Google Cloud Worth $225B, Deutsche Bank Says
bloomberg.com
bloomberg.com
I wouldn't say the Google strategy was wrong per se - their stock has about 10x'd since then. But it's interesting to see how much things change over time.
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.
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.
But I don't see anybody competing with AWS/Azure/GCP anytime soon.
But I strongly object to the capital characterization. Akamai, the gorilla in the CDN room, to looks to have capital expenditures of $200M or so for hardware/colo/etc. Cloudflare was spending $20-30M IIRC. Conversely Amazon “Cash capital expenditures were $6.7 billion, $10.1 billion, and $11.3 billion in 2016, 2017, and 2018, which primarily reflect additional capacity to support our fulfillment operations and additional investments in support of continued business growth in technology infrastructure (the majority of which is to support AWS).”
Money alone doesnt buy success but the CDN guys dont seem to showing up to the game yet. As youve noted I dont really see anyone else on the trajectory to general competition with the big three.
Disclaimer: Im a principal at AWS and have worked on CloudFront. All my comments are based on my personal reading of publicly available data like 10K & S1 filings.
The barriers for entry on the Cloud will never drop. The Cloud grows more and complex and regional data centers across the globe are impossible for any company without gobs of money to compete with. The margins will drop, but only because the competition between the big 3 has barely even started; even that I believe is a decade away.
The same thing happened with the underlying server/architecture/processor providers. For a while it a vibrant field with multiple competitors and high margins. After a while, competition and differentiation drove down margins.
When the margins drop only the best players will be left. Those players will buy out the competition until there's just 2 or 3 big players who will then ratchet up the prices until they reach a stable equilibrium.
And then another layer gets added to this tasty lasagna:
- Processor
- Architecture
- OS
- VirtualizationService
- CloudProvider
And then we start the process of innovation to margin squeeze again...
Why? My guess is that the market for Cloud computing is constantly expanding and there isn't a plateau in sight?
It would cost $850,000 to move 10PB of data out of a cloud. People aren't going to do it. They aren't going to be able to afford to do it.
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.
But once you are there and make the cloud/devops process part of your DNA, you may find that it isn't the optimal place to live from a cost perspective. I moved a workload from a big cloud provider to a private datacenter recently and reduced the costs on an annual basis by like 60%. We did need to make a big capital investment.
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 pricing becomes a race to the bottom and margins become much smaller.
Not sure if this is the original from HBR but it is from 1965: https://hbr.org/1965/11/exploit-the-product-life-cycle
From "Maturity Stage":
> The market maturity stage typically calls for a new kind of emphasis on competing more effectively. The originator is increasingly forced to appeal to the consumer on the basis of price, marginal product differences, or both.
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.
The cloud is enormously expensive if people are buying it for "compute time".
But that's the miscalculation: thinking people buy cloud for "compute time". By and large they do not. They buy cloud for flexible provision, robust management, easier deployment, and better monitoring.
And those are differentiated qualities.
But I feel like their real mistake was trying to do things right, rather than compatibly. I think Google Cloud Engine is undeniably a better system than ad-hoc Linux VMs. But nobody really wants to rewrite all their code to work with it.
Which is a fundamentally wrong analysis. Managed compute, network, and storage was going to happen whether or not Google got into the business, helping build Google's competitors. The only difference is that Amazon gets to collect the rent.
Just like Microsoft, which made bad decisions about the Internet but grew anyway so continued to reward its execs, Google completely fumbled in cloud but grew in other places and continued to overcompensate its execs.
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). Long-term, it seems like Google could come out the winner, but only if the other aspects of business are also done well (like sales). It seems like Google Cloud is picking up market share, but still far away from the 3 As (AWS, Azure, Alibaba)
And they stayed because of Azure. Azure was making huge profit when google decided to increase number of data centers. This wouldn't be coincidence, IMO.
