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Dave Winer recently broke the news that Google will soon introduce a “Google Web Services”,  a competitor to Amazon Web Services. This isn’t much of a shock to anyone. The extra bit that is somewhat of a surprise  is the price: free. He then explains that the reason it will be free is that they can pay for it in the reduced cost of integrating new acquisitions into their infrastructures which would become, effectively zero.

I don’t agree with that. At least I don’t think that is the main reason. I think it’s just the same old business model - basic service is free, premium is paid. The same model you see in Google Apps and a lot of other business on the web.

The basic service will be limited, in terms of traffic and/or storage (file and DB) etc. This will be the most widely used by startups. The premium service will just be the same pricing model amazon - pay as you go, the only different is that you don’t start paying at zero usage but rather at a higher threshold. When a startup becomes successful its needs will grow exponentially. They will be using more than the maximum allowed for free, and they’ll need to pay. But that’s alright because now that they are successful they can afford it. And the 1% or so that will be successful will have subsidized everyone that didn’t make it and still give Google a nice profit. Let’s not forget that Google’s infrastructure is already here and even tens of thousands of failed ventures won’t make a dent in it. Successful ventures will generate enough cash to upgrade that same infrastructure. Specially as the cost of hardware continues to drop.

Off course I’m sure people at Google also thought of the acquisition factor. Past acquisitions have taken a lot of time to be integrated. I think it took something like a year for writely to become “Google Docs“. That’s a very long time on the web.

Combine the free GWS with the powerful web development frameworks like Ruby on Rails that allow single individuals to create useful applications quickly and the new marketting oppurtunities that the web2.0 has created and the cost of trying won’t be measured in millions, thousands or even hundreds of dollars. It will be measured in terms of hours - the hours you “wasted” trying. And that, in many cases, won’t even be “time wasted” but rather “experience gained”.

It’s a brave new world indeed.