Random Google Speculation

Google-mania may have subsided a bit with their recent earnings announcement, but Google Conquers the World talk is still alive and well.

Case in point, all the recent talk about Google creating a “private internet“. The rumors are based on, in part, Google job postings for “Strategic Negotiators” for dark fiber. (Actually, these ads are not new – they have advertised for these positions for a while. But they caught people’s attention again).

The word on the street, if I understand it correctly, is that this Google Internet would be more efficient, etc, etc, than the existing internet. People would be able to access it via a Google Cube. Content providers who are locked out of the system are in big trouble. Free speech is dead, Google is world government and censor, Peace reigns on… ok, take a deep breath.

I am going to go out on a limb here and suggest that all these reports are wrong. It doesn’t make much sense for Google to create a real parallel but closed universe.
However, there is one option that makes a lot of sense to me. Google is planning to create a monster Content Delivery Network (CDN). These are companies that route content more efficiently through internet. They set up data centers at different nodes, cache content at these centers (typically client content), and then deliver it when it is requested from a website. There are bandwidth savings, server load balancing benefits, and the overall speed and quality of the consumer experience is vastly improved. Akamai is the creator and leader in this space.

So, why do I think this is what Google plans to do? Several reasons:

1. CDN’s are all about math. Akamai was founded by an MIT math prof. The best routing algorithms go a long way. This is surely a good fit for the Googlers, who are similarly all about math.
2. CDN’s also rely on great server management skills – which Google has in abundance. In addition, CDN’s need content caching and delivery skill. Again, Google already caches and serves a ton of web content
3. Akamai has great Margins – i.e., this is unlikely to dilute the top line profitability of Google – in fact, it might add to it. Akamai’s Gross Margins are 87.4%. Very high. Google’s are 61.9%. Pre-Tax Margins are also high in both cases – 24% for Akamai, 35% for Google.
4. CDN’s are very very useful when delivering large files – such as media files (Google Video, Google Music?)
5. Adding a CDN service is a perfect cross-selling opportunity for Google’s contextual and branded advertising services (in both directions). It is the same customer base – large content providers. Google would have easy access to the content. It can greatly help localization (as you are serving content from a relatively local server). And both can use pay-per-click and value-based selling models.

Granted, I have no idea if this is what Google plans. But I think it makes more sense than most anything I have heard to date. It uses datacenters and fiber – giving the Strategic Negotiator something to do. It makes sense financially. It makes sense from a customer standpoint. And it is all about math. Frankly, the last part might be the most important. Before Google, the internet math whizzes lived at Akamai.

That said, I also thought that Google was raising the $4bn through their secondary offering in part to buy Akamai. That hasn’t happened yet. So I could be completely off my rocker 😉