Google exec: Cloud will generate as much revenue as ad business — but not yet

Dive Brief:

In coming years, Google's cloud computing business could bring in as much revenue as its advertising unit, according to Urs Hölzle, senior vice president of technical infrastructure at Google, speaking at Structure 2017, GeekWire reports. In 2015, Hölzle initially predicted the cloud business would catch up to advertising by 2020, but he has since pushed back his timeline.
Even though the cloud unit is "growing much faster," catching up to the advertising unit is a challenge, said Hölzle. After all, Google's ad business brings in $10 billion a quarter. "I think I was a little optimistic with 2020, but I don't think the endpoint has changed."
Though Google and Microsoft trail Amazon Web Services in the cloud, experts recognize Google's technical proficiency as the company works to emerge as a cloud leader. Google Cloud is growing quickly and has a strong product, but Microsoft has a better marketing effort, Hölzle said.

Dive Insight:

In the cloud computing market, it's a race to the No. 2 spot. It will prove extraordinarily difficult to catch AWS in the cloud, particularly since the company pioneered the technology and has offered cloud hosting for more than a decade. AWS is "in a league of its own" when it comes to cloud computing, bringing in $4.6 billion in Q3 revenue, up 42% year-over-year.

Because Google's advertising business is a powerhouse, Hölzle's projections are optimistic. But it does highlight the potential power of the market. If vendors have a cohesive, long-term strategy, cloud units could prove extremely profitable.

To compete in the cloud market, Google has worked to reshape its reputation as more business friendly. Bringing in Diane Greene, the founder and former CEO of VMware, to run Google Cloud has helped the company gain traction in the market. Greene doesn't think Google will always play runner up in the cloud market. Instead, Greene thinks Google Cloud has a shot at being No. 1 in the market by 2022.

Key to Google's success is its ability to transform into a true enterprise provider, not only a company that provides tailored offerings for SMBs. That's where partnerships with companies like Cisco come in, which allow Google to gain a foothold in markets legacy vendors already have a presence in.