Tuesday, April 15, 2008

Google's App Engine Nurtures Innovation

Google is a one-trick pony.

Fortunately, the business they dominant – advertising supported Internet search – is a huge market that produces tremendous revenue and profits for the company. It’s no different than the enterprise desktop space that Microsoft has long owned.

Like the gang in Redmond, Google continues to struggle with how to best diversify its revenue. They’re playing with Web-based video through the YouTube acquisition, office productivity applications, Email security via the Postini buy, and a host of other technologies that may one day produce measurable revenue and profits. There’s nothing in the pipeline though that comes close to what Google has with its core business.

That is why the announcement last week of a Web services offering branded the “Application Engine” is such a brilliant play. Modeled after Amazon’s comparable offering, Google will allow software developers to build a web application and then host it for free on Google’s existing infrastructure.

Yes, this is going to be a money loser for Google for quite some time. They have the cash though to fund it and the infrastructure is already in place. More important, it is a great way of keeping an eye on the innovative applications being developed by leaner, more entrepreneurial start-ups. Any application deemed to have potential can be tested and acquired with limited risk.

I believe this is a more viable model for corporations interested in encouraging innovation. The days of corporate-sponsored VC and equity funds may have just ended.

Google’s Cloud Now on Tap for Web Developers

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