Google Cloud Worth $225B, Deutsche Bank Says - <AUTHOR> https://www.bloomberg.com/news/articles/2019-10-03/google-cloud-worth-double-ibm-s-market-cap-deutsche-bank-says <comment><USER2> I was working at Google when AWS launched in 2006. The internal message was, we don't want to build a competitor. We have the technology to compete in this area, but it is fundamentally a low-margin business, whereas reinvesting in our core business is high-margin, so we should keep our infrastructure to ourselves.

I wouldn't say the Google strategy was wrong per se - their stock has about 10x'd since then. But it's interesting to see how much things change over time.

<comment><USER3> I feel they entered the business because they AWS showed the industry that it actually has pretty good margins.

However, I think the sentiment is probably true that selling VPS is low-margin over the long-term, but i think the margins come from the other bits: global economies of scale, good infrastructure management & practices, and providing their proven internal technologies (ML/AI, managed distributed services). Long-term, it seems like Google could come out the winner, but only if the other aspects of business are also done well (like sales). It seems like Google Cloud is picking up market share, but still far away from the 3 As (AWS, Azure, Alibaba)

<comment><USER4> Market share is measured in some very, very funny ways. Like Office 365 being part of their cloud division, including when people download and install office on their computer. If Google was to switch things around, and have Ad- words, Gmail, maps, etc, all pay a small, internal fee to google cloud to host their servers own internal servers, I think the market-share conversation would be very, very different.

<comment><USER5> Most of internal Google services don't run on Google cloud. Was true as of a couple of years ago and I haven't heard differently from my Google friends recently.

<comment><USER6> Just reclassify Borg as Google Cloud Internal Edition and boom, everything runs on Google Cloud. This sounds stupid but it's no worse than what MS and IBM have done. Heck, when you are your own customer maybe you could even double-count some revenue...

</comment></comment></comment></comment></comment><comment><USER7> Google Cloud is worth $225B and Waymo is worth $100B [1], so the rest of Alphabet is worth less than $500B in market cap? The math doesn't add up.

[1] [https://www.cnbc.com/2019/09/27/waymo-valuation- cut-40percen...](https://www.cnbc.com/2019/09/27/waymo-valuation- cut-40percent-by-morgan-stanley-to-105-billion.html)

<comment><USER8> It's DB, if they knew what they were talking about then maybe they could have predicted their own share price sliding 97% in a decade.

<comment><USER9> If a company fails, does that mean everyone in the company is wrong about their work?

<comment><USER10> 97% slide means there is a lot of blame to go around.

</comment></comment></comment></comment><comment><USER11> This only means that Deutsche Bank is long on Google. 99% of these analyses are extremely biased and purposeful.

I'm not trying to peddle "banks are evil" it's normal, it's how this business works.

I worked in a leading asset management firm and never met a truly rich analyst. Usually bureaucratic employees nobody at the trading desk takes seriously.

<comment><USER12> You can search for "Chinese Wall" in the context of banks for more context on this.

</comment></comment><comment><USER13> Google is dumping money into their enterprise programs. They hired some experienced people to run it. Their offerings are soooo much better quality than AWS. Try getting a GPU vm with a local SSD on AWS, does not exist... In GCP I can set custom values for CPU, MEM, GPU, SSD. Try to ssh to a machine, and then one without a public network connect.

Google is the only provider with a good portal to their partner program. They can actually communicate and we now have a dedicated account rep.

<comment><USER14> They're good until you get automatically banned for some reason and there is zero people you can contact to fix it.

<comment><USER13> I have people I can call, we have a business account.

We are going to be upgrading soon to a special partner account that gives us an enhanced portal / cloud console to make managing our clients' accounts much easier.

We migrate companies from AWS to GCP. If anyone is interested, please reach out. Happy to provide reference accounts.

<comment><USER15> Or they could just go visit [https://cloud.google.com/support/](https://cloud.google.com/support/) themselves.

</comment></comment></comment></comment><comment><USER16> Not one mention of AWS.

