No such thing as a free lunch, even from Google

About a week ago, I received an email from Google, which, I imagine, sent the same email to many customers. The Google Apps for Your Domain service used to be free for unlimited accounts in a domain, unless you wanted premium features: better account control, no targeted advertising, etc. As of the near future, unless you are grandfathered in, free Apps accounts will be limited to 10 users, above which you must buy the paid service, $50/year/user.

Google’s market strategy (assuming it had one) for this service always was, “get you hooked for your personal domain or business, as your need grow, we will get you paying, and it is still much cheaper than doing it in-house.”

Clearly, that strategy has changed. They still want you hooked, and the value proposition is still valid, but they want to capture revenue from smaller players, including personal/family users. While the scale used to be a horizontal line – anyone with greater feature needs pays, anyone without does not, completely independent of size, they now view it as a quadrant: anyone with greater than a fairly small size or more feature needs will pay.

I do not have access to Apps usage data, and cannot possibly know how many accounts are larger than 10 users and are likely to pay. I also do not know much ad revenue they make off of Apps. Some significant percentage simply will not sign up, where they used to before; others will want the service and agree to pay. Clearly Google is writing off larger groups for whom even $500/year is a significant factor. I assume that Google has done all of this analysis and decided it is worth it.

The most interesting effect of all this to me, is that it opens opportunities for competitors. Whereas before, no one would bother competing: Apps as an email+Postini and calendaring platform is just too good, and free for those with basic needs, $50/user/year is enough of a cost to open an opportunity for new players. That might have been Zimbra, but they were too difficult and bought by Yahoo, itself, apparently, in a death spiral. Interesting to see who that will be.

About Avi Deitcher

Avi Deitcher is a technology business consultant who lives to dramatically improve fast-moving and fast-growing companies. He writes regularly on this blog, and can be reached via Facebook, Twitter and avi@atomicinc.com.
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