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How Google App Engine Affects Startups

Google App Engine
Google has just announced a new service called Google App Engine. “Google App Engine enables [developers] to build web applications on the same scalable systems that power Google applications.” Basically GAE is a scalable web application back-end with a nice API. So what does this mean for web startups?1 Because web startups commonly have an exit strategy based on being acquired by Google or a similar company, and because web startups are bounded financially in growth by constraints such as scalability, GAE means a lot.

Google App Engine Effects on Google

Previous to GAE, Google only directly benefits from startups by acquisition. After an acquisition, Google must spend time scaling the acquired assets to Google proportions.

Now with GAE, Google will profit more directly from startups who pay for GAE services, allowing profit in numbers. Also, if Google chooses to acquire a certain startup, the startups assets are already generally fitted to work with Google’s internal scaled systems.

Google App Engine Effects on Startups

Previous to GAE, startups really only truly ever made big money if they are acquired by Google or, by chancing the storm of scalability investment and try to break though the scalability investment wall like Facebook and Digg. Breaking through is obviously extremely rare and few startups even consider this a valid “exit” strategy.

Now with GAE, startups don’t have to avoid designing their systems to scale up, right from the beginning (a previously extremely expensive and questionably worth it endeavor). GAE’s inherent scalability dramatically reduces the dependency for startups to be acquired as an exit strategy. Growing big is much more practical than in the past.

How’s the Model Changed?

So, is the startup-Google bond being loosened or tightened. Breaking the situation down, it seems that Google is spreading their endeavors more thinly. Without GAE, the startup-Google bond is an “all eggs in one basket” situation. With GAE, startups will be less likely to sell out to Google but, Google’s made more money in the numbers of startups using GAE.

  1. Based on my observations after visiting Disqus. [↩]
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  • Andrew
    I think acquiring of startups was not the main goal here. GAE does help but effects of GAE are going to be more than just easy acquiring of popular web apps.
    Google doesn't have to own a web app to benefit from it. They get users, attention and even money without owning app. And without having responsibilities and management issues. Google is going to create a long tail of web apps and not just buy a few popular ones.
  • Totally agree with you Luke and I think Andrew you hit it on the head but you also missed as Luke said his larger commentary.

    Of course Google did not do it just to be able to aquire as the market is too big for even them to have that as a top business goal. But Luke's assertion that this would allow for Google to integrate startups faster is still valid and would motivate many a startup (oddly) to go down this path.

    That being said of course this is why Google is doing it as their reason and Amazon's is the same thing.

    Also Google has massive extra capacity due to their business needs and so small startups can soak up a small amount of that capacity and Google can make some $$ in the mean time. This is again the same for Amazon.

    Additionally Google as does Amazon a great deal in development tools and this may also be a way for Google unlike Amazon get even more developers on their platform. This means more trouble for Microsoft not just Amazon assuming of course that Google is successful.
  • I, in fact, agree with you, but you're wording seems to suggests your comment is contrary to my article. If anything, I was trying to convey that Google is moving to profit more from startups Google does not end up acquiring rather than trying to make less work later for startup acquisition. It's merely a nice side effect for Google if they happen to acquire an app that is built around their internal framework.
  • Hi Luke,

    I like the article. I think we should talk. What do you think? I am in the UK so if you do want to catch up and have a chat let me know as it is noon here now and obviously once you wake up it will be later in the day for me.

    You can email me at roger (at) techwinter (dot) com

    I look forward to hearing from you.

    Cheers
    Roger
  • Sure thing. I'll send you and email straight away.
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