Google Cloud started running its servers for an extra year, still loses billions

Google Cloud has racked up another 12 months of losses, despite extending the life of its hardware by a year. The search and ads giant in 2021 revealed that it extended the operational lifespan of its cloud servers from three to four years and found it could squeeze an extra couple of years out of some networking kit, …

[Anonymous Coward]

I'm curious on how the IRS views a business, or a portion of a business, losing money year after year after year. I know that as an individual who tracks business profit/loss on their 1040 return, having this pattern of repeated loses would lead the IRS to call the business a failure and treat it as a "hobby" instead. You can't apply hobby losses against your other income, unlike business losses.

I suspect this does not apply to Alphabet.

[yoganmahew]

They'd have to pay tax first :)

The losses are probably distributed around high tax environments, just like their licensing costs...

[andy 103]

I suspect this does not apply to Alphabet.

I suspect the rules that apply to you or I do not apply to them.

[Charlie Clark]

Google Cloud is only a division within Alphabet so any profits or loss are entirely notional and have no effect on the parent company's situation. Indeed, classic conglomerates favour loss-making companies in high growth areas: the cash cows bankroll the supposed businesses of the future. And, of course, the accountants get to move profits and losses around the world for the most favourable tax treatment.

[Andy 73]

For reference:

That is a profit of just over $32 for each and every human being on this planet.

Turns out all that 'free stuff' they give away isn't quite so free...

[Dinanziame]

Re: For reference:

Not $32 profit, $32 revenue. Profit was $9.62 per person. That said, we can expect people in developed countries reading tech news are worth more, and we are contributing maybe up to $1 a day to Google's wealth. Ha! Who said I was worthless?

[v13]

Re: For reference:

But it isn't you that's paying that. I'm OK with bigcorp paying Google so that I can have free GMail.

[Michael Hoffmann]

Hope GCP survives

I confess, I *like* working with GCP!

Having used the "Big 3" extensively, I found GCP is really great to work with as a dev/devops guy. Whatever else I think about Alphabet/Google, at least they managed to put together a great cloud platform.

However, with Google's record of cancelling on short notice whatever doesn't bring in as much profit as ad flinging, I'm worried.

[BigAndos]

Re: Hope GCP survives

Agree, I've only used GCP in anger but colleagues who have used AWS as well say GCP is easier to work with. I'm also worried about the future of GCP. I think its probably unlikely that they would can it completely but we use some fairly niche services and I'm concerned they might start removing the less popular ones!

[Anonymous Coward]

Re: Hope GCP survives

At the moment, they're all in on cloud, whether on data center investments or on hiring. There's a limit to how much of a goldfish they can be.

[Steely]

Re: Hope GCP survives

Why would they do that when it’s used extensively by HSBC, BT, Vodafone, Sky, Spotify, Deutsche Bank, Goldman Sachs, Paypal amongst many others ?

[katrinab]

Re: Hope GCP survives

Because it is Google, and that's what they do.

[Detective Emil]

So, costs of sales and customer retention on the up, then

That's how I read trippling the sales force to achieve a 50% revenue increase.

[Peter D]

Re: So, costs of sales and customer retention on the up, then

The fact depreciation expense was cut by $2.6 billion yet net income rose by only $2 billion is also testament to that.

[Anonymous Coward]

Old kit

I thought that part of the idea of 'cloud' computing was that individual servers are commodity items. So if one dies it doesn't particularly matter. Much like RAID, but for whole servers.

So why not run the hardware for much longer? Like 7-8 years. It works for many small businesses and kit is far more reliable now than it used to be. Replace it only when it dies or you need more powerful kit in that space.

[sabroni]

Re: So why not run the hardware for much longer?

Marketing.

It's in the article, other cloud vendors trumpet the cores that your workload will run on. "It's a pentium 6" doesn't cut it.

[Roland6]

Re: So why not run the hardware for much longer?

> "It's a pentium 6" doesn't cut it.

ISP's get around that by the "up to ..." tagline....

[John Riddoch]

Re: Old kit

There's a cut-off point at which you're better replacing older servers because the hardware cost is made up pretty quickly in reduced footprint/power costs. If you're running 6 year old servers with 6 cores/socket, you can probably half your running costs with a newer 12 core CPU because you'll get twice as many cores in each rack.

