Consumers Wield Pricing Power Over Web Apps
The Google Maps API was launched in June 2005 by the company and has taken off, finding a myriad of essential uses on smartphones, Websites, GPS applications and much more. The pricing retreat was not unexpected, according to several IT analysts.What Google is trying to do, he said, is to find some ways of recouping its investments in the Maps API by charging its very largest users of the servicewhich are receiving a significant amount of financial value from the servicewhile not charging everyone else. "So basically what they're saying is that this is Google's map tax on the top one-third of one percent who use it," King said. By charging those users, Google can recoup some of its investments and do what Apple has donemake map access free to both users and developers, he said. "It simply becomes for them part of the cost of doing business." In the big scheme of things, King said, the Google backpedaling on the map fees also is partially in response to Apple's recent plans to drop the highly popular Google Maps app from its iPhones and iOS operating system and replace it with Apple's own mapping services. "With all of the money that Apple's got stuffed in its socks right now, Apple can probably afford to give away map services for the rest of recorded time," he said. "From a competitive standpoint, we're staring at a couple of Tyrannosaurus Rexes go at it, in terms of Apple and Google. This is probably more important to those two companies than to developers and users at the end of the day." Dan Olds, the principal analyst at Gabriel Consulting Group, said the $4 per 1,000 map load fee proposed originally by Google was just too high for the market to bear. "You look at that initial pricing and that could get damned [costly] pretty fast," Olds said. "Even just for mapping hotel locations, when users click on a website, that could have run into some serious money quicklyespecially when you realize that the price [for the service] up until then had been zero." And there lies the big rub for companies once they start a product by giving it away for free, Olds said. "I would argue that one of the big impacts that the Internet has made in commerce worldwide is that it's almost impossible for anybody to raise prices because it is so easy for people to shop around for prices. All the power is in the hands of buyers."
"This is probably strong evidence that mapping technology has simply become a commodity," said Charles King, principal analyst with Pund-IT. "We've seen this happen with many other technologies over the years. When the use of a tech becomes so pervasive that people expect to have access to it without paying a great deal of money, then it puts pressure on vendors to find new ways to monetize it."