The Google Apps Revenue Myth: $10mm In 2009 (GOOG)

There are two theories about Google Apps (Spreadsheet, Word-processor, GMail, etc.):

  • Google Apps will rapidly become a multi-billion dollar business that will diversify Google’s dependence on search
  • Google Apps will kill Microsoft

The first of these theories, a source outside Google familiar with Apps tells us, is laughable.

Two years after launching Apps, the source says, Google’s Enterprise division is targeting revenue of $10 million in 2009 (200,000 paid subscribers at $50 a pop).  The same source says that, privately, some Google executives hope the company might hit $40 million of revenue in 2009 (800,000 subs at $50 a pop).  Both of these numbers are a joke.

Why so little revenue? The source says Google is having a devil of a time persuading free Google Apps users to sign up for the paid version.

That said, the fact that Google is apparently having trouble building Apps into a real business does NOT mean that Apps isn’t a big threat to Microsoft.

Google Apps are a classic disruptive technology. They meet the needs of casual users (whereas Microsoft Office is vastly over-featured).  They are simple and convenient (we use them almost exclusively). Their price, free, can’t be beat.

Google Apps could end up being a lousy, puny business for Google and still steal a huge chunk of revenue and profit from Redmond.  So don’t give up on that second theory.

See Also:
Microsoft In Denial: Google Threat Is Classic Disruption
Ballmer: Google Apps Blow, No One Actually Uses Them

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