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Google's Memory Boom

By Porter Stansberry
Thursday, November 16, 2006

In April 2004, Google made the decision to give away a gigabyte of e-mail memory for free with each Gmail account.

Soon Yahoo! and Hotmail were providing similar amounts of storage for free. Recently, a new competitor,, advertised e-mail with up to 30 gigabytes of storage – for free.

This has proven to be enormously useful to people like me. I have all of my corporate e-mail automatically forwarded (or “mirrored”) into my Gmail account. And, because I’ve never deleted a single e-mail from it, I have a record of all my corporate communications, all of my notes, all of my newsletters... In fact, instead of writing down someone’s phone number, I’ve started simply sending e-mails to my Gmail account with the name and number. It’s easy to find, despite the large amount of mail in my inbox, because the same search engine that powers the Google website also will troll through all of my e-mails, finding anything I need almost instantly.

To keep pace with the trend it started, Google is now constantly expanding the total memory available to each Gmail user. If you go to Gmail’s login page, you see a memory counter that’s constantly expanding by about 15 bytes per hour. Total memory available to each user is now more than 2.7 gigabytes.

Google won’t tell me how many Gmail users it has or how much data it’s storing for them – but it’s clear the amount of data is massive and growing rapidly.

Google is building a 34,000-square-foot data center on the Columbia River in The Dalles, Oregon. (A 1.8 gigawatt hydroelectric power plant on the Columbia produces some of the world’s cheapest electricity, and data-storage centers are voracious energy consumers. The top-five search-engine companies, which together have around 2 million servers working for them around the clock, suck up as much power in a year – about 5 gigawatts – as Las Vegas uses on its hottest days.)

Meanwhile, Google’s two dozen existing data centers are estimated to hold 200 petabytes of data.

This is where things get interesting. The Library of Congress estimates it holds 20 terabytes of data. As recently as 10 years ago, the total amount of content on the Internet was estimated to be about 15 terabytes. A petabyte is 1,000-times more storage than a terabyte.

Google’s going to need a lot more storage. Computer-data experts are already beginning to talk in terms of exabytes of demand for data storage. Yes, you guessed it – an exabyte is 1,000-times more storage than a petabyte.

Currently, Google spends about $700 million per quarter to buy additional servers and digital storage. To compete with Google, Microsoft says it will spend two dollars for every one dollar Google spends on resources for its Internet search and free e-mail business. Almost all of this money will fund data-storage and data-search hardware.

What’s behind this insatiable need for more memory?

Let’s start with the obvious. Everything you see or hear on the Internet, on your TiVo, or on your iPod has to be stored somewhere on a magnetic disk. Consider that just two years ago, when Google started giving away a gigabyte of storage for free, there were 37 million domain names (websites) in use. Most websites consist of multiple pages, images, datafiles, pictures, etc. Today, there are 65 million domain names in use.

As making videos and sharing videos online becomes more and more common (thanks to more powerful computers and more broadband connections), demand for digital memory will explode.

Keep in mind, we’ve already seen demand for storage grow by several orders of magnitude (factors of 10) every four to six years. And we’ve only seen the beginnings of the video boom.

It’s obvious that the Internet will continue to grow rapidly in terms of total content. As the amount of content increases – especially video content – people will want faster and faster Internet connections. As these pipes get “fatter,” digital storage demand will grow exponentially.

That’s why I’m bullish on digital media storage. I think it will continue to be one of the fastest-growing areas of technology... and there’s no better time than now to invest in the digital memory boom.

Good investing,


Market Notes


You’d be hard pressed to find a bleaker earnings announcement this week than the one produced by Home Depot (HD).

On Tuesday, the nation’s largest home-improvement chain reported a 3.1% drop in third-quarter earnings. Sales in stores open for at least a year fell 5%. The blame was placed at the feet of the housing slowdown.

So what happened to Home Depot’s share price after the announcement? It rose 4%! The nations largest homebuilder D.R. Horton (DHI) did the same... bouncing 9% after reporting terrible earnings on Tuesday.

You can decide the fate of the U.S. housing market... we’ll just point out that a bullish reaction to bearish news often marks the bottom for a sector.

Is the bad news already priced into guys like Home Depot (home improvement), D.R. Horton (homebuilding), and USG Corp (drywall)? Send us your thoughts at [email protected].

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