Odd Argument: Google Will Lose Out Once Everyone's Comfortable Paying For Stuff
from the wait,-what? dept
I think that Google has a fair number of weak areas where there are wide open opportunities to attack its business, but honestly I have a lot of trouble believing that Google's embrace of "free" services is its Achilles' heel as claimed in an article over at SeekingAlpha. The argument is that Amazon and Apple have figured out how to make paid content work, and that goes against Google's general culture:Because it's not culturally disposed to charging fees and has few billing relationships, Google's online search clout has been limited to free ad-supported arrangements. Google's share of total domestic online revenues could be at risk as user payments begin to match or exceed advertising, Mitchell contends. Google claims more than 30 percent of online ad market and a smaller share of online content apps payments.This is wrong on so many different levels, it's hard to know where to start. First, I'd argue that Amazon and Apple haven't really figured out how to make paid content work. Both still mostly use it as a loss leader (or very very low margin leader) to sell higher margin physical goods. Second, the growth projections for paid content are (a) questionable and (b) starting on such a small base as to be effectively meaningless when compared to a market as large as advertising.
But, furthermore, the idea that if paid content/apps actually do become popular, Google couldn't capitalize on that, is difficult to believe. Google has certainly experimented with various forms of paid content and software. The fact that they haven't gone all that well doesn't mean that Google couldn't quickly come in and enable the ability where it does work.
So, yes, there are plenty of places where an attack on Google could be successful. But betting on the success of paid content and paid apps to bring down Google? Sorry, it's just not believable. But, you have to hand it to some Wall Street folks for actually thinking that the way to beat a company that gives away most stuff for free is to charge for it. After all, haven't we been hearing for years that "you can't compete with free?" And, now suddenly we're being told that offering something for "free" can't compete with a paid offering?
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Filed Under: business models, charging, content, free
Companies: amazon, apple, google
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The idea being spread around that paid content is better must be a "cheap" attempt to try to justify an old, and failing, business model. This sort of talk is popping up everywhere, where one source will, probably, quote another as fact, and so one, trying to convince the public that "paid" is better than "free" and that "free" does not work in a corporate world.
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1st Product IPHONE
2nd Product Safari
Hell even Windows Mobile is better then Android.
Google does 1 Thing well "SEARCH" and does many things badly such as every other project it has tried.
(Please don't say Chrome, because yes it is fast, but it craps out in almost every web based business app out there.)
I am not saying Google couldn't succeed in other ventures, but they have a long way to go and have to make up a lot of ground in the professional world.
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Wait..aren't a lot of web-based business apps reliant on ActiveX or particular severe quirks in IE as well? So, you're blaming Chrome because so many business apps were broken from the get-go?
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Ya I like to pay for stuff I can get for free
it makes me feel so American
I willjust buy more stuff on credit of course
and pay for later ..
never get anything for free if I could pay for it instead
and everyone in america has an endless supply of money
don't we , all the unemployed and under paid , the ones that make u safe.. like our men and women in harmsway.. overseas, when there service is done we take suck good care of them ,,,, bullshit
if my bussiness starts to fail I will ask for and get help
from my tax paying buddys
this gut is a moroon and I am so feed up with bullshit
non indepentant thinking ... just watch the tv and listen to cnn or fox news they really tell the truth all the time
dont need to question there sources or anything
because it is all true.. no need to check
WAKE UP AMERICA
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Just think and then respond not the other way around
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Perhaps, this is allegedly the reason why MSFT decided to make a large investment into Facebook: for better user data.
When you look at Bing and their offering, you see something similar, but more "in your face": It seems Bing is positioned to be used as an ad-based marketing tool, and perhaps they are promising higher conversion rates to ad partners. This can be used to persuade people to a product or service offering. This seems to be accomplished by federating data from multiple sources outside of just Bing Search, but perhaps also Facebook, Digg, CareerBuilder, as well as other Microsoft-heavy ad websites.
I tend to believe that the proposed Yahoo Merger would have included data sharing agreements similar to the existing agreements (public or private) on their ad platform.
The problem with this is that Bing seemed to start with advertising as a goal, and Google started with Search as a goal. As time goes on, I imagine that the two desired endpoints will have a negative effect on search results at Bing: Quality of results will suffer, as the business goal at Bing seems to filter results with the desire to initiate a transaction based on their "ad and contextual based decision engine" while Google will continue to offer unfiltered results with ads that match the actual context.