For a standard company, you often have to reckon in the project costs of doing such a replacement and getting budget approvals etc, and that's before you potentially get into licensing issues with replacements. If you're used to simply swapping out boxes on a daily basis and your software stack is free/internal, it becomes a much cheaper option to replace old kit, so that breakpoint of saving money happens sooner.

[Mr.Nobody]

Re: Old kit

We are running 12 core procs in 10 year old servers, thank you very much,

[Anonymous Coward]

Re: Old kit

“ 12 core procs in 10 year old servers”

With an active 24/7 maintenance contract ? Most hardware vendors start increasing those prices substantially after year 5, and get hideously expensive after year 7. Usually we run our gear for 7 years tops, and in some cases (*cough*IBM*cough*) the ROI to replace starts getting interesting after year 5.

[A Non e-mouse]

Re: Old kit

I reached the end of the five-year warranty on a piece of kit. I asked about extended support and was told it was cheaper to buy a new piece of tin rather than buy 1 years maintenance.

The IT world helping the world to go green....

[v13]

Re: Old kit

After some point it costs more to maintain the hardware than to replace it. Of course this doesn't apply to a single server, but when handling 1000s of them, the costs are more complex.The cost of having humans doing repairs, purchasing replacement parts for hardware, downtime, etc, add up.

[Pascal Monett]

So where's the problem ?

Revenue is trending up, losses are trending down. Everything's fine.

Alphabet has enough in the bank to survive until Google Cloud gets in the black, and it will.

I'm not sweating over the fact that one bit of Alphabet is not contributing to the increase of its already absurdly large money pile.

[Tomato42]

Re: So where's the problem ?

The problem is not if Google has enough pocket change to keep it running.

The question is if their ADD won't activate and they just drop it with a months notice, like so many other products.

[Chris G]

Can't wait to get this

"Brands… can personalize ads at scale and use video ad sequencing to tell powerful stories," he said, adding that advertisers can target connected televisions "which means users get a more helpful viewing experience and brands get to drive more online sales and/or leads."

I am looking forward to Google sending me my new Googlgoggle box, so that I can have a helpful viewing experience.

How much will they pay me to watch endless ads while recording all of my viewing habits through their Telescreen.

NB: Need a ssrcasm icon!

[Anonymous Coward]

We're there, eventually....

https://www.youtube.com/watch?v=hj7c0J_V1L8

[cookieMonster]

Re: Can't wait to get this

I got one of those android TVs a few months ago, not a chance I’ll ever connect it to the internet though. But for fun, every now and then I navigate to the “Setup internet connection screen” , it’s like showing a dog a bone, I’ll go as far as selecting some service or other then cancel, the tv looses its f$&@ing mind :-) the amount of prompts asking if I’m sure I want to quit is amazing.

I tease it like that once or twice a month, because why not.

[ShadowSystems]

Re: Can't wait to get this

At Cookie Monster, re: TV teasing.

*Hands you an extra large tankard of your favorite*

I wholeheartedly approve of that action & wish to congratulate you on your telly taunting tactics.

Cheers! =-D

[nintendoeats]

Re: Can't wait to get this

Same. I bought a Vero 4K+, even though technically the TV itself will technically do everything that I need. For any number of reasons, that thing gets connected to the internet (via LAN, don't want it to ever know my wi-fi) when I know there is a firmware update of interest. Never ever for another reason.

I do not want to hear "powerful stories" from advertisers. I doubt that such a thing exists, but whatever a marketing person thinks it is...has no place in my brain. I need those parts of my brain for thinking about dead kittens and the inevitability of death. I wouldn't want something depressing like an ad for air freshners taking up valuable space.

[David 132]

Re: Can't wait to get this

>"Brands… can personalize ads at scale and use video ad sequencing to tell powerful stories," he said, adding that advertisers can target connected televisions "which means users get a more helpful viewing experience and brands get to drive more online sales and/or leads."

<Marvin>

Sounds ghastly.

</Marvin>

[Gaius]

Ironically the option of skipping a year or two to save money isn't available to cloud customers - stop paying even for a month and you will be switched off. This tactic is only available to those who stayed with on-prem.

[phuzz]

Where's the money?

