Google Cuts Proposed Fees on Heavy Map Use to Stem Defections: Analysts

 
 
By Todd R. Weiss  |  Posted 2012-06-26
 
 
 

Google Cuts Proposed Fees on Heavy Map Use to Stem Defections: Analysts


Google Maps had planned to start charging a service fee to some of its largest business users this year, but the abandonment of the platform by several key users in response has forced the company to slash its proposed pricing.

"After several high-profile defections, Google is backpedaling somewhat on its coming fees for using the Google Maps API," according to a report by Webmonkey.com. "The company has significantly reduced the charges it plans to levy on large-scale users, dropping the price from $4 per 1,000 map loads to $.50 per 1,000 map loads (once the site has passed the 25,000-a-day free limit)."

Early in 2011, Google announced that it would begin charging the use fees to help support the work it was doing with the Google Maps API, the company said in a blog post.

When that news arrived, some key businesses that were using the Google Maps API, including FourSquare and Apple, began looking for free alternatives, and "publicly ditched Google Maps in favor of OpenStreetMap," Webmonkey.com reported. "While neither Apple nor FourSquare has explicitly cited the price increase as a factor in its decision, Google€™s Geo Developer blog makes it clear that price was a factor for some users."

In March, Engadget.com published a report citing Google's proposed fees as a key reason for its move to OpenStreetMap. "Foursquare cited greater flexibility and support for other startups as reasons for the switch, although it also admits that Google's decision to start charging for its Maps API spurred the search for an alternative," Engadget.com reported.

In a blog post late last week, Thor Mitchell, the product manager for the Google Maps API, said the company is now cutting the proposed fees in response to concerns it heard in the marketplace.

"While the Maps API remains free for the vast majority of sites, some developers were worried about the potential costs," Mitchell wrote. "In response, we have lowered the online price from US $4 per 1,000 map loads to 50 cents per 1,000 map loads."

The fees have not yet been enacted or charged, but their potential cost apparently made some users skittish, causing some of the defections.

Google plans to start measuring the usage of the Maps API now so it can gauge how the pricing model will work in the real world, Mitchell wrote in the post. "We€™re beginning to monitor Maps API usage €¦ and, based on current usage, fees will only apply to the top 0.35 percent of sites regularly exceeding the published limits of 25,000 map loads every day for 90 consecutive days. We aren€™t automating the application of these limits, so if your site consistently uses more than the free maps allowance we€™ll contact you to discuss your options. Please rest assured that your map will not stop working due to a sudden surge in popularity."

According to Google's numbers, that means that most users and developers won't be affected by the new fees.

In an email reply, a Google spokesman declined to comment on the pricing changes.

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.

"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."

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 service€“which are receiving a significant amount of financial value from the service€“while 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 done€“make 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 quickly€“especially 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."

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