It may be a year or two before this is apparent. But the slightly different endpoints will dramatically affect execution.
Funny video:
http://www.youtube.com/watch?v=0USn7eufXps
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The advantage of keeping everything else free is that it means they don't have to be very good at it.
People like chrome because it's clean and fast. That's because it doesn't do very much. If you had to pay for a browser, would you pick chrome? Not me.
Gmail overcame the original bad market reaction by giving away unheard of amounts of storage. But again, if you had to pay for email, would you pick gmail? Not me.
Chrome o/s will be the same. It will appeal to the Google fan boyz and girlz but it will be severely limited for a long time. I predict a decade before it is ready for mainstream enterprise use, if ever.
Google is very clever. They understand their focus. Giving away their 'hobbies' creates goodwill and hurts their competitors. BUT, if they ever lose their grip on search (and therefore advertising), they are dead. For the amount of bright people they supposedly have running the company, the breadth of real value is surprisingly narrow.
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Would you pay for gmail ? I would.
If someone found a way to make a paid search engine viable would google.com be hurt ? Not until the newcomer could do everything better. (not just in a niche). And the ads on google are so unobtrusive, I'm not sure I'd pay to have them removed.
While there is an "adequate" free service (like google apps) there will always be SOME people who use it rather than a feature rich paid solution.
I'm actually surprised there is no screenspace used for ads in google apps, but I guess they could be scanning content to build a richer profile to drive ads to you in your other google related activities.
Google know that trying to sell software is a mugs game. It's hard work and it can be pirated. But they are good at doing things that reinforce their ad model. Googlemail is another way to sell more ads next to analysable content. They are not trying to sell a mail program. And they happen to have made such a good webmail experience that it is actually nicer to use than a lot of mail client apps.
Noone with any sense expects google OS to be an earth shattering OS (in fact it will be pretty minimal), but if they do it right it will be
- free
- easy to use out of the box
- aimed at getting people into the google ecosystem straight after boot
It is not there to try and depose Windows as an OS.
It is there to lock in surfers as soon as they hit the net.
They're after market share of surfers, not OS users.
Saying "all that google can actually do well is search" is like saying "all that Toyota can do is build cars".
Toyota don't profit from TV advertising or Formula 1 except in that it makes people buy cars. So what ?
I don't think anyone will ever make paid search work, and I'm not sure anyone will ever surpass them at search. They are in a virtuous circle of revenue and research. I recall using Alta Vista exclusively in the early days when a few people were using google. But I never used "Alta Vista" as a verb, and I'm not sure anyone else ever did either.
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Need recommendation
Hmm, nope. I really tried to believe it there, gave it my all. But it's still farcical.
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Continuing from my previous post, I bet Google is every bit as worried about Bing (if not more) than Microsoft is about Chrome o/s. Despite their size, Google is still a one-trick pony and Bing seems to be getting a good reception.
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As far as I'm aware Bing is the POS search engine that my ISP (Talk Talk) defaulted me to without my permission when I installed my new router, so I experimented with for a day before deciding that I had better things to do with my time than spend it doing repeat searches and switched back to Google
If bing is so mindblowing how come their main search screen has a very familiar set of options "Web, Images, Videos, Shopping, News, Maps, More", "Show all, Only from [country]"? For a company you claim Google should be worried about they sure seem to want to emulate them...
Personally my advice would be that if you want to oust an established, well liked brand; bring something new and innovative to the table. Copying the existing brand but providing a less useful service doesn't seem to be very threatening
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content? no.
i repeat: google does not make and sell content.
they don't even sell other people's content. they sell algorithmically indexed associations linking disparate 3rd party producers' content. (search, gmail, maps, adsense, book search, etc.)
meaning, they're the middle-man. they point them over there to them over yonder and take a cut for the referral. the more hook-ups they can make, the more money they bring in.
you know -- kinda like a digital pimp.
m3mnoch.
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Yeah I hear this every so often. The guys that sell stuff claim that if you pay for something you're getting a better product because you're paying for guys that get payed to build and maintain said product. I like my Open Office, GIMP, SUPER et al.