[http://paulgraham.com/submarine.html](http://paulgraham.com/submarine.html)

<comment><USER17> I hadn't read this submarine article before. This just blew my mind. I've got so many ideas for promoting my side business now.

<comment><USER18> The content farms (and Wikipedia) are modern day version of the print publications.

Wouldn't it be ironic if pg was paid by a PR firm to write this piece? :D

</comment></comment></comment><comment><USER19> Not surprised. If AWS can't make their UI a bit more user-friendly (especially for beginners) and remove their AWS Educate for students (which by the way is horrible), I think a good chunk of developers and possible institutions might move over to GCP.

Other that UI, I think GCP in some instances may be cheaper (pretty sure I saw some instances that were cheaper... although I can't say for sure).

<comment><USER20> Why people keep saying that GCP UI/UX is good. Is it because of Firebase? Because granted, that's a very nice UX. But when you log in to the GCP console that thing is a fucking mess. Way more complicated than AWS, with a very subpar UX...

And don't get me started with their documentation. What a piece of crap. It's like nobody thought that things of this nature require a clear hierarchy. It's just a blob of concepts organized in no meaningful way... Not saying that AWS is perfect, but at least with their documentation, you just gotta keep reading until you find what you need. With Google Cloud sometimes you hit these walls that take you out of context and the only solution is to close that tab and start again.

Ohh. And just to be fair with everyone crappiness in this space, Azure is even worse. Their console is another horrible experience.

Nobody in this industry thought about the UX of these things. They are all disastrous...

And believe me that I have studied this from multiple angles. I worked at AWS for two years trying to solve UX issues and it's just an endless battle. Developers deserve better user experiences... Nobody is thinking about this with the intensity and focus that it deserves.

<comment><USER21> In GCP, I çan see all my instances of all regions in one go. I can't do that with aws.

In GCP, I can easily create networks between projects. It's really shitty to do in aws.

In GCP, I can create a machine and everyone in my team automatically has ssh access.

In GCP, I can make an instance, then mark the IP as reserved. In aws, I have to reserve the IP first.

Aws UX is the worst. I use both on an everyday basis. I could go on and on..

<comment><USER20> It seems that you are talking about features. I never said that AWS UX isn't horrible. It is. But GCP is also pretty shitty. They don't deserve any praise in this area at all. They have useful features but that doesn't mean their UX is good.

<comment><USER21> Well, UX means user experience. If some little features give you a better experience to me, a user, isn't that a better UX?

They both have regions. One makes it easier to see at a glance.

They both have the concept of reserved IP, one doesn't need to be set first.

They both install ssh keys for you. One does it per user, the other per instance.

One sets up cross region VPC for you. The other one makes you suffer and do it yourself.

<comment><USER20> Yeah, you're right. That's definitely a better UX. But since OP was talking about GCP UI as a potential value differentiator, I was also focusing on that. Certainly something like an easy VPC setup improves the overall experience within the platform.

But I was referring to things like their documentation, the way they organize resources inside the Web Console and the confusing paths to different functionality within their UI.

</comment></comment></comment></comment></comment></comment><comment><USER22> Unfortunately, this is an opinion by a single analyst. Analysts are frequently wrong about their prediction. I would not put a whole lot of stock in it. Post Kurian, GCP has shown _some_ traction but it still has a long catch up game to play. Google really needs to capitalize on its strengths (ML/AI, BigData) in a major way. In addition it has to spend a major chunk of money in educating first-time developers and making it super easy to migrate into the Google ecosystem. We haven't seen major movement in these directions from GCP, yet. Hope they're coming soon.

Disclaimer: I am long GOOGL.

<comment><USER23> its also Deutsche Bank one of the most reckless banks around.

<comment><USER24> Reckless? Loaning hundreds of million to the same people that just refused to pay you back the last few hundred you lent them, after they refused to pay back other backs before that, is the investment strategy of the future! /s

</comment></comment></comment><comment><USER25> Incredible. They don't even mention Amazon.

