Google: Cracking Code For A Storage Money Maker?


I was talking to one of our assistant managing editors today and asked him a question: how much is Oprah worth? His response? "I don't keep that data top of mind; I'll have to Google it." A few clicks of the keys and there it was. It's almost as if we've off-loaded a bunch of material we used to keep in our heads, and now we store it on the web, using Google as a way to keep all that data handy.

Which may be the crux of a new report from the folks at iSuppli, which says in a missive released today that Google may have cracked the code for storage profitability. This is a fascinating report that may signal the next great revenue stream for the world's biggest search engine. Blogs have been calling the Google storage initiative the virtual Hard Disk Drive, a way for Google to offer inexpensive storage to consumers, and charge a small premium for those users who would like to use even more of Google's memory.

For those of us who store huge numbers of photos, videos and music on our hard drives at home, the vHDD offers a new alternative to free up space. You'll upload/offload files and data onto a password-protected Google site, accessing it when you want from wherever you have a connection to the web. Neat idea. Not new, but neat.

Yahoo has been doing this for some time; same goes for Xdrive LLC; they offer about 5 gigs of free storage with more capacity available for a fee. But Google, some say, has vastly more storage resources available, and iSuppli suggests that the company could offer a staggering 50 gigs for free, and still rack up tidy profits in the process.

The economics, according to this report, are compelling. iSuppli estimates there would be about 4.2 million users who would eventually sign up for Google's online storage: "Assuming Google collects $50 per user per year in advertisement revenue...the revenue potential is about $210 million annually."

On the expense side of the equation, iSuppli estimates Google would spend about 25 cents per gig for those 50 gigs of free storage. Google might have to install 210,000 terabytes of storage to handle all this which would cost about $52.5 million in a one-time capital outlay. Not a bad return for an investment that will keep on paying off year after year.

And that revenue is just from those users who only sign up for 50 gigs of storage. The profits could be substantially higher if many users decide to pay for increased storage. Years ago, I remember hearing Scott McNealy and Larry Ellison espouse the idea that the "network is the computer."

That all sounded good, but the infrastructure simply wasn't there, and the technology that WAS there was way too expensive. But that all seems to be changing. And Google may lead the charge.

At the same time, HitWise reports today that Google accounted for a staggering 65.1 percent of all U.S. searches last month, up 5 percent year over year, and trouncing its next nearest competitor Yahoo at 21.2 percent, which lost ground compared to November of last year. Same with MSN. Ask came in fourth, but only saw fractional year over year gains.

The Google steam engine just keeps going. And going. Oh, and Oprah's worth $1.5 billion.

Questions? Comments?