We had a lot of discussion around how Google has launched many new projects aimed at major competitors, most notably Microsoft. This article takes a look at Microsoft's operating profit by division, and raises an interesting counter-argument to a lot of the speculation around Google's actions. At the end of the day, 97% of Google's revenue comes from ad-based revenue and nets out at $13.2 billion in profit, whereas Microsoft's profitability is up at $46.3 billion on a diffuse number of monetized business lines.
In addition, a healthy portion of Microsoft's operating profit comes from the Server and Tools business unit (eyeball comparison indicates it's about 50% of Google's TOTAL profitability). This business unit helps to create and maintain a significant Microsoft environment on the web and, again, is something that they are actually making money directly off of.
At the end of the day, Google is certainly a force to be reckoned with in the future, but in order to truly recognize that potential they will need to find a way to diversify away from a strictly ad-based revenue stream to truly take on Microsoft and other competitors on all the fronts it is exploring. This means having to actually charge some users for some of the Google tools they are using - at least that's my $0.02. If so, what tool(s) will that be?
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