While the Nexus 7 tablet and other Android related announcements were the major focus at Google I/O 2012, Google (NASDAQ:GOOG) also made other interesting announcements related to its not-as-glamorous services. The search giant has added a number of new features to its App Engine and launched a new service called the Compute Engine, which will compete directly with Amazon (NASDAQ:AMZN) Web Services by providing a way to buy cloud infrastructure from Google. Compute Engine offers a way for developers and enterprise customers to buy raw computing power on Google’s servers. 
While its App Engine is a Platform-as-a-Service offering, Google will become an Infrastructure-as-a-Service provider with Compute Engine, just like Amazon. Google will enable developers to run their current App Engine applications on their own VMs using Compute Engine.
Besides launching Compute Engine, the company also announced a number of significant upgrades and a new version (1.7.0) of App Engine. The upgrades are related to speed, performance and functionality which could make App Engine a better option for developers compared to its alternatives by Microsoft (NASDAQ:MSFT) and Amazon – the other big players in the rapidly growing cloud computing market.
We currently have a $680 Trefis price estimate for Google, which stands nearly 20% above its market price. App Engine accounts for a small fraction of its overall revenues, which are driven primarily by its search advertising business.Notes: