THE STATE OF GOOGLE: Have you noticed that it’s been quite some
time since Google has hit a homerun. Almost everything they’ve launched basically since
Chrome back in 2008 has fallen flat of expectations or been a complete failure. This includes
Google+, Google Glass, Google Cardboard, Google Fiber, Google Nexus, Google Allo, and most
recently Google Bard. But, it’s not just new product launches that aren’t going Google’s
way either. Even their hero products are starting to lose steam. Many people are switching to
Edge, Bing, and ChatGPT instead of Chrome, Google, and Bard. More people than ever are
also switching from Gmail to Outlook or even a third party option like ProtonMail. And
as for Android, well, the iPhone has been annihilating Android in terms of marketshare
over the past 10 years. Even YouTube, one of their golden gooses has started to show
a few signs of weakness as revenue fell for 3 quarters in a row. Google has been aware
of this shortcoming for quite some time now and their solution was just brute force. Just
keep launching new products and entering new sectors with initiatives like Google TV, Stadia,
and YouTube shorts and hope that something ends up sticking. But unfortunately, nothing
has really stuck atleast not on the megascale that you would expect with a giant like Google.
Amongst this graveyard of failures and disappointment though, there does seem to be one glimmer
of hope: Google Cloud. It looks like Google has taken a page straight out of Microsoft’s
playbook. When consumer products don’t work out because of public perception or too much
baggage or whatever, just switch to offering enterprise products as businesses are far
more logical. They just care about the product and the price. Your story and ethics is no
concern to them as long as it doesn’t affect their business. But unlike Microsoft who entered
the cloud scene and made strides in the early 2010s, Google has had an extraordinarily difficult
time breaking in. In fact, they were losing billions of dollars trying to chase the cloud
market until the beginning of this year when the posted their first ever profit. And given
that 50% of all of Google’s current job openings are for cloud roles, I’d say that
it’s safe to say that Google is very much doubling down on the enterprise cloud business.
So, join me as we take a look at Google’s monumental shift from being a ubiquitous consumer
business to being an enterprise juggernaut.
EARLY STRUGGLES: Taking a look back, the story of Google Cloud
takes us back to March of 2006 to launch of AWS or Amazon Web Services. AWS would eventually
grow to be the gold standard when it comes to the cloud. Virtually every esteemed company
that you can think of has adopted AWS including Airbnb, McDonald’s, Twitch, Twitter, Epic
Games, and even Netflix and Disney. In fact, some analysts estimate that AWS accounts for
a trillion dollars worth of Amazon’s market cap. This means that their massive retail
operation that everyone actually knows about is only worth a few hundred billion or a mere
fraction of their entire valuation. But when Amazon launched AWS, they were by no means
trying to create the next big thing. In fact, the launch of AWS was more of a desparate
move than a calculated one. Amazon’s retail business simply wasn’t turning a profit
and with funding drying up due to the dotcom crash, they needed another source of revenue.
Their solution was to simply rent out their spare servers and databases and this somehow
turned into a trillion dollar business. Google was watching all of this playout in realtime
and naturally, they felt that they could do it better. As such, in April of 2008, Google
would enter the cloud scene with the launch of App Engine. App Engine had a pretty ambitious
offer: make it easier than ever for developers to launch websites by leveraging the power
of Google’s infrastructure. They largely simplified the process of deploying code and
managing traffic spikes. In fact, they completely removed these concerns from the equation as
they would handle this stuff from their end. But not only was Google trying to make App
Engine as easy to use as possible but also as cheap as possible. In fact, the original
version didn’t even have a paid option. Everyone got a generous free quota to mess
around with and test. And naturally given that this was from Google, they attracted
a lot of developers, 20,000 to be precise. One month later, they would open up the service
to all developers and 10 months later, they would add paid tiers to App Engine but something
was off. App Engine was by far the easiest to use and the cheapest especially from a
big tech company but for some reason developers just weren’t sticking around. This was extremely
confusing. Google had used this same strategy time and time again usually to great success.
Offering a better service for a cheaper price or free was literally the bread and butter
of the entirety of Google. So, why in the world weren’t developers joining up in the
masses? Well, the reality was that Google had gotten developer community completely
wrong which is rather ironic given that Google themselves is just a bunch of developers.
