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Google With A New Cloud Computing System, Aims Winning Big-Spending Customers

Google, Microsoft and Amazon combined spent nearly $53 billion on capital expenses last year, driven by data center projects to house their clouds.

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Google's new cloud chief Thomas Kurian is shown speaking at an Oracle and Sun Strategy Update event in Redwood City, Jan. 27, 2010, while serving as Oracle Executive Vice President of product development. VOA

Google has a new cloud computing boss and big ambitions to someday produce more revenue from that business than from advertising. Now comes the hard part: winning over big-spending customers.

Alphabet Inc’s cloud computing division remains a distant third behind Amazon.com Inc and Microsoft Corp in terms of global revenue, according to analysts’ estimates. A few major companies manage their data on Google’s servers. But Google has nowhere near the vast customer base of Amazon, according to a new Reuters analysis of company regulatory filings.

Businesses generally are not required to disclose their cloud vendors. Reuters found 311 out of about 5,000 worldwide that did so in 2018. While not comprehensive, the data provide a window into Google’s challenge.

Thirty five of those companies named Google as a cloud provider. The largest by market capitalization were oil major Total SA and bank HSBC Holdings Plc.

Amazon Web Services led with 227 clients, including travel company Expedia Group Inc and industrials giant Siemens AG. Microsoft’s Azure cloud had 69 firms, among them weapons maker Axon Enterprise Inc and business data firm Dun & Bradstreet Co. Thirty four of the companies cited multiple clouds.

The previously untracked data show the work ahead for Thomas Kurian, who is weeks on the job as chief executive of Google Cloud. Kurian has vowed to double down where Google has seen promising results. Specifically, he plans to target governments and top companies in retail, manufacturing, healthcare, media and finance.

“A lot of our focus as we go forward is making sure that our sales organization has the background and the ability to sell to large, more traditional companies,” Kurian said at a Goldman Sachs investor conference last week. “There’s enormous appetite in those companies to consider Google.”

Google declined to comment or make Kurian available for an interview.

People familiar with his plans said he is looking to reshape his division’s culture. A key part is developing or acquiring easy-to-use, industry-specific corporate applications, an area that Amazon and Microsoft do not dominate.

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Businesses generally are not required to disclose their cloud vendors. Reuters found 311 out of about 5,000 worldwide that did so in 2018. While not comprehensive, the data provide a window into Google’s challenge. Pixabay

“It’s about the on-ramp onto their cloud,” said Daniel Ives, a New York-based financial analyst following the cloud industry for Wedbush Securities. “The main way to get that is through applications.”

A 22-year veteran of Oracle Corp, Kurian gave the database company fresh life as the product leader behind its move to selling cloud services. His hire is already making potential customers reconsider Google, said Ray Wang, founder of Constellation Research, a Monta Vista, Calif.-based firm that helps businesses negotiate cloud deals.

“They’ve worked with him,” Wang said. “There’s a trust factor that wasn’t there before.”

Kurian also must reassure some investors bewildered by Google’s cloud ambitions: Diversifying revenue beyond advertising is a plus, but it is not coming cheap.

Google, Microsoft and Amazon combined spent nearly $53 billion on capital expenses last year, driven by data center projects to house their clouds.

With gross margins of 20 percent or less, selling cloud storage or tools for which customers need specialized staff is less lucrative for a small vendor, industry experts said. But margins on the type of software Kurian likely wants to offer can top even the 60 percent of Google’s ad business.

“The next wave of growth is going to have to come from the heavy hitting applications,” said Kerry Liu, chief executive at Rubikloud, which helps retailers with cloud projects.

‘Geeky, Techy platform’

Google got serious about the cloud around 2016, five years after Amazon Web Services had become a multibillion-dollar behemoth. But Google’s reputation for limited customer support has attracted mostly newer businesses or those with significant tech know-how.

Mike Fisher, Etsy Inc’s chief technology officer, said Google’s superior AI tools helped win over the New York-based crafts marketplace. Fisher expects data-crunching algorithms to account for 25 percent of its server use this year, up from 10 percent last year.

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Google got serious about the cloud around 2016, five years after Amazon Web Services had become a multibillion-dollar behemoth. But Google’s reputation for limited customer support has attracted mostly newer businesses or those with significant tech know-how. Pixabay

“We’ve been more pleasantly surprised than we thought,” Fisher said of the cloud’s benefits.

Advertising software company OpenX recently agreed to spend at least $110 million on Google Cloud over five years. The Pasadena, Calif. firm bet its clients would benefit from transacting on the same infrastructure as Google’s ads system. “It’s a bit more of a geeky, techy platform, but we’re that kind of company,” said Chief Technology Officer Paul Ryan.

Kurian’s plan

To attract more traditional corporate clients, Google Cloud will need to do some handholding, executives at its partners and rivals said.

Kurian is well-suited to the role. Two of his former colleagues said his follow-up and candid disclosures about product limitations helped seal deals at Oracle. An early riser, Kurian impressed staff with his meticulous preparation for morning meetings as well as his recall of the tiniest details of clients’ systems from years before.

Kurian also managed billions of dollars in acquisitions at Oracle, including the purchases of software firms BEA Systems and Taleo.

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Google is testing product recommendation software for shopping apps, a person familiar with the project said, to add to its small set of specialized tools.

Kurian told the investor conference that “you will see us continue to expand our footprint there.” (VOA)

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EU Fines Google $1.7 bn for Unfair Online Ad Rules

This meant that publishers were prohibited from placing any search adverts from competitors on their search results pages

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The Google name is displayed outside the company's office in London, Britain. VOA

The European Union’s antitrust regulators on Wednesday fined Google 1.49 billion euros ($1.7 billion) for abusing its dominance in the online search market by blocking rivals.

Google has abused its market dominance by imposing a number of restrictive clauses in contracts with third-party websites which prevented Google’s rivals from placing their search adverts on these websites, the European Commission (EC) said in a statement.

“Today the Commission has fined Google 1.49 billion euros for illegal misuse of its dominant position in the market for the brokering of online search adverts,” EC Commissioner Margrethe Vestager said.

It is the third EU fine for Google in just two years.

“Google has cemented its dominance in online search adverts and shielded itself from competitive pressure by imposing anti-competitive contractual restrictions on third-party websites. This is illegal under EU antitrust rules,” Vestager said.

The Commission said the fine which is equivalent to 1.29 per cent of Google’s turnover in 2018 takes account of the duration and gravity of the infringement.

“The misconduct lasted over 10 years and denied other companies the possibility to compete on the merits and to innovate – and consumers the benefits of competition,” Vestager said.

Websites such as newspaper websites, blogs or travel sites aggregators often have a search function embedded.

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Google CEO Sundar Pichai speaks at the Google I/O conference in Mountain View, California.

When a user searches using this search function, the website delivers both search results and search adverts, which appear alongside the search result.

Through AdSense for Search, Google provides these search adverts to owners of “publisher” websites.

Google is an intermediary, like an advertising broker, between advertisers and website owners that want to profit from the space around their search results pages.

Therefore, AdSense for Search works as an online search advertising intermediation platform.

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Google was by far the strongest player in online search advertising intermediation in the European Economic Area (EEA), with a market share above 70 per cent from 2006 to 2016.

Google’s provision of online search advertising intermediation services to the most commercially important publishers took place via agreements that were individually negotiated.

The Commission reviewed hundreds of such agreements in the course of its investigation and found that starting in 2006, Google included exclusivity clauses in its contracts.

This meant that publishers were prohibited from placing any search adverts from competitors on their search results pages, the European Commission said. (IANS)