11 thoughts on “For Google, Capex Costs Are Worth the Money”

  1. I absolutely agree that infrastructure is one of those things that ensured Google could manage to outdo its competition in every initiative that is now mainstream (Search, Youtube, etc.). And it’s grating that Wall Street analysts would do just what you said — wring their hands when hearing about the increasing capital investment. And I liked the words you used for them: idiots and short-term thinkers. Pandering to them will only result in what happened to HP during Mark Hurd’s term.

  2. You have produced a very thoughtful piece on why cap ex growth is so important to Google. Analysts on Wall St are very short term oriented and if they do not worry about increased hiring numbers (Google hired 1500 this past quarter, as reported), they worry about anything else that will have a potentially adverse affect on margins growth. Google actually expanded EBITDA margins by 30 basis points quarter over quarter, despite the surge in cap ex you cite. That is no small achievement. With newer sources of income (display and mobile), the need for satisfying users need for speed and quality of result/targetted ad, etc, cap ex should continue to be a major differentiator with its competitors. As Google layers on more social and other services onto its existing product range, avoiding downtime yet spending money “frugally” (as the CFO says) will be a on-going challenge.

  3. Spot-on analysis, IMHO. Some analysts questioned Amazon’s recent data center spending, too, despite AWS leading the cloud computing movement and seeing skyhigh demand.

  4. I just realized your article on infrastructure as Google’s competitive advantage was written in 2007. Great insight back then.

    I am impressed that Facebook managed to scale so quickly as well (with the occasional bump). Would you consider that ability a competitive advantage of Facebook as well? Or are infrastructure architects becoming more & more common, thus potentially removing the advantages of such an ability?

  5. Google’s going to be introducing Google TV.

    They will need to add a lot of infrastructure to manage the video traffic and the storage of the content that they will be providing.

  6. Google is SO about infrastructure that they can just drop bombs like Maps, or Docs, or Instant Search – and everyone forgets what they were just excited about.

    Yahoo is such a vaporous bag ‘oh’ stink.

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