January 23, 2013
Google’s infrastructure spending continued its upward trend during the fourth quarter, hitting a two-year high of $1.02 billion. Excluding the fourth quarter of 2010, though — in which Google plunked down $2 billion for a massive data center/office location at 111 8th Avenue in New York — the company’s last quarter represents the biggest infrastructure investment in its history.
It’s difficult to say where, exactly, all that investment went, but the record spending probably shouldn’t come as a surprise given the current state of the web economy. Much more than just a search engine, Google now finds itself competing against (or has put itself in a position to compete against) formidable foes in a variety of different areas. Doing battle against companies such as Apple, Facebook, Yelp, Amazon Web Services and (with the advent of Google Fiber) internet service providers — and doing it well — costs a lot.
This chart shows Google’s infrastructure spending over the past few years, starting in the third quarter of 2009, which was the company’s most-frugal quarter in recent history and was then the fifth consecutive quarter of reduced spending.
As we’ve explained before, it requires a lot of investment in servers, data centers and other gear (GigaOM Pro subscription req’d) in order to deliver quality web and mobile services. For a company like Google, that means having data centers spread throughout the world to meet demand in different geographies, as well as building special servers and facilities designed specifically to meet the company’s unique workloads. Products matter, but so does the user experience, and every second users spend waiting for a page to load or a spreadsheet to update means a greater chance they’ll just go elsewhere.
Especially in its battle against Facebook, Google can’t afford to get caught slipping. The social network leader is regularly rolling out new services and storing many petabytes of user data. It’s also spending like a drunken sailor on infrastructure, investing more than a billion in infrastructure itself through the third quarter of 2012. That’s a lot less than Google, granted, but it’s nearly a third of Facebook’s total revenue during the same period.