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Google cuts Cloud Storage prices another 10% after Amazon S3 price cut (thenextweb.com)
105 points by mfringel 1611 days ago | hide | past | web | 76 comments | favorite



Google is basically telling Amazon: "You do not want to play this price-cutting game with us".

It's a great strategy from Google especially if they think they can match any move from Amazon in this way, and if they can sustain it for a long period of time.

It's basically game theory, and at this point, Amazon would be smart to stop cutting prices just for the sake of out-competing Google on price. And if they do that, Google might also stop doing it, because as in game theory, they know continuing an aggressive price war in this manner is only going to hurt both of them, because they are both very resilient and they won't take each other out in this way anyway.

Amazon, the market leader, trying to beat Google on price, would be like Coca-Cola trying to beat Pepsi on price, and racing to the bottom. Coca-Cola has learned a long time ago that it's okay if Pepsi is slightly cheaper. Same goes for Verizon and AT&T.

I think they will both still continue to cut their prices at a regular time period, as hardware prices fall, but only for the sake of expanding the market and getting new classes of customers that otherwise wouldn't use their services, and not just to try and steal from each other.


Amazon is much more accustomed to operating a low-margin business than Google or Microsoft. Google's overall profitability can allow it to take bigger losses and subsidize its cloud services division if it wants to, but at some point, executives have to wonder if that's the most strategic use of those resources.

It's also not always the case that the leader competes on quality while the followers compete on price. In many industries, being the leader means you have infrastructure advantages and nobody can touch you on price, whereas others must serve smaller markets based on quality. Retail (both online and offline) is a good example. You'd be foolish to suggest that Amazon (the retail side) or Wal-Mart give up competing on price and let their smaller competitors take that mantle.


Noone on this planet can compete with Google on storage prices. I dont want to know how many petabytes of space they have laying around "just in case" another planet comes around and they have to index/mirror all the information.


Extraterrestrial planets aside, it's a fair point. Google's fleet undoubtedly has more machines than Amazon's in total, and that might give Google better economies of scale even though it isn't the leader in the utility computing space. However, there are several other considerations. We don't know if the main google.com fleet is made up of the same types of machines as the ones used for Google Compute Engine; for example Google can much more easily tolerate a high failure rate for a single machine than a startup renting a couple of instances. There are also more costs to consider than just the hardware, customer support being a big example.

Overall, I'd say that Google can certainly undercut Amazon on price, but at the cost of reducing the margins that its executives and shareholders are used to seeing. They might see this as a worthwhile tradeoff if they see utility computing as a strategically important space; but personally I don't see that space as a long-term threat to Google in the same way social networks or mobile phones were. But I'm certainly happy to see Google compete here; I benefit as much as any other startup from a price war.


> .. Google's fleet undoubtedly has more machines than Amazon's in total ..

Given that this assertion is mandatory for your argument to hold water, actual numbers to support your claims are required here. And since Google and Amazon don't publicly share this data, where does that leave us?


From 2009 to 2011, Google spent ~$8B on capital expenditures (buildings, property,& equipment) while Amazon spent ~$3B on capital expenditures. Given Google's scale, they probably have better economics than Amazon.


Technically, this argument is mandatory for an argument against me to hold water (that I was simply trying to say was a fair point against my original claim, even though many people were unfairly downvoting spdy for it). Feel free to discard the post if you'd like, which would leave us with the argument in my original post. I'm pretty confident in what I wrote, though.


  Amazon is much more accustomed to operating a low-margin 
  business than Google or Microsoft.
I'd have thought Amazon's core business, shipping physical goods in exchange for cash, would be more profitable than Google's core business, providing search and e-mail funded by adverts.

I'm not an expert on ad-supported websites, but they aren't exactly notoriously profitable.


I doubt people choose Google's Cloud Platform over Amazon based on price.


One of the main reasons I personally wouldn't choose Google over Amazon no matter how much they lower the price is due to the lack of a solid customer support. God forbid if something goes wrong, not only will I risk losing the Cloud account but also everything else linked to them including Adsense.