The problem was that in order to make the service as easy to use as possible, Google
had to sacrifice a lot of customizability. For Google to deliver on the ease of use aspect,
they had to shrink the infinite developer landscape into a few succinct boxes because
frankly they could only address so many sectors. Also, remember how App Engine launched with
only a free tier? Well, that tier was indeed generous for testing but it was completely
impractical for production applications. Combine this with CPU limitations, scaling issues,
and slow response times and developers were out before App Engine was even fully launched.
The OG Google though wasn’t afraid to keep trying despite failure, so it was only a matter
of time until they put out a new offering.
A BREAKING POINT: A year after the launch of App Engine, Google
would add Java support but this didn’t change much. As this developer put it “there are
a couple of fundamental issues that must be addressed, and addressed properly, before
Google App Engine can be taken seriously as a web application platform. (And no, Java
support is most definitely not one of them.)” Alright then, if it’s not java they want,
maybe it’s cloud storage? No. BigQuery and Prediction APIs? No. Cloud SQL? No. Ummm,
24x7 phone support? No. PhP support? No. Encryption? Nope. None of Google’s additions to their
cloud offering over the next 5 years really did much to attract the big boys. The bottomline
was that the consumer approach didn’t work with developers and enterprise customers.
Google was trying to offer a watered down version that was cheap and easy to use when
developers preferred a fully customizable option which they were more than happy to
pay for. So ironically, Amazon’s bare bones offering that infinitely customizable was
actually far more appealing than Google’s watered down assortment. This was super frustrating.
Google was literally trying create a developer offering that was easier and more convenient
than anything else on the market but for some reason, developers preferred the less convenient
stuff. Frustrated, Google would turn back to what they were good at, the consumer market.
We would see the launch of Google Drive on April 24, 2012. In classic Google fashion,
they launched with 15 gb of free storage for everyone and Drive would take off. Within
3 years, they would grow to 1 million paying users. By 2017, they would reach a milestone
of storing over 2 trillion files and by 2018, they would reach 1 billion active users. By
all accounts, Google Drive was a massive success but Google couldn’t help but feel that they
had missed out on the larger pie: the enterprise market. Sure, reaching 1 billion users directly
was great but with a cloud operation like AWS, they could literally reach trillions
of users across hundreds of ubiquitous platforms. This feeling was only made worse by Microsoft
and their surprising success with Azure which came out years after App Engine. Also, Microsoft
wasn’t even trying to do anything revolutionary with Azure like Google was. Their entire pitch
was basically just AWS for cheaper. Google was furious and in 2014, they decided that
if they couldn’t fight their way to the top, they were gonna buy their way to the
top. This plan was two fold. On one side, they would literally buy out smaller cloud
providers and their users like Firebase. On the other side, they would subsidize their
cloud offerings by a ridiculous amount. In fact, they would slash prices of all cloud
offerings between 30 and 85%. Surely, this was a deal that was simply too good to refuse
until customers refused. The harsh reality was that no company was taking Google’s
offerings seriously. Moreover, they saw no reason to switch when there were already two
great offerings: AWS and Azure. One that was focused on performance and one that was focused
on price. Google just didn’t fit in the scene, and now that they had largely cut prices,
they were burning ridiculous amounts of money. During the worst of it, they were losing $5.5
billion per year on Cloud alone. Sundar would desparately try to convince investors that
Google Cloud should be judged based on growth instead of financials. But investors weren’t
convinced as the growth wasn’t even all that remarkable compared to the real winners.
To make things worse, this was the era in which all of Google’s new consumer offerings
would also start flopping. Google needed change and they needed it fast. Enter Thomas Kurian.
A GOOGLE MIRACLE: To be honest, Google got extraordinarily lucky
with Thomas Kurian. If you’re not familiar with Thomas, that’s understandable as he’s
spent most of his career in the background. But that isn’t to say that his contributions
were anything short of extraordinary. After working a few years as a consultant early
on in his career, Thomas joined Oracle in 1996. Over the next 12 years, he would work
his way all the way up to president of Oracle reporting directly to Oracle’s founder and
CEO, Larry Ellison. Thomas was like the dream candidate for Google as he had literally spent
his entire career building up the biggest enterprise tech company in the world: Oracle.
He was in charge of 35,000 developers, deca billion dollar budgets, and was basically
the de facto CEO of Oracle Cloud. But while Thomas was the perfect candidate to lead Google
Cloud, Google really had no shot at getting him. For starters, why would he want to leave
the world’s most successful enterprise tech company where he was already the main guy
to go lead the struggling Google Cloud? It makes no sense whatsoever. If you’re thinking
that Google could bribe him with money, this is also false becuase he has no need for money.
