Google freebies give way to fees

It's hard to resist the David and Goliath angle.

But there are other ways to look at the story of Google challenging Microsoft with a suite of online business applications introduced last week. A more interesting story may be, what's happening to Google? Or, perhaps, is the Web pendulum swinging once again from ad-supported freebies toward paid services?

Everyone knows Google and Microsoft are fighting like rabid wolverines.

Google's Officelike applications are old news, and it's been selling high-end search products to corporations forever. Even the bundling strategy is familiar — a team in Kirkland built the consumer Google Pack more than a year ago.

What's really new is that Google decided to charge $50 a year for the kind of stuff it used to give away in return for traffic and advertising opportunities.

Google set the tone for the whole Web 2.0 gravy train. Offers such as 2 gigabytes of free e-mail storage forced Microsoft and Yahoo! to suspend their quest for paid subscriptions, back in the dark days of 2002.

That changed Thursday when Google erected a turnstile and started charging for premium stuff, like 10 gigabyte mailboxes and more customer support.

It had to happen sometime. Google's been trying to build a multicore business, and applications may be its next big opportunity beyond search ads.

It's also a good time to float alternatives to Microsoft. Companies around the world are now analyzing whether it's worthwhile upgrading to Vista and Office 2007.

Google's offering will test the elasticity of its brand. The company simplified Web search with a reliable, accessible and fun service. Those attributes may sell productivity software. But Google's applications are still Spartan and a little funky.

What will happen to Google's freewheeling, software laboratory style? Will it keep throwing cool but raw beta software over the transom, now that it's trying to become a trustworthy enterprise vendor?

Microsoft's $14 billion business-software unit is the obvious target. Especially threatening to Redmond is how Google is wooing software integrators and developers to support and build on its applications.

I wonder, though, if Google Applications will compete just as much with startups going after the same market. Take the 26 going to the "Under the Radar: Why Office 2.0 Matters" conference in Silicon Valley next month. At least half are building online collaboration, spreadsheet and Web-site tools that will compete with Google Apps, which also comes with a word processor and messaging services.

Among the presenters is Kirkland startup Smartsheet.com. It makes online task-management and collaboration products. But its president, former Onyx Software executive Mark Mader, is optimistic about the effect Google and eventually Microsoft will have on the online business-application market.

"I think it's a great thing — what competition does is drive innovation," he said. "Anytime you have a couple of big players in the market, I think the quality of all products increases and the laggards will get weeded out."

Best of all, for entrepreneurs like Mader, Google is sending the message that it's time to start paying for premium online services.

"It's not really the price, whether it's $50 a year or $40 or $60," he said. "To me it's more the fact that there is a price. That's what's important."

Brier Dudley's column appears Mondays. Reach him at 206-515-5687 or bdudley@seattletimes.com.