Also, Google has a history shutting down unviable services and as these competitive price cuts continues, it gets more risky to keep betting on Google.


A history shutting down unviable services is a glass half full. On the upside, it means they won't permit a service to limp on, viewing its customers as burdens and providing terrible service in the hopes they go away.


In either of those scenarios, migration off their services would become necessary. But if they keep it limping instead of cutting it off, that I think facilitates safer more cautious migration (if for no other reason, because it would give you more time to do so). In that respect, keeping the service limping would probably present the superior customer service experience.


I don't think anyone is worried about scenarios where Google customer service might get worse than it is now.


This is a very good point and enough for me to know I will not be using Google for cloud hosting...ever.

They shut down AdSense and AdWords accounts constantly with no recourse or explanation and customer support is completely non-existant. Giving them control over my hosting as well is far more power than they've proven worthy of having over my business.


People do choose their tablet over price - and the race-to-the-bottom is inhabited by two big players - Amazon and Google.

Both of their lowest-end devices are limited to 8GB physical (6GB or less after OS) memory, so cloud storage is a key pricing issue for folks comparing a Kindle Fire vs. Nexus 7 (or Nexus 4).

The battle for the non-iPad tablet space looks like it's heating up fast... what's amusing is that pure hardware manufacturers like Samsung or Acer are nowhere to be found because iPad-style tablets require an ecosystem and a) adequate on-board storage and/or b) cloud storage.


I don't get why you're comparing consumer devices with platforms with pricing?

It shouldn't matter the company providing the PaaS also happens to sell cheap tablets with their logo on it.


I agree, but it's an easy thing for Google to do, and takes away a distraction when comparing the two solutions.


> Google is basically telling Amazon: "You do not want to play this price-cutting game with us".

I hope both players go ahead and play. Let's see who wins.


There are secondary effects you have to pay attention to... the R&D budget on products like this is paid for by service costs... when you see a system become price constrained down to "virtually no margin" you lose a lot of that; meanwhile, the winner (assuming this is important enough to even bother with, which it seems it is; although, whether this space is actually useful for Google or nothing more than a way to screw with Amazon is not clear) is predictable: Google makes a lot more money than Amazon (>10x normally, and in recent quarters "infinitely more", as Amazon has dipped into the red) and has almost no serious competition in its actual space (advertising)... almost everything else they do is just ad-subsidized (and frankly should be examined for anti-trust... giving away everything from phones to email hosting at cost or even for free in the hope of retaining more advertising revenue is a lot more damaging to the overall ecosystem than giving away one product--a web browser--in the hope of retaining more operating system sales... I'd even go so far as to say it is less justifiable from a technical standpoint: these divisions of Google are almost entirely unrelated).


Unfortunately for you, anti-trust doesn't work like that. You have to prove concrete harm to customers.

And that's how it should be, before Google, your only option for a smartphone was to pay one company way too much money. Customers directly benefit, and are more productive, so it's basically impossible in the US to prove antitrust against google.


Before Google and after Google there were other competitors to Apple, such as Windows Mobile and WebOS. Also, to be very clear: you seem to be talking about Android, when I was talking about actual physical phones and tablets; right now there are a bunch of people angry that Google is pretty much giving away Nexus devices in an entirely unsustainable fashion. This is a fairly recent development (and would probably be getting more complaints if they didn't immediately run out ;P).

http://www.engadget.com/2012/11/03/editorial-amazon-and-goog...

Regardless, your same argument could easily be said about web browsers, and somehow that case happened, so obviously anti-trust actually does work like that, at least in the eyes of the US prosecutors: just like with Internet Explorer, Google has managed to squelch numerous markets where there could have been competitors by being the only player willing to do it good enough for free; for some less obvious examples, think of cases like Google Code, or Google Charts, or even Google Groups (which is still around, but whose only competitor was another free offering from Yahoo! which is largely a laughing stock at this point).


