Thinking Tech

What makes Google powerful

What makes Google powerful

Posting in Energy

Google is constantly pushing to reduce its cost of doing business online. That is what makes it powerful. It's what's in the bowels of the company, not in its brains, that you will find its secret sauce.

I read all of Ken Auletta's recent piece on Google in The New Yorker with a growing sense of disgust.

(Picture from Edward Glantz' Wicked IT blog.)

Like most New York writers Auletta follows the "great man" theory when covering business. The drama is all in the executive suite. It's personal. The heroic CEO moves assets about like chess pieces, the whole company being just one of them.

Wall Street generally looks at business this way. Investment bankers deal only with CEOs and a few of their choice lieutenants. Since they consider themselves masters of the universe, they figure the whole story is in front of them.

Only it isn't. Auletta wastes 10,000 words without telling us anything about what really makes Google powerful.

Infrastructure.

In working to become the global leader in search, Google paid rigorous attention to the mechanics of delivering Web pages to clients, systematically driving out costs. That's why it has vast server farms based on PC technology. That's why it invests in solar energy. That's why it has regional offices linked by dark fiber. That's why it uses Linux. That's why it makes such heavy use of caching.

Google's cost of doing business is less than its competitors. A lot less. So Google can do a lot more business than its competitors. A lot more. That's why YouTube could serve nearly 1 billion videos a month before paying much attention to monetizing that traffic.

The Google story isn't about media, or marketing, or whether its CEOs are evil. It's not about young engineers flitting about on skateboards.

Google is constantly pushing to reduce its cost of doing business online. That is what makes it powerful. It's what's in the bowels of the company, not in its brains, that you will find its secret sauce.

How do I know this analysis is correct? Because there is only one other company that rivals Google for its rigorous focus on online cost cutting, one other company that can rival it in building online infrastructure, and thus one other company that rivals it in power.

Amazon.

You may still think of Amazon as a store, like WalMart. It's not. It's an infrastructure play, like Google. Amazon has a physical infrastructure, which it also pays close attention to, in order to deliver products from warehouses to people. But its primary asset is its IT infrastructure.

Why did Amazon bring out the Kindle? Why is the Kindle powerful? Because Amazon's online resources let it sell Kindle books for less than competitors. Lower infrastructure costs let it subsidize development, manufacturing, and sales of the hardware. As with Gillette the company is about the blades, not the razor.

Amazon found it had so much IT infrastructure a few years ago that it began leasing it out as the Elastic Computer Cloud, or Amazon EC2. Amazon's cloud is actually better for business than Google's. It offers more services, it is evolving more rapidly, possibly because Amazon feels a greater need to monetize its cloud than Google.

The idea that "the future of business is in the clouds" remains controversial. The direction of the market remains in dispute. Will it be about public clouds or private clouds? Does every big company need its own cloud?

IBM's answer to this question is yes. They can let you hang on their cloud, they can lease you space in the cloud, they can build you a cloud and lease it to you, or sell it to you.

In the end, however, clouds are just one way to answer the question everyone in computing asks. How do I lower the cost of doing business in the Internet age? What is my cost, not per transaction, but for every billion transactions?

This is the question Google has answered more successfully (so far) than any other company. The answer gives Google power, the time and space it needs to experiment, to have patience with things that bring lots of traffic but little money, and to goad New York reporters the way Microsoft executives did in the early 1990s.

So get your head out of the clouds, and stop focusing on the faces at the top of the computing pyramid.

The power lies in the engine room.

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Dana Blankenhorn

Contributing Editor

Contributing Editor Dana Blankenhorn has written for the Chicago Tribune, Advertising Age's "NetMarketing" supplement and founded the Interactive Age Daily for CMP Media. He holds degrees from Rice and Northwestern universities. He is based in Atlanta. Follow him on Twitter. Disclosure