Thanks for taking the time to put together a well-reasoned argument. I had adopted some of your assumptions in a follow-up response to my other reply. [1] While I don't disagree with the perspective you've provided, in fact some points make a lot of sense, I think it misses the forest for the trees.
My point-by-point response should be read respectfully, since you've taken the time to do the same, I do not mean to sound argumentative. :)
> It is reasonable to assume that running a search operation, especially one that does not require any ad sales personel, would require much less people and infrastructure.
This is a reasonable assumption for running a steady-state business, but I challenge the worldview. Google does not exist in a vacuum without competitors, and contrary to what most outsiders believe, we're constantly iterating, innovating, and improving on Search alone to provide a better product and compete with our competitors. Google can't rest on its laurels.
A lot of laymen take Google Search's progress as inevitable, but I can assure you it's not. Consider the example of YouTube Snippets in Google Search. That feature was created within the last 5 years. The average person has used and found value in that new feature. (Both anecdotally and quantitatively.) That wasn't an easy feature to ideate, create, develop, or deliver. It took a lot of effort by a lot of smart people.
That's just one new feature. Google Search has been delivering several new features consistently.
Therefore I disagree with this assumption. If Google Search chose to run in steady-state, it'd soon find itself dethroned.
> That means ~$45B in cost needed to break even, or 5 times less than your starting point.
No, the financials don't work this way. [2] GOOG's Cost of Revenue is 50% Revenue. Cost of Revenue is your infrastructure, your financial floor, you can't go below this cost. Employees are accounted for under Operating Expense, specifically, your Sales under SG&A ($35B) and engineers under R&D ($35B).
So, if you'd like to banish all salespersons, you'd only save $35B. (Of which Ad Sales is only a part because Google sells many other things.)
> It is also reasonable to assume that the most of those which do not have access to internet, belong to the <$10/day income group.
This is not a reasonable assumption. Many people surviving on < $10/day have a low bandwidth cellular connection that they utilize for their family. Hence why Google innovated here with offline maps and landmark map directions for families that can only spare a little bit of bandwidth to calculate their route, and then make their way there without online point-by-point directions.
> quality of search has detoriated a lot in the last decade as documented by many discussions here
HN is a unrepresentative sample of the world population with respect to wealth, income, knowledge, interests, etc. I wouldn't consider HN as documentation for this. In fact, once again, the real-world data disagrees with HN's characterization.
> YouTube Premium exists (unlike Google Premium), giving an opportunity for people who don't want ads to pay, opportunity that 25 million people took, paying a $12/month subscription. So if anything, this just proves the point of viability of this as a business model.
That proves a 5-10% take-rate from YouTube's MAU. :) Which changes the break-even math on delivering a service. With a 5-10% take-rate on "Google Premium", your price must be 10-20x higher.
My point-by-point response should be read respectfully, since you've taken the time to do the same, I do not mean to sound argumentative. :)
> It is reasonable to assume that running a search operation, especially one that does not require any ad sales personel, would require much less people and infrastructure.
This is a reasonable assumption for running a steady-state business, but I challenge the worldview. Google does not exist in a vacuum without competitors, and contrary to what most outsiders believe, we're constantly iterating, innovating, and improving on Search alone to provide a better product and compete with our competitors. Google can't rest on its laurels.
A lot of laymen take Google Search's progress as inevitable, but I can assure you it's not. Consider the example of YouTube Snippets in Google Search. That feature was created within the last 5 years. The average person has used and found value in that new feature. (Both anecdotally and quantitatively.) That wasn't an easy feature to ideate, create, develop, or deliver. It took a lot of effort by a lot of smart people.
That's just one new feature. Google Search has been delivering several new features consistently.
Therefore I disagree with this assumption. If Google Search chose to run in steady-state, it'd soon find itself dethroned.
> That means ~$45B in cost needed to break even, or 5 times less than your starting point.
No, the financials don't work this way. [2] GOOG's Cost of Revenue is 50% Revenue. Cost of Revenue is your infrastructure, your financial floor, you can't go below this cost. Employees are accounted for under Operating Expense, specifically, your Sales under SG&A ($35B) and engineers under R&D ($35B).
So, if you'd like to banish all salespersons, you'd only save $35B. (Of which Ad Sales is only a part because Google sells many other things.)
> It is also reasonable to assume that the most of those which do not have access to internet, belong to the <$10/day income group.
This is not a reasonable assumption. Many people surviving on < $10/day have a low bandwidth cellular connection that they utilize for their family. Hence why Google innovated here with offline maps and landmark map directions for families that can only spare a little bit of bandwidth to calculate their route, and then make their way there without online point-by-point directions.
> quality of search has detoriated a lot in the last decade as documented by many discussions here
HN is a unrepresentative sample of the world population with respect to wealth, income, knowledge, interests, etc. I wouldn't consider HN as documentation for this. In fact, once again, the real-world data disagrees with HN's characterization.
> YouTube Premium exists (unlike Google Premium), giving an opportunity for people who don't want ads to pay, opportunity that 25 million people took, paying a $12/month subscription. So if anything, this just proves the point of viability of this as a business model.
That proves a 5-10% take-rate from YouTube's MAU. :) Which changes the break-even math on delivering a service. With a 5-10% take-rate on "Google Premium", your price must be 10-20x higher.
[1]: https://news.ycombinator.com/item?id=34301742
[2]: https://finance.yahoo.com/quote/GOOG/financials?p=GOOG