<comment><USER26> Kind of telling how the chart has Oracle, Adobe and Intel as "peers" but AWS is nowhere to be seen. I didn't even know Intel or Adobe had cloud offerings.

<comment><USER27> The chart shows the entire market value of select other tech Giants, not their cloud offerings.

The purpose of the graphic was to say "Google Cloud is now worth more than all of Oracle", not to show Google's place in the cloud market relative to Amazon and Microsoft.

<comment><USER28> You can't say tech giant without mentioning Amazon or Microsoft.

</comment></comment></comment></comment><comment><USER8> Working as a consultant in Europe.

Almost every business i walk in to has "something" in Azure (AD/SSO/Compute). 50-70% have "something" in AWS. Honestly under 10-15% have Google cloud products.

I work in the ERP segment so i like to think i experience a wide range of companies / cultures / budgets.

</comment><comment><USER29> "The unit could report compound annual growth of 55% between 2018 and 2022, and reach annual sales of about $38 billion by 2025, the analysts wrote."

I'm curious how they're making basing these predictions since Google Cloud revenues aren't currently reported.

</comment><comment><USER30> So my realization after the years have been these:

* Cloud margin is very high, using IBM Orale and so on, aka the "old guards" (as said by Andy Jassy: my favorite tech executive by a big margin, got to mention this as a fan boy), as the comparison.

* Cloud is the foundation of the next generation of developer platform, being irrelevant in this market is detrimental to Google. Although that was not as obvious to Google as Browser. But the metaphor is obvious now.

* Cloud is enterprise oriented, an area that both Amazon and Google were vastly behind Microsoft at 2006. Microsoft then already had a top-tier relationship with enterprise customers. Amazon was way earlier in realizing that, but Google was at least maybe 5 years behind. Diane Green's joining symbolizes the inception of the changing perception, but I'd say Diane's execution is poor (Dianne seems very distracted to me, during their time in Google).

</comment><comment><USER31> And WeWork is worth 40B according to the big banks.

<comment><USER32> Softbank != "the big banks"

The public markets did what they were supposed to do to WeWork.

<comment><USER33> Goldman Sachs = the big banks

IIRC Goldman valued WeWork at $60B

<comment><USER34> Goldman valued WeWork at $60B, _as part of their sales pitch to lead the IPO_. The context makes all the difference since the point of that valuation was to aid a sales pitch, not be an accurate assessment.

<comment><USER35> This is incorrect. They pitched this at $60b but couldn't get a bookbuild at that price which never happens.

The key distinction with pitching to lead to the IPO is they sought to find investors (as opposed to wework management) at this price too, but not enough people bit to fill the raise.

</comment></comment></comment></comment></comment><comment><USER36> How much are AWS and Azure worth?

<comment><USER37> More. A lot more. Azure is growing 20 points faster than GCP and from a much higher base too (and I will point out that it is in Microsoft's DNA to run this sort of business, unlike Google's).

<comment><USER38> How is it in Microsoft's DNA? They've always run the software, not the hardware. And for Azure, they just took all their Office customers and rebranded them as "Azure" customers, pumping their cloud numbers.

<comment><USER39> I think the point was that Microsoft has typically been very present in "enterprise" \- lots of sales people in lots of industries with lots of connections and lots of experience making the sales and doing the deals. Google less so.

The hardware is just the hidden infrastructure that businesses don't really care about as long as it meets the SLAs, like I don't care about what the physical building materials are when I go and buy groceries or get my hair cut so long as the building meets it's SLAs (which for a building is I guess not falling down when I am inside it etc) I just want the service.

<comment><USER38> That's fair. Their sales team and the relationships they had made over the years is definitely a huge part of their success transitioning.

</comment></comment></comment></comment></comment><comment><USER40> Let me get this straight.

Wasn't Waymo valued at $210Bn like 5 months ago? Cloud is $225Bn. Google has $117Bn in cash. It's total market cap is $839Bn. That means the rest of Google is worth $287Bn. Really?

