“Google’s plan has simple economics: It can make more money in the storage business than the companies that actually make HDDs,” said Krishna Chander, senior analyst, storage systems for iSuppli.
Media reports indicate that Google is set to offer a service that allows users to store files from their hard drives on its servers. Not only could the service provide much-needed storage space for users whose HDDs are clogged with music, video and images, it could also allow subscribers access to their files from any PC, simply by entering their password on the Google site.
Chander notes that the concept of online virtual storage is not exactly new. Yahoo, Xdrive LLC and others have been offering similar services, typically 5GB of free storage, with more space available for a fee.
However, Google could trump these competing services by offering as much as 50GB of free storage, Chander estimates, adding that Google could generate significant returns from this free service by placing advertisements on the storage-service website.
Chander expects that about 4.2 million users eventually may employ Google online storage system. Assuming Google collects $50 per user per year in advertisement revenue collected from users of the free version of the system, the revenue potential is about $210m annually.
On the expense side, Chander estimates that it would cost Google 25 cents per GB for those 50GB of free storage. Google may have to install storage capacity of about 210,000TB. This will require the purchase of about 210,000 1B-capacity HDDs, representing a gross expense of about $52.5 million.
“This would represent a good return for Google,” Chander said.
“While a typical HDD supplier makes about an 18 perc ent gross margin for a desktop-PC-class hard drive, Google could command a gross margin of 75 per cent. This would give Google more than four times the rate of return compared of the HDD suppliers.”
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