Google Cloud Worth $225B, Deutsche Bank Says • Hacker News Board

Re: Google Cloud Worth $225B, Deutsche Bank Says

#121

Post by m0zg » Fri, Oct 04, 2019, 5:51 PM UTC

frostyj wrote: post #52

lacker wrote: post #43

I was working at Google when AWS launched in 2006. The internal message was, we don't want to build a competitor. We have the technology to compete in this area, but it is fundamentally a low-margin business, whereas reinvesting in our core business is high-margin, so we should keep our infrastructure to ourselves. I wouldn't say the Google strategy was wrong per se - their stock has about 10x'd since then. But it's…

I thought margin on the cloud business is pretty high...

I believe most GCP services lose money. A few years ago when I left only a handful were profitable. It's probably profitable now overall, but not as wildly as one might think. Hence the recent curb-stomping of Diane Green.

Re: Google Cloud Worth $225B, Deutsche Bank Says

#122

Post by solatic » Fri, Oct 04, 2019, 5:51 PM UTC

chillydawg wrote: post #68

frostyj wrote: post #52

Earlier quoted context omitted.

I thought margin on the cloud business is pretty high...

It is today, but it won't last. As automation tooling gets better the barriers to entry drop and competition kicks in and lowers prices. You can see it already: Aws are constantly lowering their prices. It's not just to be nice, they're competing hard.

Core infrastructure may or may not be low margin (traffic rates are nearly pure margin designed to create a moat and may or may not eventually be challenged by regulators as anti-competitive; it remains to be seen). But the lion's share of cloud margin comes from value-added managed services e.g. AWS Lambda and GCP PubSub, which are exceedingly more expensive than their underlying infrastructure but not nearly so expensive as to justify small companies hiring FTE to manage open-source equivalents. And there aren't nearly enough cloud players to justify competition building out competing implementations for, say, the Lambda API, with the sole exception coming to mind being competing object storage providers implementing the S3 API.

Multi-cloud isn't a myth, but it's pretty close. It requires lots of discipline that most customers won't have. The smart money is on cloud providers improving their margins, not shrinking them.

Re: Google Cloud Worth $225B, Deutsche Bank Says

#123

Post by gowld » Fri, Oct 04, 2019, 5:51 PM UTC

swarnie_ wrote: post #53

beambot wrote: post #25

Google Cloud is worth $225B and Waymo is worth $100B [1], so the rest of Alphabet is worth less than $500B in market cap? The math doesn't add up. [1] https://www.cnbc.com/2019/09/27/waymo-valuation-cut-40percen...

It's DB, if they knew what they were talking about then maybe they could have predicted their own share price sliding 97% in a decade.

If a company fails, does that mean everyone in the company is wrong about their work?

Re: Google Cloud Worth $225B, Deutsche Bank Says

#124

Post by VikingCoder » Fri, Oct 04, 2019, 5:53 PM UTC

josho wrote: post #94

VikingCoder wrote: post #77

Earlier quoted context omitted.

I would say the Google strategy was wrong. For every AWS API with significant adoption, Google should have implemented it. Make transitioning from AWS to GCE as simple as possible.

I don't follow you. Your suggestion just serves to turn this into a commodity low-margin business. What benefit does google have for doing that?

If there's margin to be had, the first step is having customers.

AWS was the clear leader, and sure, you can try to attract different customers... but they should have also tried to make it as easy as possible for existing AWS customers to migrate.

Then, you offer your customers additional services that the other guy doesn't offer.

Re: Google Cloud Worth $225B, Deutsche Bank Says

#125

Post by PopeDotNinja » Fri, Oct 04, 2019, 5:58 PM UTC

chillydawg wrote: post #68

frostyj wrote: post #52

Earlier quoted context omitted.

I thought margin on the cloud business is pretty high...

It is today, but it won't last. As automation tooling gets better the barriers to entry drop and competition kicks in and lowers prices. You can see it already: Aws are constantly lowering their prices. It's not just to be nice, they're competing hard.

