Google Apps hitting the chasm?

Posted on: October 22, 2008

Looks like my recent Google Apps customer base estimates need corrections and the current growth is far smaller than the one we were seeing earlier this year. What’s happening? Are they stuck getting all the technology enthusiasts and visionaries they could get, and having no way of attracting the bigger mainstream market?

Let’s look at the numbers again:

Last week Steve Ballmer quoted some private comScore research stating that Google Apps customer base stopped growing:

“Let’s look at the facts,” Ballmer said. “Nobody uses those things. And the usage data hasn’t grown in seven months. They’re just flat, comScore. Just like this,” he said moving his hands side to side. “It’s just like flat line. Exactly flat line.”

What a chance for Google to surprise the world with new usage data and all they could produce in response was:

…there are now more than 10 million active users (Granted, that’s the same stat Girouard provided in a May blog post).

But Girouard said that with the start of the new school year there had been “fairly huge growth” in the use of Google Docs.

Obviously if they were approaching 15 million or another significant number they would call it out.

To make things even worse they are back to providing confusing information about their enterprise wins. Bloomberg is reporting that this June they one $500,000/year Google Apps contract with Washington, D.C. Hmm… Weren’t they telling CNN recently that this contract was signed last year and for $1.9 million? Both stories quote the same number of user accounts (38,000) so this must be the same deal they are simply reporting as a new one again. Does not help their credibility really…

It really looks like they had been enjoying significant growth up until a few months ago (and were happy to report the numbers and customer names) and then the growth started to slow down leaving Google’s PR confused. Hmm… I sort of heard of such things before. Isn’t this a classical trend from Moore’s chasm diagram:

Marketing and Selling High-Tech Products to Mainstream Customers" by Geoffrey A. Moore

Basically, Moore argues that the needs and usage patterns of the early technology enthusiasts and visionaries groups are radically different from mainstream users, so once you get the first two groups to adopt your product you get stuck in the chasm not letting you penetrate more lucrative mainstream market.

Is that what we are seeing?

I have a few ideas of the possible reasons here:

Docs and Spreadsheets are too geeky and incomplete: I sort of think that the Gmail part is probably more acceptable to consumers – after all Hotmail, Yahoo mail and others made the concept of web mail widely popular with consumers. But editing documents and spreadsheet in the browser is still way beyond the regular user grasp. Maybe if the browser pretends it is just a local app (like Chrome presumably will be able to do for some sites) and is able to open the document you doubleclick on your desktop – but they are not close to that, and their poor ability to import doc files (I tried to import a simple doc with a clipart picture in it and the import failed altogether) is making the transition from Microsoft Office tough. They tout integration with Gmail, but just try editing the attachment you got in an email and sending it back with your reply – this is not any easier than in Microsoft Office.

Reliability concerns: I would think that Gmail is a far more adoptable concept, the recent outages have probably made a lot of the folks in the enterprise decide to put their evaluations on hold for now.

Poor transition path: Finally, most companies already have some IT infrastructure in place, and if you have more than a couple hundred of mailboxes, and would like to seamlessly go from your Notes or Exchange to Gmail without impacting the email flow and loosing any data – that can be a significant endeavor. For now I am not seeing crowds of system integrators (anyone besides Capgemini?) and ISVs rushing in to solve the problem.

[Update: added this fourth reason]
Sales/Distribution channel: Google’s consumer-oriented “built it and they will come” mentality is not working with enterprises – these guys expect vendors to be building relationships with them – something Microsoft’s direct sales force is doing and Google is not. A good distribution channel (Dell, HP, IBM, etc.) could help but Google does not have that either.

Without these problems addressed, Google might well get stuck with the “more than 10 million active users” for quite some time ahead…

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© 2008-2012 Dmitry Sotnikov

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