Google Grows Its Cloud Business In Q4, Analyst Firm Says

The analyst firm TBR said Google's cloud business, which includes Google Apps, Google App Engine and Google Compute Engine, provided a significant impact to the Google's "other" category, which grew 102 percent year-over-year. Also in the "other" category are Google Play and content sales. The analyst firm estimated Google's cloud business will triple in 2013 to slightly less than $1 billion.

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By discontinuing its free tier of Google Apps for Business for SMBs during the quarter, Google will be able to monetize the application, TBR said, estimating it accounted for $65 million, or 67 percent of Google’s fourth-quarter cloud business.

Google Apps, however, still faces challenges from Microsoft’s Office 365 and IBM’s recently launched SmartCloud Docs in terms of data security, functionality and entrenched customer relationships, TBR said.

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"Google will develop its customer and revenue base while emphasizing core technological strengths while competing on prices," the TBR report said.

Google continued its cloud price war with Amazon Web Services, cutting prices for Google Compute Engine, its infrastructure as a service, TBR said. Google cut prices twice in the fourth quarter to $0.12/GB/hour for 0 to 1 TB -- totaling over 30 percent in reductions, following IaaS leader AWS, which cut storage prices for its competing EC2 product by about 25 percent to $0.10/GB/hour, TBR said.

"In an increasingly competitive IaaS market that also saw Microsoft cut Windows Azure Storage prices by 28% in December, Google is aiming to gain IaaS market traction by capitalizing on cross-sell opportunities via integrating Google Compute Engine into its end-to-end portfolio (SaaS, PaaS, IaaS) of easy-to-deploy software, cloud and social networking products," TBR said.

Google continues to invest in the platform-a-as-service market with Google App Engine, which TBR estimated is responsible for 33 percent of Google’s cloud revenues.

For its overall business, Google reported a quarterly profit of $2.89 billion, or up from $2.71 billion from the year-ago quarter. Its net revenue was $11.34 billion.