"Your margin is my opportunity." [1]

[1] https://quoteinvestigator.com/2019/01/13/margin/

Re: Google Cloud Worth $225B, Deutsche Bank Says

#126

Post by briffle » Fri, Oct 04, 2019, 5:59 PM UTC

exacube wrote: post #76

lacker wrote: post #43

I was working at Google when AWS launched in 2006. The internal message was, we don't want to build a competitor. We have the technology to compete in this area, but it is fundamentally a low-margin business, whereas reinvesting in our core business is high-margin, so we should keep our infrastructure to ourselves. I wouldn't say the Google strategy was wrong per se - their stock has about 10x'd since then. But it's…

I feel they entered the business because they AWS showed the industry that it actually has pretty good margins. However, I think the sentiment is probably true that selling VPS is low-margin over the long-term, but i think the margins come from the other bits: global economies of scale, good infrastructure management & practices, and providing their proven internal technologies (ML/AI, managed distributed services).…

Market share is measured in some very, very funny ways. Like Office 365 being part of their cloud division, including when people download and install office on their computer. If Google was to switch things around, and have Ad-words, Gmail, maps, etc, all pay a small, internal fee to google cloud to host their servers own internal servers, I think the market-share conversation would be very, very different.

Re: Google Cloud Worth $225B, Deutsche Bank Says

#127

Post by zjaffee » Fri, Oct 04, 2019, 6:00 PM UTC

solatic wrote: post #122

chillydawg wrote: post #68

Earlier quoted context omitted.

It is today, but it won't last. As automation tooling gets better the barriers to entry drop and competition kicks in and lowers prices. You can see it already: Aws are constantly lowering their prices. It's not just to be nice, they're competing hard.

Core infrastructure may or may not be low margin (traffic rates are nearly pure margin designed to create a moat and may or may not eventually be challenged by regulators as anti-competitive; it remains to be seen). But the lion's share of cloud margin comes from value-added managed services e.g. AWS Lambda and GCP PubSub, which are exceedingly more expensive than their underlying infrastructure but not nearly so exp…

I promise you this isn't true, maybe over the long term the value add services will be higher margin, but for most of the big players right now the margins are in the core infrastructure aspects like standard storage and compute.

Re: Google Cloud Worth $225B, Deutsche Bank Says

#128

Post by echelon » Fri, Oct 04, 2019, 6:01 PM UTC

chillydawg wrote: post #68

frostyj wrote: post #52

Earlier quoted context omitted.

I thought margin on the cloud business is pretty high...

It is today, but it won't last. As automation tooling gets better the barriers to entry drop and competition kicks in and lowers prices. You can see it already: Aws are constantly lowering their prices. It's not just to be nice, they're competing hard.

> barriers to entry drop

Are more providers entering into the cloud space? I thought AWS and Azure had this on lock down, with Google a third fiddle.

Are new companies able to enter this space now? I assume the capital investment required for allocating and maintaining tons of data centers at edge nodes that are globally distributed would be too steep.

Re: Google Cloud Worth $225B, Deutsche Bank Says

#129

Post by paulddraper » Fri, Oct 04, 2019, 6:02 PM UTC

frostyj wrote: post #52

lacker wrote: post #43

I was working at Google when AWS launched in 2006. The internal message was, we don't want to build a competitor. We have the technology to compete in this area, but it is fundamentally a low-margin business, whereas reinvesting in our core business is high-margin, so we should keep our infrastructure to ourselves. I wouldn't say the Google strategy was wrong per se - their stock has about 10x'd since then. But it's…

I thought margin on the cloud business is pretty high...

It is, though it requires significant capital.

And it was widely thought to not be high margin at the time. Cloud prices have not fallen as fast as hardware.

FWIW, many people still think it will become low margin.

Re: Google Cloud Worth $225B, Deutsche Bank Says

#130

Post by zjaffee » Fri, Oct 04, 2019, 6:02 PM UTC

superfrank wrote: post #61

lacker wrote: post #43

I was working at Google when AWS launched in 2006. The internal message was, we don't want to build a competitor. We have the technology to compete in this area, but it is fundamentally a low-margin business, whereas reinvesting in our core business is high-margin, so we should keep our infrastructure to ourselves. I wouldn't say the Google strategy was wrong per se - their stock has about 10x'd since then. But it's…

Obviously I have zero information about how they came to that conclusion, but it sounds to me like they looked too far into the future. With basically every major tech company (Amazon, Google, Microsoft, IBM) now having some cloud offering and so many companies switching their on-site infrastructure for the cloud, it seems like it's only a matter of time until compute time becomes a commodity. Once that happens prici…

Compute being a commodity doesn't matter when storage has significant lock in, with cheaper prices for using the localized storage service of a particular cloud provider.

Even if moving a containerized application across cloud services was as simple as clicking a few buttons, if you're doing any sort of logging, and especially later any computation over those logs, you will be locked in one way or another.