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Summary:

Google spent more than a billion dollars on infrastructure in the fourth quarter, representing the company’s second-biggest quarterly expenditure ever. As it competes against Facebook, Apple, Yelp and Amazon, the company can’t afford to stop building data centers now.

google dc
photo: Google

Google’s infrastructure spending continued its upward trend during the fourth quarter, hitting a two-year high of $1.02 billion. Excluding the fourth quarter of 2010, though — in which Google plunked down $2 billion for a massive data center/office location at 111 8th Avenue in New York — the company’s last quarter represents the biggest infrastructure investment in its history.

It’s difficult to say where, exactly, all that investment went, but the record spending probably shouldn’t come as a surprise given the current state of the web economy. Much more than just a search engine, Google now finds itself competing against (or has put itself in a position to compete against) formidable foes in a variety of different areas. Doing battle against companies such as Apple, Facebook, YelpAmazon Web Services and (with the advent of Google Fiber) internet service providers — and doing it well — costs a lot.

This chart shows Google’s infrastructure spending over the past few years, starting in the third quarter of 2009, which was the company’s most-frugal quarter in recent history and was then the fifth consecutive quarter of reduced spending.

As we’ve explained before, it requires a lot of investment in servers, data centers and other gear (GigaOM Pro subscription req’d) in order to deliver quality web and mobile services. For a company like Google, that means having data centers spread throughout the world to meet demand in different geographies, as well as building special servers and facilities designed specifically to meet the company’s unique workloads. Products matter, but so does the user experience, and every second users spend waiting for a page to load or a spreadsheet to update means a greater chance they’ll just go elsewhere.

Especially in its battle against Facebook, Google can’t afford to get caught slipping. The social network leader is regularly rolling out new services and storing many petabytes of user data. It’s also spending like a drunken sailor on infrastructure, investing more than a billion in infrastructure itself through the third quarter of 2012. That’s a lot less than Google, granted, but it’s nearly a third of Facebook’s total revenue during the same period.

  1. Wonder if Google Fiber rollout is counted in the infrastructure costs. If yes, wonder how much it’d be.

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  2. $1 Billion isn’t too much considering that Google is now venturing into the energy sector and started the fastest commercial internet service in the country. These are all intelligent investments which will start reaping benefits soon.

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  3. Google does (did?) invest a lot of money in renewable energy. Some hundred millions per year of Google’s capex *may* go there.

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  4. Google bought a $200 million stake in a West Texas wind farm it says produces enough electricity to light up 60,000 homes. They are pushing into the sustainable energy sector with full force.

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    1. That’s a good point. I wonder if it’s considered “property and equipment” or some other type of investment, though.

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      1. Both, I would think. The land it’s on would be property and the structure contents would be equipment.
        They are probably doing it simply because owning the power plant is probably cheaper than paying a power plant to supply all the energy they consume. Kind of like large companies self-insuring.

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  5. That’s a lot of paint ;)

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  6. You can be certain that this unprecedented investment in data centers is being managed by a robust management software system that optimizes the performance of their data centers from a power, people, equipment and process perspective. Data centers are living organisms that require constant care and feeding that go well beyond the initial capital investments. Moores law drives a never ending need to refresh technology and an enterprise requires sophisticated software to optimally refresh and manage an enterprises data center(s). This type software is referred to as Data Center Infrastructure Management (DCIM). Far to many enterprises have their head in the sand and pay little attention to the management systems required to optimize the performance of these huge capital investments. Ultimately enterprises lose their ability to properly manage their investments which becomes a competitive disadvantage from both a customer satisfaction and cost perspective.

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