So if Google can't make their cloud platform profitable, what are they doing differently? Microsoft and Amazon seem to be making a profit as far as I can tell, so it must be possible. Is there something fundamentally different in the way Google Cloud works?

I guess it's more complicated than Google just not charging customers enough to cover their costs.

[Mr.Nobody]

Re: Where's the money?

AWS is a ruthless corporation, and they are not cheap. Even their "cheap as chips" storage people tell me about isn't that cheap vs rolling your own. They also pretty much invented this cloudy world because they had all this spare hardware they owned for the holiday season ordering, and it was freed up the rest of the year. They still have free resources outside of Nov - Dec each year, I am sure.

MS makes tons of money on azure by forcing people into agreements to use the stuff. They have lots of agreements where people pay for azure, but never launch an instance there. Talk about free money. Oracle does the same thing with their cloud. I am sure IBM also forces some mainframe users to purchase IBM cloud credits that are never used.

Google has none of these built in advantages, and as people often say around here, cloud computing is just your stuff on someone else's computer. Computers still pretty much cost the same to obtain and maintain, and AWS needs to make money on top of that (those rockets aren't cheap!), so it's no surprise that Google is going to lose money on this for a while until they get more people hooked on it.

[Anonymous Coward]

Re: Where's the money?

MS makes tons of money on azure by forcing people into agreements to use the stuff

I heard that one of Azure's biggest customers is...Microsoft. Office 365 runs on Azure remember.

[phuzz]

Re: Where's the money?

But then I'm assuming most of Google's stuff runs on GCP as well.

[W.S.Gosset]

Re: Where's the money?

> AWS needs to make money on top of that (those rockets aren't cheap!)

Neither are the boats:

"A historic bridge in Europe will be reduced to pieces after the builder of Jeff Bezos’ latest superyacht [$500m] realised it would be too big to sail to the ocean."

*cough* wut:

"The boat’s tall masts would present a hazard to helicopters, so the former Amazon CEO commissioned a support yacht with a helipad to follow in its wake, the outlet said."

[Omnipresent]

Must be the reason

for a 20:1 share split? They are making money at SOMETHING. They are just waiting for the smart folks to die off so they can take advantage of a new generation. Resistance is futile.

[The Empress]

So at some point Google will pull the plug

Google is famous for suddenly announcing the end of a product. This too will happen to Google Cloud. Customers will roll out of bed and read the news that the product is gone

[Borg.King]

Careful with that Google TV

I have two Sony TV's that run a Google OS. If Google starts putting ads over the top of shows I'm watching, those TV's will be history in extremely short order.

[DeathSquid]

Re: Careful with that Google TV

For god's sake! Don't give them ideas!

[Uncle Ron]

Here's my take on this: I'm certain I would never do business with a vendor that consistently loses money on whatever s/he was selling me. Never. A company doing this (and can afford to) is clearly doing it to put unfair pressure on it's competitors (Amazon, MS, IBM) and should not be able to take the tax losses. They have no real hope of making a profit. They reduced their losses in 2021 only by using older and older equipment. Which also would make me steer clear. Huh? Is it fair for a HUGE company to pressure competitors by selling a product at demonstrably below cost? For YEARS?

[Missing Semicolon]

Ask Uber how that goes

[Uncle Ron]

HW Cost

HW (all of it) makes up a substantial minority of the overall cost of IT setup. By minority, I mean <20-25% of the TCO. SW, power, space, people, etc. make up much more. Further, since they use exclusively commodity HW, GC's ratio of HW to EE (everything else) is probably considerably lower than yours or mine. I don't see how they could have reduced their loss so much with such a large increase in revenue just by extending the life of HW by one year. Something else is happening here... Huh?

[ronkee]

Re: HW Cost

Supply chain issues. Running for longer does Intel a favour right now, when it normally wouldn't.

At the rate they're growing they probably use all the new chips they can get for new capacity and would have had capacity issues if they'd switched off older kit at the rate originally planned.

[DS999]

More of the same for Google

They've always made greater than 100% of their profit via advertising, taking a collective loss on everything else.

[smittyreff]

I know that many companies use Google cloud storage for example https://oddsdigger.com/ . It is strange that Google is making losses even though it has many customers around the world.

[jamecorbitt]

But then I'm assuming most of Google's stuff runs on GCP as well.