The vast majority of Google $GOOGL’s money comes from selling ads. The company, and now its parent Alphabet, has long sought additional revenue streams, building myriad research outfits under the umbrella of “Other Bets” that would hopefully develop new, lucrative technologies.
As these moonshots hemorrhage money, Google is now looking at a more staid source of income: cloud computing.
While other tech giants like Amazon $AMZN and Microsoft $MSFT dominate the cloud computing market today, Google executive chairman Eric Schmidt took to the Google Cloud Next event keynote stage March 8 to make the case for his company’s cloud future. You can store your files anywhere, Schmidt says, but Google’s prowess in using artificial intelligence to understand a company’s data sets it apart.
In this model, companies would pay Google to store their data and run programs on its servers, tasks that once required prohibitive capital investments for small companies.
“Big data is so powerful that nation-states will fight over [it],” Schmidt said. “He who has the data that can do the analytics … will provide huge nation-state benefits.”
Last year, Gartner predicted that cloud computing would have a $1 trillion dollar impact on information technology spending by 2020, a figure echoed by Google Cloud SVP Diane Green in an interview with the Wall Street Journal.
“It is so early,” Greene said. “Ninety-five percent of the world’s data is not in the cloud.”
Internet balloons and energy kites give Google its air of dreamy creative, but they’re not paying the bills. Even capturing a small percentage of the cloud market could ease Google’s reliance on advertising, which today makes 88% of its income and subsidizes the other projects.
The economic potential for Google has been so great that the company has invested $30 billion to build out these cloud services, Schmidt said during the keynote. Even conservative estimates of Google’s potential revenue from cloud computing offer a stark contrast to the amount it has poured into Other Bets without the promise of significant return, nearly $7 billion since 2014.