It's even sillier than that: Microsoft counts (a significant portion of) boxed copies of Office that you buy in a store as Azure cloud revenue. The justification being that buying a copy Office in a box gets you the right to the cloud-based version rather than the offline one you actually bought. Ultimately it's about flexibility.
And in this case, the flexibility to make your Cloud business whatever percentage of your total company revenue it might take in order to claim the market share numbers you want.
(I work for Google, opinions are my own)
For every AWS API with significant adoption, Google should have implemented it. Make transitioning from AWS to GCE as simple as possible.
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.
Not to mention some of the paradigms: regionalized dashboards/endpoints, the mess that is EC2Classic/VPC, lack of projects for compartmentalization/namespacing ... a lot of those APIs also leak internal implementation details of their products, and trying to match them would be silly.
And they did follow one API that everybody else has: S3. And that one is decent only because it's basically HTTP with some auth headers sprinkled in.
My overall experience with GCloud is much better thanks to these redesigns. AWS just seems like an underdesigned mess of loosely coupled components implemented by siloed teams.
That was my experience as well. It felt like they never included any UX person throughout any of the decisions. Their naming convention alone always seemed confusing to me, although it does seem to be improving.
Of course little else is going to look like a better idea! Every direction is downhill!
But every other local maximum can only be reached by first crossing a valley.
Google Cloud Storage launched in 2010
Google has been chasing Amazon since AWS started, and has been accelerating investment.
When I joined Amazon in 2012, the message is clearly that AWS competes with IBM Oracle EMV Vmware NetApp. I do not have proof if the original plan was that in the early days. But given my impression on Amazon and AWS' executive team, I'd say very likely enterprise IT has always been Amazon's end game.
By that chart, GOOG's only about 5x-ed since 2006.
If they would have invested in on-demand streaming video, maybe they wouldn't have been "stomped" by Netflix's 60x return since a similar date?
Hilarious, now that we know amazon builds better infrastructure. How they say it? „don’t buy your own hype“!
Google's cloud seems pretty capable, they're just going through teething. They got to live migration extremely fast, and they seem to have nailed BigQuery and Spanner (albeit not the pricing model.) They will get more reliable.
Internally though, Google was (and maybe still is) a decade ahead. With Borg they deployed their entire infrastructure as containers, running at insanely high utilization via Heracles, and built homogeneous and highly-scalable networking. They invented synchronous georeplication with Spanner. From all accounts, it's a paradise.
It just turned out they were too greedy with keeping their innovations to themselves, too egotistical to believe the rest of the world would catch up, and it was too difficult to productize their infra.
For instance, their containers can only rely on API filters for security, so they couldn't bring Borg to the masses, other than cutting it down dramatically to make Kubernetes and requiring it to run on VMs. It looks like Spanner is also priced by the core, which implies it also can't be safely/compliantly commingled with their internal instances.
Still, for a company playing catch-up and needing to completely change their mindset (remember that initially they didn't even offer VMs), they're doing darn well. Especially now that they've pivoted to GKE/big data/ML and targeting multi-cloud or niche clients rather than enterprises.
Google deserves fame for its infra, it just didn't have good business sense when it came to cloud.
The road to higher reliability is a slow one when we are talking about cloud-level 9s. I get the feeling they are still in the early stages of adopting a B2B culture and everything that comes with that.
For example, the June global network outage was caused by a software bug that had global implications. AWS moved away from building software that crossed region boundaries years ago, I would guess because they had an issue like this one. It feels like GCP is many mistakes behind AWS.
Cloud reliability isn't due to genius, it's just software+infrastructure that has been improved again and again in response to new failure modes. I think it will be several years before GCP has reliability that is comparable to what AWS has today.
[1] https://www.cnbc.com/2019/09/27/waymo-valuation-cut-40percen...
When the tech bubble bursts, either everyone gets bailed out, and it does become worth 200B. Or we are going to find out much of this tech money was speculation.
What's hard about running a server farm? Does it lend to this valuation?
There are two direct responses to your last question: all parts of running a server farm are hard, and a cloud platform is more than just a glorified server farm.
