Google raises prices, which may be a good thing

Google has raised prices for several of its services. The annual rates for Workspace, YouTube Premium, and Nest are all going up. The internet is not happy, of course. Yet I see a benefit in these price increases, and not just to Google. I think consumers may benefit from them.

It does sound odd. How can consumers -- who pay these prices -- benefit from increases? Wouldn't they benefit more from decreases in prices?

My answer is: not necessarily.

My thinking is this:

While Google is a large company, with many products and services, most of its revenue comes from advertising.  One could say that Google is an advertising company that has a few side projects that are supported by advertising revenue.

The model was: make a lot of money in advertising and offer other services.

Google was -- and is -- wealthy enough that it could give away e-mail and storage. When Google first offered it's GMail service, it allowed up to one Gigabyte of storage to each user, an amount that was unheard-of at the time.

It's tempting to want this model to continue. It gives us "something for nothing". But letting advertising pay for everything else has a downside.

When a service depends on revenue from advertising, it is natural for the company to expect that service to help advertising. If the service doesn't, then that service is either changed or discontinued. (Why continue to offer a service that costs money to maintain but doesn't help with revenue?)

Google has a reputation for cancelling projects. Perhaps those projects were cancelled because they did not provide revenue via advertising -- or didn't help the advertising group gain customers, or better market data, or something else.

When a service is funded by advertising, that service is beholden to advertising.

In contrast, when a service has its own revenue -- enough revenue to generate a profit -- then that service is somewhat isolated from the advertising budget. If YouTube Premium costs $X to run and brings in $Y in revenue (and Y is greater than X) then YouTube Premium has a good argument to continue, despite what the folks in advertising want.

The same goes for other services like Nest and Google's cloud storage.

I expect that no one enjoys increasing prices. I certainly don't. But I recognize the need for services to be independent, and free of the influence of other lines of business. Higher revenue leads to services that are stronger and longer-lasting. (Or so I like to think.)

I may grumble about the increase in prices for services. But I grumble with restraint.