GigaOM

Great article Om. The cool thing in both cases (Dell and Google) is that all this fast mechanism is hidden behind the scenes and transparent to the user. Dell has been the leader for quite a while but its competitors have in the meantime learned a lot, I expect the same to happen with Google sooner or later, probably later…

You can compare this entry deterence strategy as a “building excess capacity” strategy. As economic literature goes, this is a very credible threat to deter entrants.

Google’s search algorithms blow me away. The speed is mind-boggling considering the task. Go Google!

I don’t infrastructure explains much of Google’s strength
$3.8BN of investment over two years for a company that makes that much in Net Income in a year? Peanuts. If that was all it took to win in search, Microsoft and Yahoo! wouldn’t have to worry!

Rather, there are entry barriers in terms of brand power (consumers think Google when they think search), and in terms of the liquidity and scale of their adsense market place (they can better monetise queries because they can offer more relevant ads)

I would agree that Google’s infrastructure is indeed part of their competitive advantage, but the other part is the Google employees that built it. They have what is arguable the brightest group of people ever assembled for a publicly held company.

[...] Om Malik has a rather eloquent piece on Google’s infrastructure putting up barrier to entry for competitors. [...]

Excellent article, Om. It really shows that Google has the lead in not just infrastructure, but also strategy. I agree with you, though, their search results need to improve in quality! Speed is important, as long as they continue generating money, they can keep improving their infrastructure and becoming more efficient: http://fishtrain.com/2007/08/30/googles-trading-floor/

I am excited to see how the new G*Drive project works. It’s great that they are offering these services and it will be fun to play around with yet another Free Google tool…

The breadth of their projects really is the key to their success. They have branched into so many channels online that AdSense will continue to grow with and into these multiple channels.

Do you see Google’s push into renewable energy as part of its drive into building infrastructure? Or is that more of just a pet project of Eric Schmidt’s growing interest in green technology?

Wow. This blog is so much better than Techcrunch. You guys actually have well thought out posts. Awesome. Finally, an alternative.

Om, have you already forgotten how they lost to YouTube (and had to acquire them) in spite of their 100-fold infrastructure advantage? If anything, video is one area where such an advantage would (a priori) appear overwhelming. YouTube didn’t have much by way of technology, so Google should have killed them on the infrastructure front - except that they didn’t.

Facebook is not winning on any infrastructure advantage either.

When you have large amounts of capital lying around, it seems like it could be used to erect an insurmountable advantage. But that is increasingly a myth. I offer Amazon S3 & EC2 as examples of leveling forces at work.

Om,

I disagree that Google’s infrastructure is its strategic advantage. If that were the case, Microsoft would have (and has) poured tons of money into infrastructure development and gained a strategic advantage for itself. However, Live search is still behind both Google and Yahoo.

The strong Google brand associated with search and the strong advertisers network they have developed because of their high traffic has made it very difficult for others to catch up.

For sure, they need to improve their algorithm and quality of search results going forward.

Thanks for the shout-out, Om. I look forward to your piece on the software side of the G house - this article was great stuff.

Google’s success as a moneymaker is based on the ability to provide relevant ads to each page.

Their search results differ less and less from those of Yahoo and MS Live, but because it takes only 20 days to form a new habit (of using Google), many have stuck to Google even though others’ results are as good (which they were not in the not-so-distant-past).

[...] real competitive advantage I have written about this before (I think), GigaOM talks about Google’s real competitive advantage, namely the sheer size of the infrastructure they [...]

great article. i think the key message for those looking to build “the next big thing” is that investing in infrastructure is NOT the way to go — you’ll end up running right into google.

@Om

All of the Google employees I know are top notch without an exception. I am not claiming this reflects their entire workforce, but I know enough of them to say that I am more than impressed. I can only imagine what must be discussed behind closed doors at that company…or maybe I can’t. I’m probably not smart enough :)

Om,
Great post. As a counter-point, consider the situation in the semiconductor industry. Intel has the infrastructure/capital advantage just like Google. Yet, a whole industry of fabless companies have thrived. They depend on massive capex by the likes of TSMC, Chartered and so on.