Here's what a bunch of smart people think:

http://www.c-span.org/Events/Law-and-Economics-Experts-Discu...

synposis: the antitrust case is at this point ridiculous.

As a formerly poor person who could only afford a G1 and not an iphone, allowing me to rise out of poverty, I'm not angry. The only angry people I know are Apple execs. Consumers are pretty happy about this. Which means the antitrust case is going nowhere.

The Microsoft case was different, Microsoft was found guilty for EOM shenanigans, and Bork, who authored modern antitrust law and thought microsoft was guilty, now thinks there is no antitrust case against Google.

When the FTC is done, they'll be a laughing stock.

If you want to really find a problem, you'll have to look at amazon who is not only selling at cost, they make no profit and have a high P/E since investors think they'll eliminate competition then raise prices.


I don't believe that's accurate (at least, as I would interpret "concrete harm to customers"). It may be enough in the US for the predator to intend to reduce competition and to have a reasonable chance of success (and of maintaining higher prices one competition is reduced)[1][2].

[1] - http://www-student.unl.edu/cis/econ321b03/online_course/unit...

[2] - http://en.wikipedia.org/wiki/Predatory_pricing


You'll notice in that second link:

> However, because the antitrust laws are ultimately intended to benefit consumers, and discounting results in at least short-term net benefit to consumers, the U.S. Supreme Court has set high hurdles to antitrust claims based on a predatory pricing theory.

So yeah, good luck MS et al. You'll have better luck in the socialist paradise known as the EU.


OP is showing the old prices for Amazon. New prices: http://aws.amazon.com/s3/pricing-effective-december-2012/

Google went to $0.095 a few days ago. S3 went from $0.125 to $0.095 per gig.

Google has undercut again by going to $0.085.

I like this very much. Hey Amazon, I heard Google also called your mamma fat, are you just going to take it?


Google responds to Amazon, but Amazon doesn't need to respond to Google.


Hey. HEY. HEY! We might switch, they don't know for sure, what? Ambiguity. Get with it. Amazon if you don't match the Google prices we all might switch. Whatchagonado.


Yea, as best I know Amazon is the dominant player in this space, so they don't necessarily have to engage directly in price wars.


I wonder if DreamHost will lower the price of DreamObjects (built on Ceph) which remains at $0.07, given that the gap between them and Google/Amazon has narrowed.

http://dreamhost.com/cloud/dreamobjects/pricing/


It's not just narrowed, dreamobjects is only equal to S3 RRS, which is now 7.6 cents, so there is no gap.

(dreamobjects only uses one datacenter with the data stored three times, it's not equal to regular S3)


As if in reply to my comment yesterday, Google continues to validate its service not by competing on quality or feature distinction, but by throwing gobs of cash at it, as they have done every other 'successful' effort outside of core search and Gmail.

Man, if only there was a single serious App Engine-compatible competitor, prices there would be at the sub-penny level by now given the fair value of that junk. Only it seems designed from the outset for this scenario to never occur, and so why would I trust my future forward compatibility to another of their cloud efforts (or the mercy of their customer support ethos)?


Chrome, Android, Maps, AdWords (or pretty much all their Ads products), YouTube, Analytics, Docs ... should I keep going?


While I think the grandparent is understating Google's success, it's worth noting that in your list AdWords comes under search (to me, at least), and the only other item that wasn't born out of acquisition is Chrome. Of course this is a perfectly rational strategy for Google and in the case of, e.g. Android, what they've managed to do with it since acquisition is remarkable. It's just worth remembering a lot of the successes come from spotting a startup on the rise and snapping it up.


This is a bit of a tangent, but at some point I find the "it was really an acquisition" thing becomes rather silly, as there is very little difference between hiring people specifically because of their experience and ideas in a product area and a startup of some people with experience and ideas but no actual product yet. Maps and Android definitely fall under that second group, as Where 2 essentially thought that web mapping was a good idea, but hadn't actually done it yet, and Android didn't release anything until two years after acquisition, let alone ship an actual phone (which came a year after that).