We always talk about how Google is a top paying employer and how Sundar Pichai is the highest
paid employee in the world but all I can say is that Thomas has already been there done
that. In fact, Thomas was the world’s 5th highest paid tech executive way back in 2010
before Sundar was even a thing. And by 2018, Thomas was earning just under a $100 million.
So, at this point, all that was left for Thomas was to become a C suite executive or even
CEO, potentially earn even more than Sundar Pichai, work for another 10 years in a familiar
comfortable environment, and retire as an Oracle legend. But obviously things didn’t
play out that way. That’s why we’re even talking about Thomas. You see, around the
same time that Google desperately needed help, Thomas and Larry would get into a massive
argument over the future of Oracle Cloud. Thomas felt that Oracle should run more of
their software on AWS and Azure to reach more customers while Larry felt that they should
run Oracle software on their own cloud to bolster the usage of Oracle Cloud. This disagreement
would quickly be blown out of proportions and on September 28, 2018, Thomas would announce
that he was resigning from Oracle and was actively searching for new opportunities.
This was straight up a blessing from god for Google. During a time in which they needed
more help than ever before, one of them most qualified cloud executives in the world was
looking for a job. Likely the only people in the entire world who were more qualified
than Thomas were Andy Jassy, now the CEO of Amazon, and Mark Russinovich, the CTO of Azure.
So, Google lucked one with the 3rd best option in the entire world out of nowhere. Yeah,
I don’t think you’d be surprised to hear that Thomas would be hired as Google Cloud
CEO at the start of 2019. But, it was by no means a smooth road ahead as Thomas was literally
taking over a money pit.
A REMARKABLE TURNAROUND: Thomas says that the main issue at Google
Cloud wasn’t hard to spot once he joined. The problem was that Google was focused on
creating sophisticated technologies when the key was build straightforward reliable solutions.
So, the first order of business was shifting the mindset from “we’re a tech company”
to “we’re a solutions company”. As such, instead of hiring a bunch of developers, Thomas
would hire a bunch of sales engineers and solutions architects. These guys are in charge
of engaging with current customers and new customers and addressing all of their questions
and concerns regarding how Google can accomplish what they’re hoping for. To really solidify
this mindset shift, Thomas would also acquire some up and coming cloud companies. His most
notable acquisitions were Looker for $2.6 billion and Mandiant for $5.4 billion. All
of these internal changes helped tremendously in terms of product development and sales
but likely Thomas’ biggest play was finding a new distinguishing factor. As we previously
mentioned, AWS is desired for its performance, Azure is desired for its price, and Google
was trying to be desired for its ease of use. But what they figured was that developers
don’t actually care about ease of use all that much if it comes at the cost of performance
or customizability. So, what Google needed was a new distinguishing factor and that’s
when Thomas stumbled upon the open source cloud market. Open source platforms like MongoDB
and Elasticsearch were not only having trouble competing against the likes of AWS but they
were actively being attacked by the likes of AWS and Azure. Seeing this, Thomas knew
exactly what their distinguishing factor would be. They would be the champion of open source
cloud solutions. With that, he would form a partnership with 7 of the most popular opensource
solutions. This gave developers the tremendous power of the Google infrastructure as well
as the insane freedom and customization offered by these opensource platforms. And that was
it. That was the turning point which finally started attracting large clients including
Coinbase, Deutsche Bank, Ford, General Mills, and SpaceX. In fact, Google Cloud is now performing
even better than their ad business which has become stagnant. Google Cloud now also accounts
for ¼ of Google’s entire workforce and judging by their open roles, they’re only
looking to grow this bigger. And speaking of growing bigger, they have plenty of space
do so as they still only control about 10% of the market. All of this brings us back
to Google’s original issue which is that none of their recent consumer products have
been sticking and their existing ones are starting to lose steam. This is not a good
omen for any company but luckily for Google, it seems like they have built a solution to
grow past their consumer days just like Microsoft did a decade ago. So, while Google’s future
in the consumer market is looking bleak, their future in the enterprise market is looking
brighter than ever and that’s why the Cloud is the future of Google. Speaking of consumer
products that are losing steam, ChatGPT’s accuracy has really fallen off a cliff. Check
out this video to learn more.