Financially speaking, debt markets have efficiently financed capital-intensive companies - at low interest rates, therefore requiring relatively low ROI - but they need low risk, which they achieve by aggregating the volumes of numerous fabless companies. Individual fabless companies would have much higher volatility (therefore need to have relatively debt-free balance sheets to withstand the ups and downs of the cycle) while the fabs trade lower risk for cheaper debt finance.

My point is that both models will co-exist.

Google’s total dominance in search is a disaster for small business. Untold hours are wasted on trying to figure out how to improve SERPs and PageRank instead of on building the business. Is Google Really Good for Small Business?:
http://smartstartup.typepad.com/my_weblog/2007/07/a-fable-doing-b.html

Om –

So glad to see you picking up on this thought. I made “operations as competitive advantage” a key part of the first O’Reilly Radar Executive Briefing back in 2006, and we’ve now launched a whole conference on the topic, called Velocity.

Google is, of course, not the only company playing this card. What are Amazon’s S3 and EC2 but an operations play? And Microsoft understands this, even though they haven’t yet been able to execute on it as well as Google or Amazon. Last year, I quoted Windows Live VP of Operations Debra Chrapaty uttering one of the most profound (and as yet not fully appreciated) statements of the Web 2.0 era: “In the future, being a developer on someone’s platform will mean being hosted on their infrastructure.” It turns out that Ray Ozzie had said something very similar in a Fortune interview.

So yes, this is the new game, and there are very few people who can afford to play it. Google is a master, but don’t count out Amazon or Microsoft, and maybe even Yahoo!, quite yet.

[...] 4, 2007 in google, memetrackers, search Om is asserting that Google’s infrastructure is a huge competitive advantage: To sum it up, Google’s gigantic infrastructure is the big barrier to entry for its rivals, and [...]

Om - Great article!

Does anyone know the cost of serving a query in Google and how does it compare against the query serving or ad serving for other companies?

Om:
Great stuff. I agree infrastructure plays a bigger role in this ecosystem. However, don’t forget the biggest asset and true value to Google is their brightest geeks working round the clock churning out all those awesome applications.
BTW,
I found this funny and awesome web 2.0 bubble video, guess what, u feature in this video. If u have not watched it, take a look at it
http://www.youtube.com/watch?v=fi4fzvQ6I-o
Hope u are not blogging with one hand and smoking with the other :-)

Cheers,
Omfut

Om

as i have often said in the past - Google is (re/creating) the new Bell System. If the bell system had the best per-call cost of infrastructure, Google has the best per-bit compute+store+delivery and continues to leverage this infrastructure as a key differentiator.

Meanwhile, telecom is mired in the imagined struggles of years past, even as Google is putting giga-bit-miles between its own network and everyone else’s. In a few years, I bet ATT, VZ, and others tending to their previously captive landline and wireless businesses are going to be woefully out of touch with the customer needs and out of step with where technology is going (http://www.techcrunch.com/2007/12/04/ibm-survey-telecom-executives-still-clueless/” rel=”nofollow”>see) as another example. In decades past they had the luxury of matching their snail’s pace of evolution with the equally slow rate of networking technology growth. Analog transmission and switching (manual + strowger) lasted five decades, digital transmission and finally SONET took another few decades (1960s to 1990s).

The future is not looking as kind. The telcos today believe that they ‘own’ the customer by virtue of owning the somewhat broadband pipes that link the customer with the network. I believe what really matters to the customer are the various ‘clouds’ of interest - Google, Yahoo, Amazon, Ebay, and Microsoft and perhaps someone like Facebook (though one never hears of facebook excelling at infrastructure) and the services possible in the clouds. Connectivity is hardly the value-added piece of the chain.

I wonder if any decision maker at the telcos even knows what memcached, lucene, hadoop, GFS, mapreduce are and how these technologies influence fundamental decisions about internet data center switching and resultant network architecture.

As enterprise data centers morph from legacy architectures to mimicking internet data centers and applications/services out of Blue or Google clouds become pervasive, lessons learnt from Google Infrastructure engineering may just become standard practice across all kinds of networks. Are the telco engineers taking notice?