There can be insight there (one great property of startups en masse is that they serve as a great experimental method for proving zanier ideas will work or market segments can exist if a product is made for them), but there does come a point where it's like saying Google's success in AI research is because they spotted AI researchers and snapped them up. Well...yeah, employees usually are hired for the job they were hired for.

Regardless, the original poster's criteria was "Google continues to validate its service not by competing on quality or feature distinction, but by throwing gobs of cash at it", which I think the GP's examples clearly contradict, as all of them have continued to gain quality (for some people's definition of quality) and feature distinctiveness.


It's definitely not black and white, and I called out Android for specifically that reason. I wasn't actually aware that maps was not a web product at all when acquired so you're quite right that it fits into the same category.

To take the tangent further off topic it's interesting to me that Google's greatest successes post-search/ads appear to be these strategic products. Not things that bring direct profits, but those that allow them to influence the major platforms (mobile, web). Committing key resources in this way speaks of long-term thinking that other companies could learn from.


From the perspective of the company's overall performance there is no question that just because some product was an acquisition is a minor detail, it's of course their prerogative to make use of resources on-hand as they choose. However from the perspective of measuring talent and ingenuity it's hard to ignore a company relying so heavily on Plan C to ensure success of their products, and when it comes in the form of a price war in an already cut throat sector I find the absence of finesse in their strategy remarkable, something like a rabid bull in a china shop after feasting on the brains of 20,000 Phds.

Least of all after witnessing the random price changes with App Engine, there's no reason to believe this low pricing is for the long term, so it's not like this is even good for consumers.


What feature distinction is there for cloud storage? You upload bits and later download the same bits.


It would be nice to have NFS. And it would be nice to attach an EBS volume to multiple VMs simultaneously (with SCSI reservations, natch).


"I'm feeling lucky" mode where you get the first bits under the read head, instead of the files you asked for.

1-click downloads of content, billed immediately without asked for confirmation.

Ads embedded in files you retrieve.

Super saver transfers: transfer charges waived when you store $25 worth of files.


Amazon responds to Google by not shutting down successful new services and alienating users.


What free services has amazon ever provided?


Is this comment based on the assumption that because users do not pay for most of Google's services, they should have zero expectations about the availability and longevity of said service? If so, let me approach this from the reverse:

A company creates a service to generate revenue. Google provides numerous free services from which they show advertisements (or crowdsource free labor such as the google voice training system or google image search tagging "game") to generate revenue. Another company might charge for said service but not flood me with advertisements. Both companies make revenue from their service offering.

Why is it okay for Google to shutdown services (which either served their purpose or weren't profitable) but so unspeakable if another company were to do the same for a paid service?

Regardless if you agree with that viewpoint or not, at the end of the day, Google has a long history of creating products, gaining users, and shutting down those products. This history has made it extremely difficult for them to break into a market such as this one because quite frankly nobody trusts that the product will be around very long. The utter lack of customer service also makes it difficult to place faith in their systems.


I've found Amazon's freely available reviews to be an extraordinary resource over the years. I use them regularly when researching something I want to buy, due to the sheer scale of their retail operation there are almost always tons of reviews. People may take the accessibility of reviews for granted, but it's still a great free service.

Amazon also previously had a free consumer-facing search engine, A9; along with a free maps / street view service.

At various times Amazon has experimented with free shipping, including in general in the past, or with a free prime trial, or their free super saver shipping program. Obviously these are incentive based systems that require a purchase to use, but the shipping is still free non-the-less.

They provide, if I recall correctly, around 5gb of free cloud storage for you to upload content to, with an Amazon account.

They provide their Kindle book software across almost every platform at no cost.



The only people who will switch are people/companies with a lot of data where it may be cost effective.

Most small developers will stay away from Google. Amazon offers a 12 month tier free. Google offers prices and terms that change with 30 days notice.

The AWS conference is still on with Jeff Bezos talking in half an hour. Anyone care to guess what his response to this may be?


We've been at 7.9 cents/GB[1], per month, for a few months now, and neither google nor amazon is responding to our price point.

