Google is smart – they offered a service everyone needed, at no cost to the user whatsoever, then earned their money (a lot of money) on services “around the edges” of that free service. Google’s biggest income source is Google AdWords – an ad- vertisement service based on auction principles.
Google is a rather function-focused company, where design is not the top priority; instead, they focus on simplicity and widespread appeal. Their technical and mathematical back- bone is the guiding star in all they do. Their business is all about gathering data and using it in ways that are valuable to themselves and to their users.
To sum up what Google did right and still does:
1. They changed the way we advertise.
2. They are the biggest – a uniqueness factor all by itself.
3. Most of their prices are based on supply and demand, which makes their business seem transparent.
Summary: Skype and Google
The primary similarity between Skype and Google is that both offer an essential, high-demand service for free, at its basic level. Both then offer access to all their many periph- eral and more advanced services, at affordable rates.
The point is, you can provide something for free, if you do so as part of a strategy to gain more users, many of whom will pay for more advanced services based on the core business.
Even though AdWords is the main source of income at Goog- le, it isn’t their primary product. Google is the world’s go-to search engine because it is fast, exact and provides relevant search results, 24/7. Skype does something very, very similar. Their main service is free Internet calls. If you want some- thing extra, like the ability to call a regular phone, it will cost you.
Both Google and Skype are examples of successful second movers; they both “cracked the code” of how to earn money on secondary services. As a result, they are the leaders in their class.