It is clear that Google has decided that for long term success infrastructure is a competitive advantage. It is also clear, based on this and other moves, that Google uses commodity hardware and open source software to a point. When it comes to gaining a leg up, they do their own thing, often on top of existing technology.

Will these investments pay off in the long run? Only time will tell, but my bias is towards companies that have a solid foundation, especially one that is a competitive advantage. My money is on Google. Now they have to figure out how to go beyond search and advertising and take advantage of this competitive advantage.

Parul
http://www.bhopu.com

great post, totally on point..

the next question is why do even need the internet? once they have everything served up from their own infrastructure and massive supercomputer?

[...] Google’s Infrastructure is a Strategic AdvantageOm Malik points out another example of what our freshmen have been studying as a basic lesson for several semesters now, “Google’s gigantic infrastructure is the big barrier to entry for its rivals” (see “Can Yahoo Catch Google” from last December, among other WiG posts). Malik points out that Google now has 64% of the market. Google’s big, honkin’ infrastrucure helps it keep this lead. The avg. search response time smokes out somewhere between .06 and .12 seconds. At speeds like that, even if a query doesn’t give anticipated results, users just search again with refined search terms rather than jump to a competitor. Google has it’s own OS (modified from open source offerings), servers (made from commodity parts), as well as its own operational software. The firm is also rumored to be buying dark fiber to connect its data centers. Malik calls this a ’supply chain’ play, but it’s more easily understood as a game of scale. Remember, when you search Google you’re searching one of several ‘copies of the Internet’ stored on hundreds of thousands of Google servers that are regularly refreshed with the latest snapshot of what’s online. How much does that infrastructure cost? Serious dinero. Google CapEx is roughly $3.8 billion over the past seven quarters. Stanford gave us Jerry and David, then Sergei and Larry, but with this kind of coin required to support an effort, this is no longer a game threatened by two students in a trailer. [...]

[...]  Google’s Infrastructure is its Strategic Advantage - GigaOM “While their results aren’t optimal, they are good enough. Just like Microsoft Windows was good enough to dominate the market. Google, according to Hitwise, now has 64 percent of the total search market. And although a typical Google query can often be an act of futility, we put up with it because the results are fast. If they’re wrong, we can just start all over again. [...]

Informative and insightful. Thanks, Om

Dell and Google both understand and demonstrate that critical behavior that more companies need to embrace–adapt or die.

Something to think about: Google is probably one of the top three server builders in the world, the catch is they don’t sell to anyone else.

Google only lacks Access and ownership of the Last Mile, which it has a shot at with the 700Mhz Spectrum to dominate the Broadband Distriubtion networks in the US and (future) world markets. When and if it gets the spectrum it will be able to create a Centrally managed end to end High Speed, QoS based, Low Latency distribution network for its existing search as well as an entirely new series of Content/Applications (Hosted Apps).
What this is is a replacement for much of the Best Effort Internet that many Service Providers will link (using fiber)to in order to provide the Premium Level Broadband Services and access to content they need.
Examples of new Content/Apps that Google can provide out of their Data Centers Link to SP via Fiber:
1. MultiPlayer Gaming Network-that relishes the Low Latency and serious Broadband links this Network can provide-This is massive revenue service with excellent Ad revenue opps.

1. TV Programming Distribution Source, replacing the Satellite based distribution using Aggregator-Like TNN the MSO use today-At very High fees- % of Revenues). Why use Satellite when they can connect and route everything over their Fiber backbone and connect to the CATV headends via fiber. Seriously reducing cost (CAPEX & OPEX) to install and operate a Headend.

2. Replacement of the CDN like Akamai who specialize in Content delivery.

3. VoiceIP Network: Its low latency excellent QoS (precedence capability), security as well as the 24X7 Mangement of the Network will dramatically improve the end to end delivery of the IPVoice links. This will also reduce the costs to the Local Incumbent to deply a new Softswitch/Feature Server (VoiceiP based) Network and lower LD costs Worldwide.

Many more like this but these are big ones.

