Sunday, 15 March 2009 09:47
By Owen Thomas
The accountants have taken over the Googleplex, once a hotbed of amiably unprofitable innovation. The notion that ads would pay the way for everything has been dropped — and "fee" is replacing "free."
More than anyone, Google popularized the notion that free websites could be supported by advertising, touching off the insane Web 2.0 boom that led self-promoting social media marketers to overrun San Francisco and drove venture capitalists into fits of expensive madness. If Google could give away its Web searches, why couldn't, say, Ploorkle monetize its users' ploonks?
Google didn't just serve as an example. It actively funded the free-everything boom with its AdSense ads, matching keyword buys from advertisers with every last blog and Web app.
The Google-spread delusion of "free" as the perfect price infected such lofty minds as Chris Anderson, the editor of Wired who penned first a cover story and now a book due out in July on the subject.
What does it mean for the freetards, then, that Google is starting to charge left and right?
The latest and most notable price hike came today on Google Checkout. The credit-card processing service for online merchants will soon match PayPal's fees, which run as high as 2.9 percent of a transaction.
When Checkout launched, it offered free processing for stores which spent heavily on Google ads, with the notion that free payments would lure vendors away from Amazon.com and eBay. Google is eliminating the AdWords discount, making Checkout just another PayPal clone.
Google has also raised prices on its once-free hosted computing services for startups which don't want to bother running their own servers.
The hikes have mostly hit Google's business customers. But how long before Google will raise prices for, say, extra Gmail storage? How long before it spackles ads on services previously kept pristine, as it's already done with Google News?
The advent of ads to Google News is notable. Just last summer, Google VP Marissa Mayer argued that Google News made $100 million a year from the Web search traffic the site generated, and therefore didn't need its own ads. Looks like she lost that battle with the green-eyeshades brigade. YouTube, too, is burying its videos in every imaginable form of advertising.
Google is widely expected to announce disastrously bad results for its first quarter. Industry trade groups have cut their forecasts for search advertising, Google's mainstay. Rumors of layoffs are sweeping Google's Mountain View campus. And even Google's Pollyanna CEO, Eric Schmidt, admits that the economic situation is dire.
Far more than a temporary belt-tightening, the cutbacks are a far-reaching change in mindset. It's no longer okay to invent something new and figure out how to pay for it later, as Google cofounders Larry Page and Sergey Brin once did. At today's Google, products must pay their own way, and with actual receipts, not business-model whiteboarding.
Who cares that that's not how Larry and Sergey did it? The billionaire founders are flying around the world somewhere on their private jets. The rest of Google has a business to run. And their paychecks don't come free.