I'm not trying to peddle "banks are evil" it's normal, it's how this business works.
I worked in a leading asset management firm and never met a truly rich analyst. Usually bureaucratic employees nobody at the trading desk takes seriously.
Google is the only provider with a good portal to their partner program. They can actually communicate and we now have a dedicated account rep.
We are going to be upgrading soon to a special partner account that gives us an enhanced portal / cloud console to make managing our clients' accounts much easier.
We migrate companies from AWS to GCP. If anyone is interested, please reach out. Happy to provide reference accounts.
I'm pretty sure that's not true. I believe you can get V100s or T4s with local NVMe SSDs.
You're right though, what I meant was a machine I could do a hypervisor with, which is any VM on Google Cloud. Need baremetal on AWS, and that type does not have GPU options.
Wouldn't it be ironic if pg was paid by a PR firm to write this piece? :D
Other that UI, I think GCP in some instances may be cheaper (pretty sure I saw some instances that were cheaper... although I can't say for sure).
One thing I do credit them on is SSHing into an instance is a lot easier than GCP's "gcloud" way (I say this since I recently found the "gcloud" sdk to take over 10g on my laptop) and even if you use SSH on GCP, they make it considerably harder than AWS (although somewhat more secure for beginners... to prevent from attackers to getting to port 22).
Each member of your team can do it, and it works retroactively.
In conclusion, I guess both ways aren't bad. I just seem to prefer AWS here because for me it was a bit easier than GCP because I ran into several problems when sshing to GCP initially.
I came from a background where we'd created/ran all of these kinds of services in-house - simply because we started building our stuff before AWS/GCP existed in any meaningful way.
Anyway, after switching employers four years ago I had a greenfield project. I had zero investment in either platform. (I had joined a hardware company with a responsibility to build the software org. Side note: don't do that. I now understand why hardware-centric companies often can't do software - the CEO and other key people in sales/marketing simply don't understand the field at all. And that does matter. They won't even be able to understand if you're doing a good or bad job.)
My impressions were:
1) AWS had many more services than GCP
2) GCP services were generally designed better, more carefully thought out, etc. I felt that AWS APIs were designed without a very large amount of thought put into it, on an individual basis. I imagined Werner Vogels laying out edicts for a generalized service API design, and the individual teams all had to follow them, or else. And then the individual team built each service, without being able to change the general API design guidelines.
GCP services meanwhile seemed they like they were built by a smaller (and more talented) team with more team cohesion and communication. They traded a better design for a slower API/service output over time.
3) GCP was cheaper.
* GCP gave me the feeling it was designed with taste, through every layer. Comparing this to the desktop platform fight; think Apple. Quality over volume.
* AWS gave me the feeling it was designed without taste. Think Microsoft. Volume over quality.
I'm talking about the combination of service design criteria, APIs, documentation, etc.
Another way of thinking about it: GCP is clearly designed by hackers schooled in the ways of UNIX over a very long time. Simplicity and elegance is valued very highly in terms of designs. For AWS: Simplicity is clearly not a design goal.
I was working on a personal project where I wanted to try a "server-less" setup and I found Google's firebase authentication pretty handy and when I was looking into Firestore I found these handy videos on Youtube that Google made that I thought were pretty good introductions ... and they even updated the videos here and there so they weren't up to date. I felt like I understood how things worked pretty quickly considering I was comming from SQL land.
I had previously been playing with AWS and tied a domain to some S3 stuff and some other things and holy crap it was pure frustration and I kept thinking using AWS that "There is nothing about how this works that I could possibly have guessed correctly without googling for a painfully long time... so if / when things go wrong how would I ever know how to fix it?"
Even when I found the "right" way to do things on AWS, just the setup felt wrong it was such a "click here click there now go back to ..." adventure.
I just felt unsure and had an uneasy feeling about AWS the entire time, even after I did it right...
Google Cloud I felt like they were trying to help me understand the complexity and once I completed the task I could do it again with limited difficulty. They also were providing services tied together for me already.
