Google’s $1B Gamble

GoogleInternet Outsider (Henry Blodget) cites a WSJ article that reports that Google is willing to pay Dell up to $1 billion over three years to preinstall Google software (probably the Google Pack) on Dell boxes. For me, this highlights a serious challenge for Google’s growth plans: the cost for a user’s desktop is exponentially higher than a users eyes on a web page.

Google should be given credit for handily winning brand loyalty inside the browser. But let’s not forget the level of commitment required to install software – and use software – on a desktop versus typing a URL in and searching. For a major chunk of computer users, mainly ones that aren’t reading blogs like this, they use whatever Dell throws on those boxes before they ship them out. Google badly wants in on that usage. So badly, that they’re willing to pay a lot of money for it. I couldn’t guess at the cost/benefit of paying that much money to preinstall software.

But let’s assume that it’s a good move for a second. New Dell customers happily use the various Google Pack software products. Now what? Will they be hit up for a “Sign Up Now” after six months the same way McAfee & Symantec do it today on Dell installations? Will they start to sprinkle the desktop and the chat client and other installations with ads? How does Google recoup on such an investment?

People talk a lot about how it’s materializing into a Microsoft-Google battle. It still costs $100+ to purchase Windows XP Pro on a Dell desktop. You pre-pay for a Microsoft OS. They make their money before the hardware gets to your door. Google is being forced to attack from a completely different angle: paying off a hardware vendor to install software that users pay nothing for. It’s a frightening gamble. $1 billion in. What’s supposed to come out?

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