By their reasoning my OOo and Google Docs should be worse off than MS' products because I got them for free but they work for what I want I want them to. That's good enough for me and I didn't have to spend a dime on them (save internet access of course). In many cases free products do more than payed ones. OOo reads more file types, VLC lets you play a boatload of video extensions, odds are you'll never come across a .lzh file but 7Zip will decompress it if you ever do.
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I was a fan of ARJ myself, it seemed to be the best of all worlds, albeit, a little slow. Plus, the free archive comment feature made it a few steps ahead of PKZip and the others out there. I recently changed to Mac, and well, when they used 7zip, inhouse, I didn't quite understand why, but as inquisitve as I was, I found that 7Z archives were free, and if you needed to buy a WinZip license for 30,000 employees, well, it made sense to use it.
I have to say though, I'm a WinRar person myself, but it seems that StuffIT has come a long way since I last used it. I was surprised it was still around. StuffIT was also the company that made "DiskDoubler" back in those days, which was possibly shamelessly started up a copy machine and created some crappy product called "DoubleSpace".
It was a weird time back then actually. Other companies showed up, I remember using 386-Max back then. This was around the time when companies were experimenting with Int 02,13 because the dominating operating system at the time wasn't setup for multitasking, as it was in "Real Mode". It wasn't until 95 that things started to come together, but only by abandoning real mode completely did things start to work. This was, of course done in the NT/2000 era, which led to XP. In some ways, XP is the the end of the line. Much like what ProComm Plus was to BBSes, or greenscreens were to the AS/400: perfect for accessing stovepiped applications. It filled the need completely, and thusly, business saw no additional need to continue with the ecosystem.
However, it seems that in an effort to continue with some sort of status quo, some companies are deciding to build hugely inefficient kernels which only tax the system. Thusly, I believe that Google may very well create Microsoft into the IBM of 1970s. While they are focused on building typewriters, innovation occurs just beyond the walls.
There's some parallels to what an ex-high ranking person at Cigna said last week.
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My favorite quote was "20% of our revenue goes to overhead, while the Government MediAid runs on a 3% overhead cost."
When I thought about that, I came to the realization that perhaps DoJ probably was correct, and MS probably would have been better off if it swallowed the pill it was Prescribed and broke into 3 to 5 separate companies.
It would have removed the Stovepiped mentality, and created several very vibrant businesses. But instead, it seems most of the revenue goes towards overhead costs: maintaining processes, procedures, which keep the business from being truly numble and able to address customer requests.
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Would I pay to use Google services?
Would I pay for this stuff? Well I paid for Microsoft Office, I paid for Windows Vista, I'll be paying for Windows 7 before the year is out. If I had to pay for a browser, would I choose Chrome over IE or Firefox? Well I chose Chrome over IE and Firefox when I didn't have to pay...so go figure. If I had to pay for mail service, would I choose GMail over yahoo mail and hotmail? Again, they're all free and I chose GMail.
So yes, if I had to pay for stuff...I'd pay Google, and I'd want an OS to be in the works. As it is now, I don't have to pay Google and they're making a profit anyway...so I'm not going to choose to use something I have to pay for when I'm more than happy with what I get for free.
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Re: Would I pay to use Google services?
Office is okay, Vista made me a Mac Person, and, well, Entourage is a joke: It's based on Outlook Express Codebase. Hell, Novell Evolution has had Exchange support since the 1920s. The deliberately slow development process at Microsoft India is probably why Apple decided to announce native exchange support.
I'll be paying for Windows 7 before the year is out.
Good for you! Sinofsky will be happy. But don't pay more than $50 though-- $50 will pay a family of four in India for a year and a half.
If you desire to pay more, look into what Steve Jobs has created. Today, he's building laptops stateside using in house CNC processes, all from a solid block of metal. That's freaking cool innovation!
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The other flawed comparison is "Google's share of total domestic online revenues could be at risk as user payments begin to match or exceed advertising". The money is not coming from the same pockets. Users don't decide between paying or advertising. Google may do worst than, say, Amazon. But that's not a failure IMHO, it's a completely different business. You can't start comparing yourself with just about everyone out there!
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Still not making much sense.
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Aroo? Really? Who's cashing my checks to Google?
Google charges plenty of fees. They just don't usually charge the end user.
I pay for Google Apps, but I consider my email mission-critical and am willing to pay for it.
But Google has demonstrated they want to be a player in those cases where a service or content is paid for by the end user.
That's why they created Google Checkout.