And AWS does have of course evangelists blogging about a lot of stuff. You should check out their blogs overview page [2] which lists 29 new posts since the beginning of October alone!
[1]: https://aws.amazon.com/premiumsupport/knowledge-center/
The thing that bothered me was that each entity, like S3, domain hosting, everything else I did felt like an island.
Google's version felt like a "solution" in terms of things being related documentation wise and everything else.
I fully admit that given a different situation I could feel differently about Google.
According to this, however, AWS seems like it should be valued considerably higher (and this is in line with my industry experience - AWS is used everywhere, Google Cloud is not): https://kinsta.com/blog/google-cloud-vs-aws/
I've found the only way to make anything work in AWS is to search for hours and hours looking for the Stack Overflow question that tells you what the docs left out. And yet I stick with AWS because last time I tried Azure everything was broken. It'll be nice when this stuff gets a little more polished.
And don't get me started with their documentation. What a piece of crap. It's like nobody thought that things of this nature require a clear hierarchy. It's just a blob of concepts organized in no meaningful way... Not saying that AWS is perfect, but at least with their documentation, you just gotta keep reading until you find what you need. With Google Cloud sometimes you hit these walls that take you out of context and the only solution is to close that tab and start again.
Ohh. And just to be fair with everyone crappiness in this space, Azure is even worse. Their console is another horrible experience.
Nobody in this industry thought about the UX of these things. They are all disastrous...
And believe me that I have studied this from multiple angles. I worked at AWS for two years trying to solve UX issues and it's just an endless battle. Developers deserve better user experiences... Nobody is thinking about this with the intensity and focus that it deserves.
In GCP, I can easily create networks between projects. It's really shitty to do in aws.
In GCP, I can create a machine and everyone in my team automatically has ssh access.
In GCP, I can make an instance, then mark the IP as reserved. In aws, I have to reserve the IP first.
Aws UX is the worst. I use both on an everyday basis. I could go on and on..
They both have regions. One makes it easier to see at a glance.
They both have the concept of reserved IP, one doesn't need to be set first.
They both install ssh keys for you. One does it per user, the other per instance.
One sets up cross region VPC for you. The other one makes you suffer and do it yourself.
But I was referring to things like their documentation, the way they organize resources inside the Web Console and the confusing paths to different functionality within their UI.
Yes. But that's not what I'm talking about (I'm a 9 to 5 designer so to keep my job I believe I need to have a strong enough foundation to not confuse UI and UX).
A product can be ugly but still functional. For example, HackerNews is kind of ugly but it has a decent UX. GCP sometimes has decent UIs with horrible UX or horrible UX with horrible UIs.
Of course, I'm speaking about web consoles. If we are going to talk about the whole developer experience (including the CLI, documentation, APIs, etc), I think it gets more complex than that. But as a user of both GCP and AWS, I think Google DX (developer experience) it's not great. Perhaps better in certain areas when compared to AWS, but not something that would deserve any praise.
Maybe that isn't a good argument for a business to use GCP over AWS but it is an important point.
You make claims, other fellow users counter your argument with objective statements, but you ignore everything and opt to double down on more baseless assertions. That is not helpful at all.
I don't know what type of evidence you want me to provide. It is as simple as logging in to any of these major cloud providers' web consoles and come up with your own conclusions.
- Hierarchy: A lack of hierarchy concepts and the overall feeling that everything is scattered around. No clear defined boundaries between entities. For example, they have something called API Library, which for some weird reason, seems to be the default path to enable things that are required in specific service consoles.
Also, the way they compartmentalize things. Why is there a section in the sidebar that reads "Products" and then there are other sections at the same hierarchy level like "Compute"..aren't the services under Compute products as well?
-Discoverability: Very poor discoverability across all services. For example, go down the path of enabling one of their flagship services like Google Vision. The expected path would be something like entering the console > going to the sidebar > Finding Vision > Enabling API. Does it work like that? Nope. There's only a link to the documentation that explains how to enable it.
