The Curse of Free

Rupert Goodwins, the Register:

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

[…] Google is notably brutal in pulling the plug on popular services it considers no longer interesting, but surely Gmail would be impossible to shrug off. And it must be profitable, with all those users. Right?

It is very far from clear that it is. Google isn’t saying. Gmail, like G Suite-cum-Workspace and the whole bouquet of user and business-facing appified services, is reported as part of Google Cloud, which is losing a lot of money now and perhaps a lot more next year. There are subscription models and a little advertising which will be making some money. Clearly not enough.

Google famously baits its users into its free service offerings before either killing them off or beginning to charge for them. I do not think Gmail is at risk of going away or becoming payware, though. As commenter LDS writes, getting users to log into Gmail is an effective way to ensure they remain connected to their Google account across the web. Whatever Gmail costs, I bet Google makes that up in the volume of tracking it enables, especailly as it begins migrating its services to its root domain.

Goodwins’ post reminded me of the other curse of free-to-user services, though, which is their inherently predatory quality. Google was able to buy up a bunch of other companies to create Google Maps, which it then offered free — a move that benefitted both users and Google itself. But it also put a damper on the rest of the industry as few substantial competitors to Google Maps existed for the better part of a decade following its launch. Not only did Google boost its other businesses through mapping data — for example, being able to show nearby business results in search — it also offered developer integrations and API keys. After few major competitors remained and even high-budget attempts like Apple’s were struggling, Google dramatically increased pricing for developers. Today, the landscape looks a little different with Apple’s increased dedication and third-party efforts like Felt, but we should not ignore how dangerous it is for deep-pocketed companies to undercut competitors through pricing schemes like these.