Not having a ton of success against PayPal, but it's Google. If the time comes that paid content comes close to ad revenue, you can bet everyone will be made aware of Checkout.
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This is the stupidest comment ever, by far, especially coming from the guy who suggests all music should be given away for free as a loss leader to push traffic to other "scarce" stuff. If a band could figure out how to sell their music at break even at least and still get a push,wouldn't it be better? Apple has come up with a perfect way to drive business, while not having to pay out the ass to do it. They have found a way to at least break even, that is pretty damn good.
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I don't say "should" I say "will."
If a band could figure out how to sell their music at break even at least and still get a push,wouldn't it be better?
Yes, and that's exactly what I've said. If you *can* sell stuff, more power to you. But the question is how well will you be able to do that for very long.
But the real point here is that I'm not talking about the artists. I'm talking about Apple and Amazon. Neither make any real money on the digital sales. Apple makes their money selling hardware. Amazon is currently selling mp3s at a *loss* in many cases.
Apple has come up with a perfect way to drive business, while not having to pay out the ass to do it. They have found a way to at least break even, that is pretty damn good.
Yes. I'm not sure what you're arguing. My point is the same as yours. Apple is using the music as a loss leader to sell hardware. So the idea that selling content is somehow a great business (as implied by the article) is wrong.
So what point are you making?
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The only point is that you are mostly pushing the idea of giving away "infinite" content for free, as a promotion for other products. Itunes shows not only does content not have to be free, but it can be a valid and functional (at least break even) business model. With slight tweeks, it could be suggested that Itunes could be a valid and profitable stand alone business.
Doesn't this upset the idea of content as infinite?
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(and then wanted more)
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Not at all. Because content being infinite is a physical property of the content. That doesn't change no matter what the business model is.
My point is to simply discuss the economics around it. The fact that Apple has built a good business using music as a loss leader doesn't change that at all. In fact it supports it.
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What does this mean ? Is this your opinion ? Do you have any facts ? Are most music biz private or public, and are their finances public record ?
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Apple doesn't seem to be making much and the artists
seem to be getting shafted for the most part.
Meanwhile, I still see a wider selection on Amazon.
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Nah
If they had not their offerings, they would not of gotten this far. Maybe their ads pay for their offerings, but I can't help but to think that their apps, search engine, gmail, is what lured the masses of people in the first place. Tell me that I am going to a website to view just ads, and see if I go. Nope!
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you're both wrong
Not everything they do is free, the things a consumer can do are free.
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Old Business model
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What an odd and totally incorrect comment. I've said from the beginning that there's nothing new at all about the business model -- and even wrote why I hoped Chris didn't present it as some brand new business model when his book was announced. Because it's not new. But, what is new is that there are many more opportunities to employ it profitably due to the rise of digital.
As for Chris, have you read his book? He doesn't claim it's new either, and actually uses tons of very old examples.
Finally, "ad supported" isn't what we're talking about.
So... you basically got every point in your comment 100% wrong.
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Yet, outside of the way the auctions work (which in itself doesn't seem new, so much as just highly automated), there isn't much new under the sun. Yet, there is Chris Anderson, once again attempting to trend search and call the "new new economy", when it is just the same bag of tricks assembled in a newly pressed bag.
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Thanks.
Also, I'll note that you didn't respond to any of the other points I raised.
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Have I read Chris's book? nope, waiting for the free edition (oddly didn't come out the same time as the expensive hard cover version, sort of the shiny plastic disc of publishing). I am a regular reader of Wired, there isn't much that Chris is going add that is going to surprise anyone, considering he is trend spotting rather than truly developing anything new.
Chris pretty much claims everything is new in some format or another.
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Yes, I pointed out how you were wrong on a variety of different things, including my position. Funny. You didn't respond to any of those.
Have I read Chris's book? nope, waiting for the free edition (oddly didn't come out the same time as the expensive hard cover version, sort of the shiny plastic disc of publishing).
Er, actually the free editions have been rolling out since the launch. There's a free audio book, and free versions available on Scribd and Google books already, and more on the way.
Chris pretty much claims everything is new in some format or another.
Except that he doesn't. Not sure why you insist this is true when you haven't even read the book.
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Yes, he does go on and on about things being new when they aren't.
