Google Apps: SMB Acquistion Channel?

Google Apps

The NY Times and WSJ (sub req’d) cover the well publicized integration of Google Docs & Spreadsheets into the poorly named “Google Apps for Your Domain“:

The offering is the latest package of its services that Google, Mountain View, Calif., has created for organizations. In August, the company launched a free bundle of online applications, such as email and calendar services, which it says is now used by more than 100,000 small businesses. Google says test users of its new Google Apps Premier Edition include blue-chip companies like General Electric Co.

The new higher-end version of its application offerings for businesses costs $50 per user annually and includes more email storage and support for companies’ technology staff, as well as guarantees that the email service will be available virtually all of the time.

Near term this is not a threat to Office, a “bread and butter” product for Microsoft. However the combination of broad collaboration capabilities along with the Web-based nature of Google Apps, and the fact that costs are significantly lower than Office, makes it a potential long term threat. But security and reliability will be issues that Google will have to address in winning over customers (and IT departments).

Of course Office and Google Apps are not mutually exclusive. The more interesting aspect of all this from my point of view, however, is the creation of another channel to gain small business advertisers.

From the Times article:

Google said more than 100,000 small businesseshad been using Google Apps for Your Domain, as the earlier package of e-mail and messaging programs was known. Docs and Spreadsheets had 432,000 users in December, according to Nielsen/NetRatings. Microsoft says Office has 450 million to 500 million users.

(My emphasis.)

Google isn’t going to be able to convert the majority of those SMB Apps users into advertisers but it will acquire some of them. And as it grows the overall base of Apps users, Google will likely gain new SMB advertisers accordingly. This is the secondary benefit for Google of beefing up the productivity suite. Further, it reinforces Google’s brand and usage as well as creating more ad inventory in selected cases. And it could prove, over time, to be a reasonable and cost-effective way to more deeply penetrate the SMB market.

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Here’s a side-by-side comparison of Google Apps vs. MSFT’s Office Live (which is an SMB site creation and advertising tool, not a Web-based version of the Office suite).

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2 Responses to “Google Apps: SMB Acquistion Channel?”

  1. howardowens.com: media blog » Blog Archive » Google gains traction with small business through apps Says:

    [...] Google isn’t going to give up, and Greg Sterling observes that Google Apps may be the gateway into SMB [...]

  2. edbong Says:

    This is definetly the road to the SMB market. All the other large players from Microsoft and Oracle to IBM and SAP have pretty much failed up to now. Maybe Salesforce.com (applicationexchange) could be good adquisition for Google?

    The best thing about Goolge Apps is the API… it allows to grow an ecosystem… for example we are developing an FREE open source “business application platform” (think salesforce.com). Our first application is working tightly integrated with GOOGLE APPS. http://www.applicationexchange.com.

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