Big Tech’s billion dollar curse of the free • The Register

opinion Consequences can come your way quickly or slowly. When you’re a trillion-dollar company, you can have a bit of a choice about what, but you can never quite get away from it.

Amazon is burning billions on Alexa because voice assistants require massive infrastructure but can’t be monetized. Google Cloud is $700 million in the red by latest earnings and is heading south into a state of insanity like a New Jersey retiree. These are mature products in saturated markets. You don’t need an MBA to know what’s about to happen. But even the dean of Harvard Business School can’t say when.

The big disruptive factor is reputation. Take Alexa, which, as mentioned, is mostly used for a few simple tasks: play music, set timers, make quick queries, turn on lights. Shopping and advertising? Not as much. The problem for Amazon with these few popular use cases is that they are very popular. For some demographic groups among the elderly and disabled, they are now part of everyday life. Millions more have gotten used to it, with Alexa only being quietly useful when hands are full or pulling up a calculator app is just too tedious.

Amazon’s model was to sell the hardware at or below cost and earn the revenue from content and services. It’s an absolutely fine model when those services and content are as engaging as video games or user data can be incorporated into ad targeting. None of this applies to Alexa and never will. But when Amazon cuts and runs, hundreds of millions of users have had an intimate part of their lives snatched away. They also thought one of them was paid for when they bought the device in the first place. How bad does Amazon want to do that? It costs billions. It cannot be paid further. But it can’t just be like that.

Google is in an even worse position, not because of the amount of red ink currently bleeding from its cloud division, but because of its far less room for maneuver. There are about 4 billion email accounts worldwide, and about 1.8 billion of those are Gmail. When you run a service for that many users, they run you.

Forget smart speakers, the ultimate digital assistant is email. They can’t be more closely intertwined with a user’s digital life. In addition to business and personal correspondence, e-mail is the primary identity management interface in other services, the main personal archive, the butler of everyday life. Losing access to your primary email account is beyond traumatic. Google is particularly brutal when it comes to pulling the plug on popular services it no longer deems interesting, but Gmail would certainly be impossible to shake. And it has to be profitable, with all those users. Right?

It is far from clear that this is so. Google doesn’t say it. Gmail, like G Suite-cum-Workspace and the whole bouquet of user- and enterprise-centric appified services, is reported as part of Google Cloud, which is losing big bucks now and maybe a lot more next year. There are subscription models and a little advertising that brings in some money. Obviously not enough.

An easier way to gauge Gmail’s hue in the revenue chart is to ask yourself, as a personal Gmail user, how much money do you make. The old adage that you are the product if you don’t pay, cut both ways. Products cost, especially when you buy billions.

Advertising within Gmail is very low key and easy to avoid altogether, and Google is very clear that it doesn’t monetize your email content: “We don’t scan or read your Gmail messages to show you advertising.” Google has played fast and loose about how it uses data, but if it cheated here it would be beyond disastrous.

If Google isn’t making any money off you from Gmail and there are billions like you out there, the numbers can explode in no time. Even if the company loses just a cent a day per free user, that’s $3.5 billion a year for a billion users. It could be a lot more – Workspace Business subscriptions start at 20 cents/day and don’t offer much more than free. Untangling the cost of each component is impossible from the outside, probably even from within Google, but there’s a balancing act here, and a fall could be very tough indeed.

Google couldn’t kill Gmail, but Gmail could kill Google. You haven’t failed until you fail on a large scale.

Are there no departures? Big losses can be attractive loopholes for financial planning – do you think Musk’s Twitter investors expect an operating profit? – and a traditional face-saving way out of the corner is cutting off the bleed. Amazon could flog Alexa from someone else for big bucks, just as many unsustainable tech acquisitions are used as a means of debt management. If the system dies or degrades, Amazon will be far from the wreckage. This is almost impossible for Google, the regulatory impact and user pushback from selling 1.8 billion active email accounts would be measured in megatons.

Will Gmail fail? Google is still immensely wealthy and can put off difficult decisions for a while. The next year is going to be very tough quarter after quarter, and the discussion could be very different in 2024. But while Amazon can, and almost certainly will, find a way out of Alexa, Gmail matters to incomparably more people.

There may not be a good exit strategy for Google, and so the question arises – is there one for you? ®

https://www.theregister.com/2022/12/26/opinion_column_alexa/ Big Tech’s billion dollar curse of the free • The Register

Rick Schindler

World Time Todays is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@worldtimetodays.com. The content will be deleted within 24 hours.

Related Articles

Back to top button