the company was burning, shareholders applauded when they admitted defeat in that arena.

     

    I wonder how they would react to Docs, which after 5+ years out of beta still holds an infinitesimal market share (or so it's believed - no help from GOOG here either); better to hide the financials than face reality I guess...
    25 Mar 2014, 02:49 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (624) | Send Message
     
    Look at earnings/cash of GOOG and AMZN, and it is pretty clear who is going to fail first. Amazon does not have capital to compete in this business.
    25 Mar 2014, 02:23 PM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (1214) | Send Message
     
    Then look at MSFT, which generating twice as much cash flow from operations in the most recent fiscal year as GOOG ($28.8B vs $14.5B).
    25 Mar 2014, 02:51 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (624) | Send Message
     
    Microsoft's Azure is more limited, even though MSFT is trying to improve it. Google Cloud Platform is a more direct competitor to AWS. In either case, both MSFT and GOOG are much better positioned to compete on price than Amazon.

     

    And today's announcement is not just about price. The ability to mix App Engine instances and VMs is huge.
    25 Mar 2014, 03:03 PM Reply Like
  • DanoX
    , contributor
    Comments (3461) | Send Message
     
    But it is a moneymaker profitable, Google and Amazon are not.
    25 Mar 2014, 03:11 PM Reply Like
  • knrdk
    , contributor
    Comments (32) | Send Message
     
    you clearly haven't used either service. while aws is the clear leader, azure has a much more robust offering than that of Google. And it's global presence is even superior to that of AWS.

     

    Google is late to the party, with no differentiating features whatsoever and often even lacking in standard/expected features.
    26 Mar 2014, 06:13 PM Reply Like
  • Andrei Volgin
    , contributor
    Comments (624) | Send Message
     
    @knrdk

     

    I have 7k reputation points on StackOverflow. How many do you have?
    26 Mar 2014, 06:48 PM Reply Like
  • $vix
    , contributor
    Comments (634) | Send Message
     
    just the business to be in. High start up cost with no to very low profit margin and a very long term pay back time frame.
    Google still derives the majority of its revenues from selling advertising, but they have quite a lot of cash on hand.
    Amazon, has cash on hand but only due to the debt it has incurred. Google has enough cash to bury amazon, but it looks like amazon is doing that on its own. Longer term, I believe msft will be the winner in cloud.
    25 Mar 2014, 03:04 PM Reply Like
  • DanoX
    , contributor
    Comments (3461) | Send Message
     
    Please Google spend that money in a race to the bottom, spend more on worthless moonshots, if we are going to play the if bury game well Apple can bury Google by not having Google in the default search box or in the app store.
    25 Mar 2014, 03:16 PM Reply Like
  • Eric Jhonsa
    , contributor
    Comments (1276) | Send Message
     
    After the Apple Maps fiasco, I think Apple will be very careful about restricting or denying access to Google's most popular services. The companies need each other.
    25 Mar 2014, 03:22 PM Reply Like
  • DanoX
    , contributor
    Comments (3461) | Send Message
     
    Google just announced more pump up the stock vaporware today, Apple is however doing fine much more prosperous today and even more so by the end of 2014, with real products instead of that nebulous moon dust that never makes a appearance or a profit.
    25 Mar 2014, 03:30 PM Reply Like
  • ReligiousWacko
    , contributor
    Comments (1825) | Send Message
     
    I'm waiting for Gary to explain how this is good news for amazon.
    25 Mar 2014, 11:49 PM Reply Like
  • Marcio Santos
    , contributor
    Comments (12) | Send Message
     
    That´s interesting:the high costs associate with computer´s personel to maintein data centers and the companies investiments issue like obsolescence,scalabili... among others.Are pushing companies towards cloud computer.

     

    Note:the same roll of problems should apply to providers as Amazon,Google etc...

     

    And If... A disruptive thing like quant computing becomes true...

     

    Companies will be hurt or dead?

     

    In fact I believe that a robust cloud operational system will emerge from complexity.

     

    And this new company will be the next MSFT.
    26 Mar 2014, 09:22 AM Reply Like
  • Adam Hartung
    , contributor
    Comments (251) | Send Message
     
    Google is taking a formidable run at leader Amazon - and Amazon is forced to react with its own price cuts. As the leaders battle there is little room left for Microsoft to gain share - and its own price cuts are highly problematic for the struggling company that was late to the cloud. read more at Forbes http://onforb.es/1jxIaP2
    1 Apr 2014, 06:09 PM Reply Like
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