Jim (aka Jacomo)

@ Parag,

Microsoft and Live Search may benefit from money being poured in to it, but if they are stacking bricks, a concorde they do not get…

For more on Microsoft Research’s ideas on Rethinking Data Centers, see powerpoint from Chuck Thacker’s talk at Stanford in Oct
http://yuba.stanford.edu/~nbehesht/netseminar/seminars/10_25_07.ppt

From his talk it is clear that what is ‘practice’ at Google and others is merely ‘talk’ @ Microsoft.

rohit

[...] will prove to be the foundation of the massively vertically integrated Google of tomorrow. Om’s post today explains how “it makes perfect sense for Google to build their own servers, storage systems, [...]

just cuz of this post, i will keep coming here rather than techcrunch.

Hey Om, Great post. I heard awhile ago that Google owned fiber, but didn’t know how it fit into the picture. If infrastructure is really their game, I’m wondering if we could apply your thinking to what they are doing in wireless? You can see my post on the subject here.

Om,

I enjoy your articles a lot but for this one I will take you to task. First, I am amazed that you would quote “0.12-0.06″ as what it takes to do a search. Have you ever checked your TCP/IP roundtrip delay (e.g. by ping)? I got 100+ ms a minute ago from my FIOS, now it is 70, this is the floor for the delay, it makes no sense to talk about 60 ms delay when it becomes dominated by transport.

The other point is that the speed is simply about perception, once you get to fractions of seconds nobody can notice anyway.

Google has always played the speed card, and I agree, it is cool but is no big deal these days, you can do really fast search with amazingly small resources (hint: see Gigablast).

The fact is, despite oohhing and aahhing by mesmerized onlookers and assorted Wallstreet types, Google search results have barely changed from 10 years ago. The quality of a multitude of results is visibly deteriorating as they are being search spammed to death, by tens of thousands of COMPANIES, not to mention legions of individuals . This is hardly a secret as it is being openly discussed among search experts.

It is true that Google has amassed enormous infrastructure and they are playing the card of giving an impression that all that is absolutely REQUIRED since they keep mum about what it is being used for. But how about how much of that is really needed, and how efficiently it is deployed?

The size of the crawlable Web is small, 20B pages will fit into 200TB which today one can jam into a couple of racks for two hundred grand.
Sure you want to back it up, cache it, have copies for speedup etc but that hardly an imposing infrastructure make.

As for bandwidth, that is really funny since for $100K/mo one can get 10Gbps in the Bay Area, you can crawl 10B pages/DAY with that, well, nobody dares to try that incl Goggle, Yahoo and Microsoft. The moral of the story is that crawling DOES NOT SCALE! Google probably spends more that $100K/mo on coffee so crawling is certainly not any kind of “infrastructure advantage”.

The fact is, IMHO, that Google has been getting a free ride as they have not been faced with serious competition (from Microsoft, Yahoo nor anyone else). Couple that with a perception, I would say perfectly exemplified by your article, that it takes some mythical, enormous resources to do search and presto, we get Google invincibility.

There are other claims you make in there, e.g. “indexing the Internet really well”. What is so special about that? It is well known that indexing is the game of RAM i.e. if you stuff your index into RAM then it will be really fast and that is it. The size of a really large Internet index, with all the languages words, product names, acronyms, people names, parts of URLs and whatever else these days is few billions (Google actually admits that in one of their earlier papers), throw in few more billion for N-grams (most frequent combinations of 2,3,4 .. keywords, they have actually released these numbers) and you end up with, say, tens of TB of RAM. The cost of RAM itself is not much few hundred grand, perhaps few million for machines to stuff the RAM in but what is the big deal about it?

You also mention “imagine connecting hosts with 10Gbps and any-to-any connections”. You seem to be confusing the connectivity speed with throughput of the switching fabric. But even with the full crossbar, what is the point? Will that help Google rotate their index faster? Are Google customers happy with the current rotation frequency? Will it allow them to have say, incremental index, instead of the current, write-once one?

OK, I will stop here. Do no get me wrong, I like your stuff, just thought to give you a little workout on this one :)

Finally, I guess as a disclaimer too, one can say if I know and say all this, what am I doing about it? Fair question, I have experience (founded two search startups) and resources now, and am doing something about it, will have more to say pretty soon :)

[...] Google’s Infrastructure is its Strategic Advantage “Instead of trucks and assembly plants, however, Google’s supply chain is made up of fiber networks, data centers, switches, servers and storage devices. From that perspective, its business model is no different than that of Dell’s (DELL): Google has [...]

