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Is Google Pursuing a "Kill Industry" Strategy?

11:20 am on Dec 8, 2009 (gmt 0)

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Is Google destroying industries by "dumping" their products into the market free of charge? While other companies have to charge in order to keep innovating and providing their products and services, Google subsidizes those products with their AdWords income.

A few years ago they purchased an analytics company called, Urchin. They were a leader in their space, their product was very good and they charged thousands of dollars for it. They were charging $500/month and up for the service. As I recall, their average was around a couple grand per month. Analytics companies were charging thousands of dollars per month for providing data to companies with a large amount of traffic. Here is an archive.org cache of their home page before they were purchased:


Analytics was a business that was about providing a service for a price. There is no way to provide this level of service without charging for it, unless you subsidize it with something else. This is what Google does.

Take the case of WebsideStory, which offered the popular Hitbox product. They had produced a popular analytics program that was used by many businesses and individuals. WebsideStory was purchased by Omniture, who in their heyday was charging up to $18,000 for their product, before Google purchased Urchin. Previous to Google purchasing Urchin, a small business could purchase the HitBox service for under fifty dollars per month.

Here is an article about WebsideStory and their rates:

Omniture, which purchased WebsideStory and HitBox, was purchased by Adobe for about 1.8 Billion dollars. [omniture.com...] Adobe is still charging for their product. They don't publish how much they charge. But it must be difficult to compete with free. This must be why they no longer offer their low priced HitBox service. Even the industry leading WebTrends product had had to abandon their low price offerings to focus on top tier level companies.

[webtrends.com...] They only have 7,500 customers.

Back in their heyday WebTrends offered a $35/month plan for small businesses: [web.archive.org...]

Along with HitBox, that service is no longer offered.

Now Google is moving into providing free GPS information via cell phones, providing a free Android operating system to compete with Windows and OS X, as well as moving into offering free applications to compete with Microsoft Office. They are underwriting all these offerings with AdWords, offering those services at a loss. This is similar to what the Japanese did to American car manufacturers in the eighties when they controlled the closed Japanese market and were able to charge a premium to their home market in order to subsidize lower prices in the United States, prices that American car companies could not compete with, which resulted in penalties for "dumping". Here is a Wikipedia page about dumping: [google.com...]

Dumping is traditionally defined as subsidizing sales in one country from the sales in another country. The twist is that Google is subsidizing sales in one industry from sales in another industry, the online advertising market. This is similar to what Microsoft was criticized for when it offered Internet Explorer for free, which destroyed Netscape. Offering IE for free was a "Kill Netscape" strategy. Looking at everything Google is offering, it's hard not to come away thinking that perhaps Google is pursuing a "KILL" strategy that focuses on Kill Microsoft Office, Kill Internet Explorer. Kill Palm, Kill iPhone, Kill Omniture, Kill, kill, kill....

While many, including webmasters, see this as benign, that Google is cool for giving away useful services for free, is it possible that something is wrong about disrupting industries with free products that are subsidized by something else?

2:00 pm on Dec 8, 2009 (gmt 0)

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WebmasterWorld Administrator incredibill is a WebmasterWorld Top Contributor of All Time 10+ Year Member Top Contributors Of The Month

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Actually you missed a couple of items in the shakedown which included 3 analytics companies merging, including Atomz site search (competes with Google appliance) and a CMS product.

1. WebsideStory purchased Atomz (site search and CMS) - Feb 8, 2004
2. WebSideStory announced that it has acquired Visual Sciences - 1 Feb, 2006
3. WebSideStory started operating as Visual Sciences
3. Omniture purchased Visual Sciences - Oct 25, 2007
4. Abobe purchased Omniture

I'm sure we'll see more analytics shake outs like this because there's no money to be made there anymore.

2:14 pm on Dec 8, 2009 (gmt 0)

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WebmasterWorld Senior Member vincevincevince is a WebmasterWorld Top Contributor of All Time 10+ Year Member

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I still see web developers hawking expensive analytics software... not because it is technically superior to Google Analytics (although they typically claim it to be)... but because they can mark it up. It's tough to charge a markup on Google Analytics!
3:04 am on Dec 9, 2009 (gmt 0)

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Why not go back to the pre-Google days, when free search engines like Infoseek, Altavista, and Hotbot reduced demand for subscription and pay-per-search databases? Or the early Internet days, when free newsgroups, ftp servers, etc. killed off demand for proprietary online services? Or Microsoft's bundling of a winsock into Windows 95 instead of charging $20 like the popular add-in of the Windows 3.x era, Trumpet Winsock? Or the bundling of monitors and keyboards into computers like the TRS-80, Apple II, and first-generation IBM PC, which took business away from vendors who'd sold those products as add-ons to computers from the S-100 era like the NorthStar Horizon?
4:39 am on Dec 15, 2009 (gmt 0)

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Google has an Achilles heel and soon we will see that revealed in all its glory. The heel won't be innovation but something related to finances. All the bubbles haven't been burst yet... In ten years, we will read interviews by former Googlers about stuff happening at the Plex and how it was euphoric and growing all the time and so on and how some aspects of the business were neglected. Google is as strong as people believe it is. Stop believing and it falls, just like the stock market.

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