Google Apps Already a $400 Million Business?*

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TechCrunch's Michael Arrington cites a Google source who puts Google Apps revenue at 2%-3% of Google's revenue, or about $400 million. This up 10X from $40 million last year.

For paying Google App customers (small minority of all users), our understanding is that the price is about $50/user per year. So this would imply about 8mm users, which seems high*. But let's take it at face value for a moment.

$400 million is peanuts relative to Office ($18 billion) and Google ($17 billion), but it's still meaningful and impressive. The product didn't even exist three years ago. A stand-alone company offering Google Apps with $400 million in revenue would be valued at at least $4 billion, based on Salesforce.com's 10X revenue multiple.

Not bad for a product (Google Apps) that many people still consider irrelevant. Also not bad for a company (Google) that most people still consider a one-hit wonder.

If Microsoft doesn't view Google Apps as a disruptive technology that could eventually decimate the value of its most important business, it should. Nick Carr hears Microsoft is finally preparing to launch a Google App killer. For the sake of Microsoft shareholders, we hope so.

*UPDATE: So far, the SAI reader consensus is that TechCrunch's source is hallucinating. See below for logic.

See Also:
Microsoft to Launch Google App Killer, Buy Salesforce.com?

Microsoft in Denial: Google Threat is Classic Disruption (36 Comments)

Microsoft's Colossal Strategic Error: We Need to Be in Advertising

 



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I guess if you include all the ad revenue from Google App UIs, esp. gmail, in addition to paying Google Apps users, the $400 million # might make sense.


I'm guessing that this $400MM includes the revenue from their Postini acquisition as part of the total Google Apps estimate. I believe that Postini was doing around $100mm if not a bit more when they were acquired.

Rick said:
Long time Google apps user and consultant...

no way does Google apps have 8mm users.

Maybe the advertising on Google Apps version of gmail... but I still doubt it.

I love Google apps and what they've done. Terrific program.

Mark Ashton said:
Do the math. $400MM/year divided by $50/mailbox means 8 million users. Not happening now. Probably won't happen for a very long time.

stone said:
I've started playing around with Google Apps and gmail. Both suffer from spotty performance. My gmail account seems to hang more and more each day. Google is certainly losing a step.

click bot said:
Google Spreadsheets are fine for simple read-only access and light/shared read-write, but our power-users threw up in their mouths trying to use it (and I threw up in my mouth watching them try).

Google docs is currently absurd, except for very simple edit/share situations (blog posts, etc). If microsoft had released this, the twitteroshpere would never shut up about how lame it was.

@Jamestown -- We find calendar/email pretty good (if slow), but we use the *free versions* (switched from yahoo about a year ago). I would not pay per seat for this stuff (I'd switch back to yahoo first). Not sure how big your company is, and why it did not work for you (ours is small).

Google should offer a free car rental service too! I'd sign up for that (along with millions of others), and they could "support it" with ads shown on LCD screens in the seatbacks, on the car roof (integrating GPS targeting, of course). Or maybe youtube integration. With priuses. Then SAI could breathlessly write how google has cornered the car rental market. Kozmo.


stone said:
Michael Arrington has very little credibility outside of his narrow area of thumping tiny start-ups, many of which fail and some of which he's invested in. He needs to be much more successful in life before I believe a word he utters. The co-founder of Edgeio has failed too many times.


Jamestown said:
We tried using Google Apps for our enterprise mail/calendar services. It was a total disaster and we were off in 3 months. Google has a long way to go in understanding this market and even basic customer support.

billm said:
From the recently filed 10k (http://edgar.sec.gov/Archives/edgar/data/1288776/000119312508032690/d10k.htm#tx96453_3, on page 71), the "Licensing and Other Revenues" bucket, which represents all non-ad revenue, is only $181MM. So, for that $400MM number to be true, they would have to be including ad revenues as well and not just the $50/month subscriptions.

Also, this bucket is up from $120MM last year, which means 50% growth rather than 10x. I think it is safe to say that the numbers are very high.

anonymous said:
wonder if this is all enterprise revenue, including postini... even then, seems incredibly high.

Rob said:
TC source needs to put down the pipe. That figure is not accurate.

Henry Blodget said:
Gmail and Docs and Spreadsheets, I think. $50/year per user. They have some big corporate customers, but I was certainly surprised by the $400mm number.

Possible Mike's source is hallucinating.

dwight said:
Surprising, I am not sure what that consists of. Gmail enterprise premier is $50/user/yr. Is that the majority? If so that means 8MM users? I do not know that many people who are paying for it.

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