- Visibility: Ok. Staying with the Vision example. Now I want to see my usage of this API. It would make sense to see this data inside that console. Is it there? Nope. You have to go back and start hunting down where to find this information. Apparently they expect you to know that this lives under the API console, but there's no way to know this especially if you used the CLI or one of the "Enable Buttons" within the documentation. Maybe they thought those were useful, but they just break the learnability of the platform.
I could keep going...but you get the idea. This is not usable. I don't blame them either, to be honest. Even Google and Amazon have limited resources and the UX is a low priority for them since the value proposition is coming from other areas (security, reliability, offering range, price, etc)... but I feel as this space matures this is gonna become an area where the legacy of their poor decisions will generate issues down the road.
The search within console is fantastic for finding things quickly.
I have yet to find a platform that doesn't have some amount of learning curve.
I'm already intimately familiar with the AWS dashboard. Just because GCP's dashboard has a bit more polish is not enough for me to switch. Even slightly lower prices may not be either.
Disclaimer: I am long GOOGL.
The purpose of the graphic was to say "Google Cloud is now worth more than all of Oracle", not to show Google's place in the cloud market relative to Amazon and Microsoft.
Google includes their SaaS offerings as part of Google Cloud (like Gmail and Docs). Intel and Adobe have SaaS offerings.
They're comparing Gmail to hosted Photoshop basically.
Here is their chart back to 1986:
https://i.imgur.com/lVeAGHQ.jpg
Sales were hardly moving for years and have soared since fiscal 2015, from $4.7b to $10.6b (last four quarters). In that time operating income more than tripled from $900m to $3b.
When Adobe bought Omniture, that was I would argue, one of the best acquisitions since DoubleClick, and Adobe has taken that and built out this very high-margin, very lucrative “marketing cloud” business for agencies and small businesses and large enterprises.
It’s genuinely impressive and brilliant to see how Adobe has turned its business around.
And as an end-user, I may dislike that it’s harder to pirate Photoshop (and if we’re legit honest, that’s what 95% of the complaints about Creative Cloud’s pricing comes down to), but if you’re a creative professional who relies on those tools, $600 a year is a worthwhile investment, especially since the updates have been higher quality and more frequent. My employer pays my sub but I’d pay it myself if I had to — just because it makes my life easier — and I’m not even a designer or video editor by trade (I do edit a lot of video, however).
It's the same thing every platform or large service ends up attempting. From Reddit to Twitter to Google to Microsoft & Windows and so on.
Amazon understands that well, they're aggressively doing it in retail. It's guaranteed they will do it with AWS. As its growth rate slows, they'll accelerate that cannibalize-your-customers (CaaS, or CYCaaS) as the next growth opportunity.
Generic CRM, targeting Salesforce and Oracle. Etc. Amazon will view these types of offerings as just another block of software service on top of their AWS structure. The playbook is that Oracle's margin is their opportunity and it doesn't stop at databases.
Almost every business i walk in to has "something" in Azure (AD/SSO/Compute). 50-70% have "something" in AWS. Honestly under 10-15% have Google cloud products.
I work in the ERP segment so i like to think i experience a wide range of companies / cultures / budgets.
I'm curious how they're making basing these predictions since Google Cloud revenues aren't currently reported.
* Cloud margin is very high, using IBM Orale and so on, aka the "old guards" (as said by Andy Jassy: my favorite tech executive by a big margin, got to mention this as a fan boy), as the comparison.
* Cloud is the foundation of the next generation of developer platform, being irrelevant in this market is detrimental to Google. Although that was not as obvious to Google as Browser. But the metaphor is obvious now.
* Cloud is enterprise oriented, an area that both Amazon and Google were vastly behind Microsoft at 2006. Microsoft then already had a top-tier relationship with enterprise customers. Amazon was way earlier in realizing that, but Google was at least maybe 5 years behind. Diane Green's joining symbolizes the inception of the changing perception, but I'd say Diane's execution is poor (Dianne seems very distracted to me, during their time in Google).