<comment><USER41> See [https://news.ycombinator.com/item?id=21159401](https://news.ycombinator.com/item?id=21159401)

</comment></comment><comment><USER42> I am interested to know the valuation of AWS. If the values are apart then it makes sense that AWS was ahead of teh game. If GCP has caught up then that would be blazing-fast improvement.

<comment><USER43> From Bloomberg re GCP: "The unit could report compound annual growth of 55% between 2018 and 2022, and reach annual sales of about $38 billion by 2025"

AWS q2 2019 was was 8.4 billion so AWS in 2019 is near where GCP is projected to be in 2025. AWS q1 to q2 growth was 37%, so much slower growth than Azure and GCP.

From Barrons earlier this year: "He sees AWS revenues of $36.1 billion this year, growing about 31% a year to $140 billion in 2024. He ... estimates the value of AWS alone as $506 billion."

[https://www.barrons.com/articles/amazon-stock-web- services-w...](https://www.barrons.com/articles/amazon-stock-web-services- worth-half-a-trillion-dollars-51559060451)

<comment><USER44> AWS is probably worth more than Amazon retail. Amazon Retail is a low margin very competitive business.

</comment></comment></comment><comment><USER45> Amazon is under valued.

<comment><USER46> Or everyone is overvalued and these are fantasy numbers pulled from the unicorn forest. There is no repercussion when an analysts predictions are "overly optimistic" (see: everyone pitching $50B-$100B valuations to WeWork to get their IPO biz).

Throwing darts would be just as accurate as the predictions investment banks are throwing out.

<comment><USER47> Well, AWS actually is highly profitable and changed the game so most of the recent startups could actually be built. I wouldn't associate WeWork with it. I won't even associate Tesla with WeWork. At least if you give $10B to Musk, you get rocket ships and category-leading car companies out of it.

<comment><USER46> AWS is only highly profitable for an investor if you cut it loose from Amazon retail so it's not subsidizing it (spin it out) and other Amazon endeavors that aren't profitable. Otherwise, it's only of benefit to Amazon proper.

</comment></comment></comment></comment><comment><USER48> And yet I still don't trust Google not to "sunset" services on a whim (despite being an almost $1 trillion business) so I'd rather stick with AWS.

</comment><comment><USER49> How much are their shares of SpaceX worth?

</comment><comment><USER50> GCP I'd say could worth definitely tens of billions, but not hundreds.

<comment><USER51> The thing that has confused most of the commenters here is that Google Cloud contains both GCP, which is a dumpster fire, and GSuite, which is probably very profitable.

</comment></comment><comment><USER15> Not paywalled: [https://www.datacenterknowledge.com/google- alphabet/google-c...](https://www.datacenterknowledge.com/google- alphabet/google-cloud-worth-double-ibm-market-cap-deutsche-bank-says)

</comment><comment><USER52> If only Google could say the same about their investment in MapR.

</comment><comment><USER53> I do not want to sound like a nay sayer but which responsible enterprise CIO would put their stack on Google Cloud. They have a well deserved reputation for being unresponsive and opaque and downright irresponsible with their customers' infrastructure.

<comment><USER54> Not that I want to defend Google or anything, but there are some impressive customers here [1]

[1] [https://cloud.google.com/customers](https://cloud.google.com/customers)

<comment><USER55> That list is probably the exact list of google customers that get any real support from google

<comment><USER38> Anyone can get Google support with Google One [0] for as low as 2$ a month (along side 100GB of storage).

The issue is people expect free products they haven't paid a penny for to have live customer support, which doesn't make much sense at the billion user scale.

[0] [https://one.google.com/](https://one.google.com/)

<comment><USER56> Have you ever interacted with Google support as a paying customer?

It's miserable in my experience.

<comment><USER57> Anecdote on the other side - Small customer (~5k/mo google cloud / firebase spend). They're support has been decent. Sub 24hr email response and technically competent enough to quickly escalate. It was comparable to AWS basic support.</comment></comment></comment></comment></comment></comment>