By Sambhav Ratnakar:
Just yesterday, a former colleague of mine came up with a rather interesting business plan. Within seconds, he called me up. We then engaged in some intellectual tête-à-tête while he explained to me his rather ambitious proposal of competing with Google. Mr. Entrepreneur wanted me to help him create his own email service (he had come up with a ridiculous name too) and he, quite simply, wanted to create his own Google. Unfortunately, I had to spend the next ten minutes explaining to him, why it wouldn’t work and why his plan was complete and utter bullocks.
Entrepreneurs around the world have begun attempting to replicate Google products. A friend of mine one who owns a website development startup received a rather peculiar request of building a search engine. According to the client, it was a very easy job. A logo on top, a text box at the bottom and the search engine has commenced. Things are much more complicated as the client was informed his request was promptly rejected. The occurrence of such incidents have led me to believe that people don’t quite understand Google’s revenue model. Why else would you try and build your own search engine?
Google, as successful a company as it might be, has an extremely complex and intricate revenue model. Ever wondered how Gmail generates revenue? Think: what would you do if you had a website with approximately four hundred million repeating users? Sell advertisements. Now, have you ever noticed ads on the gmail interface? Unlikely. Google wouldn’t risk damage to its brand image by employing large chunks of ad blocks. Yahoo did that and look what they’ve got themselves into.
In the past, Google did use advertisements on the Gmail interface, they were extremely small, generating very little revenue per view (approximately $0.01 in revenue per account per day). Considering that ads no longer appear, total revenue generated is close to insignificant (compared to Google’s total costs).What gmail earns is only a very little percentage of what Google’s total revenue is (20,257.00 million in the three months ending 2016-03-31)So gmail, in a sense, is Google’s loss leader. So why is Google not addressing the dog of its Boston Matrix? Turns out the answer is why you can’t replicate Google and build as successful a company.
The primary aim of gmail is to encourage users to use other products. So gmail, in a sense, is a prequel, just like those three Star Wars films. Moreover, gmail also helps consumers recognise the brand that is Google. It’s a method to get consumers to product trial. It helps initiate repeat purchase. Gmail doesn’t work as an isolated product, it generates revenue and leads to profit for Google by working in synergy with other products. When you have a gmail account, you’re more likely to use adsense on your website instead of Chitika. There’s a reason why you don’t have to make a new account when you use adsense, admob, YouTube, drive, calendar, chrome, blogger, hangouts and Google+ and that reason is gmail. Gmail binds all of Google’s products together and provides them with a user base.
In a sense, Gmail collects revenue indirectly. Having a Gmail account, though, is not the only thing that makes you a client. Gmail helps integrate customers and clients to numerous other products such as Admob which allows business and app makers to advertise to their specific target segments. These are the products that bring in the real revenue. When someone like me puts a banner on their app (yes, I know all this because I’m working on my own app Enlit), through admob, Google finds clients who advertise. They then take a percentage of the total input and give developers a small cut.
We’ve established that through Gmail, revenue is generated by encouraging the initiation of product trial of various other Google products, helping Google gain search engine users and sell its tangible products, but now it’s time to connect the dots. Unless you have a user base containing millions of consumers, a few millions to shed on advertising, thousands of clients ready to pay you for advertisements, a well organised product portfolio and an intriguing unique selling point/core competency that differentiates your product from that of Google’s, it’s likely your email service/ search engine won’t be the next big thing. I could probably write a book on why exactly it won’t gain significant market share, but to sum it all up, I’d say: Google is Google and there’s a reason why it is what it is.