[...] Malik had an interesting post about Google’s super-sized datacenters. He posited that Google’s massive infrastructure, customized for its processes, represents a the [...]

[...] Google’s Infrastructure is its Strategic Advantage - GigaOM Google’s massive infrastructure is their best competitive advantage… building a second google requires a huge amount of raw cash … to much I guess. (tags: google infrastructure strategy businessmodel hardware networking business) [...]

[...] Google’s Infrastructure is its Strategic Advantage - GigaOM [...]

Great post. It helped me to validate my recent blog post.
http://www.livrona.com/blog/technology/clash-technology-titans-recap

Google both understand and demonstrate that critical behavior that more companies need to adapt or die.

Very well written! Thanks, Om

Om,

Interesting post - thanks! But fwiw (and I know it’s peripheral to your main point), the premise at the beginning is incorrect. Dell’s initial breakthrough wasn’t in supply chain, it was in distribution. As “PCs Etc.”, it didn’t have enough clout to elbow its way onto retail shelves, so it developed a different way of reaching customers. The supply chain stuff came later…

[...] For Google, Its Infrastructure is a Strategic AdvantageBy Om MalikWith the exception of optical systems, Google has built or is building the gear. It has been rumored to be a big buyer of dark fiber to connect its data centers, which helps explain why the company spent nearly $3.8 billion over the …GigaOM - http://gigaom.com/ [...]

Google should go green with some serious virtualization. Here’s a good article:

http://www-03.ibm.com/systems/virtualization/view/071807.html

I’ve done a lot of investigation of Google’s infrastructure. For more on software and hardware on Google check out:

• Google File System Eval
• Google’s Bigtable Distributed Storage System
• And for a quantification of Google’s competitive advantage over Yahoo see Killing With Kindness: Death By Big Iron

For Microsoft’s best idea, look at this article on a Microsoft Research project named Boxwood. Honestly though, I don’t think Ballmer gets it. Ozzie maybe.

Robin Harris

Interesting read, Om. While Goog’s infrastructure is a competitive advantage, I would argue that it is not Google’s only one. Otherwise, it would be in Google’s best interest to collect the Ricardian rent on it by allowing others to build on it.

I believe Google’s strengths run deeper. I suspect the infrastructure they’ve built out is closely aligned to how they carry out their other activities - process of developing new products, their software stack, etc. The intertwining of these different activities make Google’s infrastructure more valuable to itself than to others (at least for the present), and, in my mind, justifies Google’s experiments to churn out its dizzying array of products.

The more interesting question is how sustainable is the advantage?

[...] as well as if you’re interested in shorter posts or more contextual work, such as the piece on Google using its infrastructure as a competitive advantage. And who are the people you’d be most interested in reading about? The comments are open, and I [...]

[...] an interesting article on GigaOm yesterday titled “Google’s Infrastructure is its Strategic Advantage” (go read it if you [...]

[...] * Relevancy of results. * Speed of search. * Cost of executing a search query. Interesting article Read More __________________ Boss Cart Shopping Basket | Word Press [...]

[...] how big of an asshole the telcos are. Supply chain strains are bound to hit somewhere. Just as Om Malik was saying the other day, digital logistics is a competitive [...]

[...] http://www.stanford.edu/services/websearch/Google/ http://gigaom.com/2007/12/04/google-infrastructure/ [...]

[...] have written about how Google is using its infrastructure (including network) as a strategic advantage, and this latest move is an extension of that philosophy. It has been buying dark fiber to grow its [...]

[...] Interesting prediction 90% share. The article is saying that Ask is out of the picture, Microsoft/Yahoo are distracted and GOOG is continuing to invest in people and infrastructure. [...]

[...] faktor ve schopnosti najímat úžasné zaměstnance je totiž obecný jev. To, že Google léta masivně investuje do infrastruktury nemusí být pro Microsoft (narozdíl od ostatních společností) až takový problém. Inzertní [...]