Google isn’t a web application company—they’re an advertising company. That’s what they do best, and that’s what drives their company. Of Google’s $23.6 billion of revenue in 2009, all but $760 million of it was derived from advertising, and nearly 70 percent of it was from Google’s own websites.
Everything Google does must be understood within this context. Google builds services like Google Maps, Gmail and Docs and gives them away for free not because they have a philosophical belief that web applications should be free, but rather because giving them away for free gives them a competitive advantage. Free services, running Google ads, are obviously advantageous because free means more people will use them than if they charged and thus they can realize greater advertising revenues.