Last month, CNBC and Protocol reported gleefully that Google is diving deeper into a relationship with Coinbase and the Crypto community in general following the announcement that they will begin to accept payments in cryptocurrencies for any Google Cloud clients in 2023. Coinbase will act as the facilitating partner to manage the crypto payments for any cloud business.
The opening line of the Protocol article reads “Google and Coinbase announced a deal Tuesday to help each other out: Google wants to get into crypto, while Coinbase wants more large institutional customers.”
This is a generous reading of the situation. Does Google really want to get into crypto? Or is it more likely that Google wants crypto companies to use Google’s cloud services over AWS (which currently has Coinbase’s business and leads the cloud industry)?
Following disappointing results from the most recent Alphabet quarterly earnings call (EPS and Revenue below expectations), it is not a surprise to see Google leaning into accelerating growth in its cloud business which has been growing faster than the company as a whole. This feels more like creative client acquisition than a true pivot toward crypto as a viable payment method. While it is great PR for Coinbase which has seen its revenue crater in the past year, the likelihood that Google’s clients are clamoring to pay for Cloud storage with crypto is extremely low.
While Protocol reports this as “a big step for Coinbase” and CoinDesk calls it “validation”, it smells more like the desperation that led to Peleton’s partnership with Hilton to offer Peleton bikes in the hotel gym. Coinbase is finding its services are less in demand than they used to be. Earning business now requires concessions, in this case moving cloud providers.
Coinbase Q3 earnings are coming up tomorrow so we’ll learn more about how dire their situation is. Expectations have EPS continuing to deteriorate from a loss of $0.87 per share to a loss of $1.47 per share on falling QoQ revenue.
These articles are written to make it sound like Google wants the ability to accept payments in Crypto and Coinbase is coming to the rescue. It's more likely the other way around. Google is in a war to win the cloud business and if payment gimmicks help catch up to AWS, then so be it.