As for your position, as always, you are a slippery little eel when it comes to taking a position, and when backed into a corner you wave your hands dismissively and say "you don't understand anything I say". That is usually the way that someone gets out of ever getting attached to their own opinions.
Pretty much any time anyone tries to pin you down, you try to turn it around on them. Come on Mike, grow a pair and stand up for your opinions - and really express them. If I am wrong, don't just say I am wrong - tell me why. You are great at linking to your stuff, so show me where I am wrong.
Strange, you never do.
I have yet to find a free edition of Chris' book, I don't like google books (too cumbersome) and I don't tend to like audio books either (if I wanted a boring seminar reading, I know where to get it). I will have to check scridb once I get back in the western world.
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You mean this article? He uses the word "new" several times, but never to describe old concepts (though he does use "new" in a past context multiple times).
Really, if you want to make a decent argument, at least be able to support it.
And as for Mike's opinions, you only care because you want his opinions. Opinions mean squat in the economy. Any economist who bases his arguments on personal feelings loses all credibility on the spot.
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"And as for Mike's opinions, you only care because you want his opinions."
No, sorry, I want Mike's actual opionins because I think he is playing Guru here, being very loose and slippery when it comes to his own position so he can always claim to be ahead of the curve and on the right track. Based on his presentations (too flashy for me, seems to be trying to keep people from thinking), Mike is certainly trying to look like he is on the ball on all of this stuff. It's easy to be right and call everyone else wrong when you don't separate out your own opinions from the opinions of others.
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And I have always found Mike's position to be consistent. Then again, it could be largely that you think of him as a "Guru" when he's not trying to be. It might be simpler to just ask what you actually want him to take a stance on, rather than these vague and sweeping accusations.
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Um. We're not talking about that. We're talking about what's in the book. In the book he spends an awful lot of time explaining the historical uses of free, and various business models -- including advertising -- but then goes on to explain why the digital world is changing how some of that works.
He isn't, as you claimed, pretending that advertising is new.
You are simply, flat-out, 100% wrong.
As for your position, as always, you are a slippery little eel when it comes to taking a position, and when backed into a corner you wave your hands dismissively and say "you don't understand anything I say". That is usually the way that someone gets out of ever getting attached to their own opinions.
This is not true. I state my opinion clearly and I stand behind it. Where I challenge you it's when you falsely assume that I have said something I have not.
For example, you insisted above that my position is that these business models I talk about are something new and revolutionary. But I have not done so. In fact, I have explained, repeatedly, how they are just applying basic economics. What *has* changed is the rise of digital technologies that mean these economics have more of an *impact* than they have had in the past, but I have never suggested that the models themselves are something new and revolutionary. Just their impact on the market. And I stand by that.
Pretty much any time anyone tries to pin you down, you try to turn it around on them.
This is not true. Only when folks claim I have said something I have not do I respond and point out that they are incorrect.
My positions are clear. The fact that you do not like them and repeatedly have tried to mischaracterize them does not change that.
If I am wrong, don't just say I am wrong - tell me why.
I have told you why. In great detail. Over and over and over again. But you come back and simply repeat your false statements. It's amusing, and a fun pasttime, I'm sure, but I would appreciate it if you actually tried to back up a single false claim you have made about me.
You are great at linking to your stuff, so show me where I am wrong.
Ha! How do I prove a negative? You insist I have said something I have never said. I think the actual burden of proof is on you to back up what you claim I said.
I have yet to find a free edition of Chris' book
Ha! First you insist that the free book did not come out. Then when I prove you 100% wrong (again!) you claim that you have not been able to find it. Why not just admit that you were wrong. Your words: "waiting for the free edition (oddly didn't come out the same time as the expensive hard cover version)" Except it did and you were wrong. The fact that you couldn't find it or don't like Google books doesn't change the fact that you were wrong. It just highlights it.
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Re: Old Business model
I never suggested it was new. But the fact is that the internet has made it easier to employ such a model.
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Remember econ 101 ?
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Free? Free?
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Re: Free? Free?
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Selling to businesses, not individuals
Individuals they largely give stuff for free to build brand recognition and as beta testing, but businesses they ask for money:
- advertising revenue
- Google tools for your intranet (e.g. Google Search Appliance)
- higher assurance Google Apps (as noted by Lon above)
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Google
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Re: Google
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Google paid services
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http://www.spamhaus.org/organization/funding.html
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