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Comment by buff-a | Hacker News Reader

So they built a service called "App Engine" and it turns out that the "engines" that run my "app" are exactly the parts that Google doesn't have enough of, and so they are going to charge me uncompetitive amounts of money per day?

Lets suppose that google doesn't have enough machines. Do they:

  a) Massively increase the price to reduce customers?
  b) Massively increase the number of machines?

You're saying "a".

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Actually no. I'm saying that they seem to have learned what their costs are and have priced their service based on those costs and what ever economic model they use. Given their pricing it suggested that "transactions" (which is to say a query from the web and its response) are either a good scalar for their cost to deliver, or are one of their scarcer resources.

It is entirely possible that they discover they can't make a business out of selling 'engines' like this, it wouldn't be the first time they decided they were leaving too much money on the table.

They chose "c" - scale the price so that AppEngine is revenue positive for the company using these constants for the various moving parts.

Clearly some customers will find that it no longer makes sense for them to use AppEngine. It doesn't say anything about whether the market reach will be sufficient to sustain that business.

I'm not sure if Google understand their own freemium model. Isn't the idea to let people use your cloud service at a very low cost, in hopes that they'll scale up and pay more? I feel like there's a huge gap between free and paying $400 a month. The day that the app becomes popular is the day the developer will have to shut it down or get hit with large server bills.

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