The public markets did what they were supposed to do to WeWork.
IIRC Goldman valued WeWork at $60B
The key distinction with pitching to lead to the IPO is they sought to find investors (as opposed to wework management) at this price too, but not enough people bit to fill the raise.
The hardware is just the hidden infrastructure that businesses don't really care about as long as it meets the SLAs, like I don't care about what the physical building materials are when I go and buy groceries or get my hair cut so long as the building meets it's SLAs (which for a building is I guess not falling down when I am inside it etc) I just want the service.
Google is excruciatingly awkward in the room with that group. Amazon is in the middle.
There's an entire realm of software development and consulting in and around Microsoft enterprise products - and that has extended to Azure as well.
Personally, I've worked with AWS,GCP and Azure in a professional capacity (data science consulting) - and while Azure has its fair share of warts, the level of integration and "it just works" between Azure and MS Enterprise products is fairly impressive.
For example, I'm big on postgres - but working with SQL Server on Azure is such as breeze. There's nothing I can do with it that I couldn't do on other platforms, but the combination of tooling (SSMS, VSCode) and smooth azure integration (Blob Storage, AzureSQL, Logic Apps, Azure Functions, etc) made it easy to make things that 1. worked and 2. could be mostly supported by a BA instead of a dev.
It's a rich set of articles about various system design patterns. It's not even really set in the context of Azure, it's just plain "Here are things you should learn about". It's really well done.
I haven't seen anything close from Google or Amazon.
For example, read Bulkhead, Circuit-Breaker, Queue-based load leveling, sharding. The level of detail around why you might want to do it this way is fantastic. AWS whitepapers and best practices never really get into the why, they just focus on the what.
And isn't Azure's main feature the fact that they provide a service invented and developed by Google (kubernetes') and a first-class citizen in GCP?
Wasn't Waymo valued at $210Bn like 5 months ago? Cloud is $225Bn. Google has $117Bn in cash. It's total market cap is $839Bn. That means the rest of Google is worth $287Bn. Really?
AWS q2 2019 was was 8.4 billion so AWS in 2019 is near where GCP is projected to be in 2025. AWS q1 to q2 growth was 37%, so much slower growth than Azure and GCP.
From Barrons earlier this year: "He sees AWS revenues of $36.1 billion this year, growing about 31% a year to $140 billion in 2024. He ... estimates the value of AWS alone as $506 billion."
https://www.barrons.com/articles/amazon-stock-web-services-w...
Throwing darts would be just as accurate as the predictions investment banks are throwing out.
The issue is people expect free products they haven't paid a penny for to have live customer support, which doesn't make much sense at the billion user scale.
It's miserable in my experience.
For GCP, you can get 4-hour response time SLA for $100 per user. If you want 1-hour response SLA it's $250. Then there's Enterprise Support if you need 15-minute response SLA, TAM assigned etc which costs more.
Caveat: I work at Google Cloud.
Your examples sound a bit biased. Based on your argument, using GCP as part of a multi-cloud solution for risk mitigation could also imply that those clients don't trust AWS or Assure to provide a reliable service, thus they are compelled to use GCP for reliability. Using Kubernetes workloads means that GCP is trusted above any other competing offer to provide a fundamental service. Using GCP's PaaS offers means that GCP is able to better fulfill the client's needs with their enticing higher-level services. Your hypothetical claims ring as true as there statements, but your bias points in a different direction.
I don't work for google, nor does your attempt to switch to personal attacks change any of the points I made. In fact not only do your assertions sound heavily biased, you now admit that you never done a real evaluation of a service you're criticising. Frankly I don't care if X or Y has more market share, but people making baseless assertions regarding stuff they have no experience or knowledge in simply add noise to a discussion that's expected to be insightful.
Google is absolutely clueless in sales to enterprise. The only thing that they throw at enterprise is CAF and everyone has CAF, it is just called something else.