How odd!

[1] http://www.rsync.net/products/pricing.html


You're very much more expensive in the brackets below 10TB amazon takes around 10cent, you up to 24. Break even is in the bracket between 10 and 49 TB but after that amazon again undercuts you with 7cent/GB/month. With you I have to pay in advance and not by monthly usage - at least that's how I read your product page.

Now there may or may not be other reasons to choose your service (data center in switzerland is appealing) but according to your pricing page, you're only cheaper in a very narrow window.


> Break even is in the bracket between 10 and 49 TB but after that amazon again undercuts you with 7cent/GB/month

did, i mean did.. did you graph and solve that mentally while browsing the pricing page?


No need to graph. They both list the brackets and the prices.


Dreamhost and Constant are cheaper for example.


Really like the DRA concept from google - same durability, but reduced availability.

Comparing to reduced durability of Amazon RRS, it's a nice happy medium between the normal storage and Glacier.


Sounds like a price war started between Google and Amazon. Good :) Hopefully other providers will join. BTW - you can compare cloud prices at http://www.cloudorado.com


do you know of a price comparison of s3 alternatives (not ec2)?


This is a great example of how competition is good for the customer.


Can Google Cloud Storage be used to just store personal Backups? Getting started with the service it seems that it's really targeted to developers. Why can't Google build an interface and offer it as a backup solution.

Maybe that would compete with their other offer of Buying Google Drive storage for five times the price.


There are a variety of third-party backup apps. Many of them only support S3 and sometimes Rackspace, but they may add Google support now that it's cheaper. See http://gladinet.blogspot.com/2011/11/google-has-been-providi... http://www.zmanda.com/backup-google-cloud-storage.html


Are these prices for locally redundant storage or for georedundant storage?

For reference, Azure's prices for those are 0.0931 and 0.125, respectively. I wonder if they'll be dropped as well in reaction to these changes.


How can they drop their prices by 30% and still make anything? I was under the impression that the margins for S3 and Cloud Storage weren't that high.


Hardware costs drop over time. The servers they needed to power S3 cost more and required more power a couple years ago than they do now. It only makes sense that the price of the service continues to drop.


Google makes virtually all of their money on advertisements: almost everything else (from phones to services) they seem to be willing to do at cost.


I think they've wanted to make the margins on bandwidth for a while.


How easy is it to switch my usage to google from s3?

Right now i have a rails app that uses carrierwave to manage images and store them on s3.

All i needed to get s3 set up was two lines of config, a ruby gem, setting some heroku config variables to the api keys.

How easy is it to switch?


Whatever happened to Google's Don't be evil! May be the effect died long back with all the law-suites against them.

Just nitpicking but the author is adding percentages when they clearly should not be.


How is that evil?

You are right about the percentages though. 20% + 10% = 32% not 30%. They actually cut a further 8.3%.


If you look at the actual old and new prices, it actually could be over 30% depending on how much you use.


Price wars this never ends well, where have I seen this before...?


You mean always ends well?


No, not always. A bitter race-to-the-bottom always seems to lead to feature cuts, reduction in quality, etc.

It is for this reason I prefer a nice, friendly, slow price war. I guess you could say the kind of price war where it is in fact a product war- price is only one of the many battles being waged.


Yeah that was my view on it, although I can see if they slow down a bit this can be good for the customer. This all just seems a little too quick.


At the same price, I'll go with the one that is the first to eliminate any charges for get/put requests.

For public hosting of many smaller objects those gets add up fast.


And thus begins the market exchange of bandwidth/storage.

This is nice because it also helps make it cheaper for startups and product development.


Welcome to Cloud Pricing a´la Oil Pricing

The Confusement of Variable Pricing Throughout the Day

Storage is King

Datacenters are the New Parking Lots

Computation is the Future Occupant


...unless Amazon matches Google and retorts "let's battle this out on agility, support, security, service"


If they had balls they'd make it FREE!!!1


they did and then they shut it down :\


OH NO SHE DIDNTTTTTT




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