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I’ve been pretty critical of a lot of Google “innovation” recently, simply because their products have either been poorly launched (Google Base, AdWords Print Ads) or because the revenue potential seems tenuous at best (Google Earth, GTalk). Page Creator, however, is different.

For those of you who don’t know what Page Creator is, it’s a free ‘what you see is what you get’ (WYSIWIG) Web page creator. It currently enables you to create very basic templated Web sites. Right now, Page Creator looks to be nothing more than a glorified blogger or blog creation tool.

Frankly, when you compare Page Creator to for-pay Web site templates out there (ex. BoxedArt), this is at best a work-in-progress. Assuming, however, that the plan here is to eventually create a Dreamweaver or FrontPage-like product, the benefits to Google – and I’m talking about financial benefits here – would be huge. Here’s why.

First, as with Blogger, Google can easily upsell Page Creator users on AdSense. From Google’s perspective, the more content on the Web, the better, it just means broader distribution for AdSense!

Second, and perhaps more importantly, free WYSIWIG Web development enables a lot of small businesses to create Web sites, Web sites that will eventually want to market their products via AdWords. Again, this initial release of Page Creator isn’t going to help your next door neighbor take on But what if Google created free software with highly professional templates, free hosting, free data feeds to Froogle, and free eCommerce tools (shopping cart, etc)? Suddenly, it becomes a lot easier and affordable to be an online merchant.

And of course you could also integrate Page Creator with Gmail (to process orders and customer questions), Froogle (direct data feed from your Web page into the Froogle database), GBuy (payment processing for orders), and Google Analytics (track your AdWords buys, your AdSense revenue, and your Page Creator sales all in one place).

Put all of these together and you’ve got a win-win for both merchants and businesses: the merchants get a lot of services free that they currently must pay for, and Google gets multiple opportunities to monetize both the merchant and visitors to the merchant’s site. Now that’s really cool.

Switching gears a bit, it’s also worthwhile to consider how this could negatively impact Google’s already-lagging competitors. In many ways, this reminds me of when Google lauched Gmail. As many loyal Yahoo Mail users will no doubt recall, Gmail was launched at a time when Yahoo was trying to monetize the heck of its users by only allowing six megabytes of storage and increasingly limited features for Yahoo Mail. If you actually wanted to keep emails on Yahoo, you had to pay for a bigger account. Oh, and spam counted against your storage quota on Yahoo, to add insult to injury!

Gmail came out and was free, and not only that, had basically unlimited storage and lots of free features. Yahoo quickly reduced pricing and increased storage, but the damage was done. And sure, Yahoo is still the mail leader today, but Gmail has really taken a cut out of the both the user base and revenue potential of Yahoo Mail.

Now consider a service like Yahoo Stores. As with Yahoo Mail, Yahoo Stores tries to monetize, monetize, monetize – hosting fees, merchant account fees, transaction fees, domain fees, etc, etc. The strategy is exactly the same as the (former) strategy around Yahoo Mail.

If the folks at Yahoo Stores are smart, and I’d like to think that they are, Page Creator should worry them . . . a lot. Page Creator is Gmail part deux. If Google overtakes Yahoo in search, PPC advertising, news, and evenually stores and email, you suddenly begin to wonder what exactly it is that Yahoo does.

I read a good book on this topic called The Innovator’s Solution. The point is that big companies tend to let little innovative companies take bits and pieces of their business. Initially, these are the low margin businesses that the big company can’t be bothered with. Eventually, however, as the little company grows, it starts to move up the chain, taking over the higher-margin businesses and pushing the (now formerly big) company into a corner with less and less of a business.

The example the book uses is American car companies. Initially, Japanese car makers competed with American companies in the economy compact space (Datsun, Toyota Corolla, Honda Civic). But the American companies didn’t mind, because the big money was in luxury cars and trucks. Then the Japanese companies started selling luxury cars, like the Lexus, Acura, and Infiniti. The American companies were OK ceding this market to the Japanese, because they still had trucks and the emerging market of SUVs.

Of course, you know what happened next – the Japanese car makers have entered the truck space and have been hugely successful in SUVs. Suddenly, the Big Three car companies are the ones trying to find a niche to play in. With talks of bankruptcies and massive layoffs, there may not be a niche left that’s big enough to keep these industry dinosaurs afloat.

Google’s algorithmic search was the Datsun; AdWords was the Lexus; Page Creator may very well be the Nissan Murano (I think that’s an SUV). Michael Moore’s first documentary – Roger and Me – was about Flint, Michigan, a once prosperous town devastated by massive layoffs at its GM plant. The “Roger” in the movie refers to then-GM CEO, Roger Smith. Perhaps someday there will be a similar movie about Sunnyvale, California called Terry and Me.

If I ever hear of such a movie, I’ll let you know. You’ll probably be able to purchase it from a Page Creator store.