This is exactly what Google needs to do. As I discussed at length in June, Google is highly vulnerable because its core data -- the content of the Web -- is open to any competitor that wants to build an at-least-as-good search engine (such as, oh, say, Microsoft). And when there's a better search engine, it's only a click away. There is exceedingly little reason to stay committed to a search engine that suddenly isn't quite as convenient as another one (such as one that is made into an integral part of a mainstream operating system by a company like, oh, say, Microsoft).

However, if your blog is hosted by Google, it would be much more difficult to move your blog elsewhere. You're much more of a captive user if you use their blogging tools than if you use their search engine.

Thus, the strategy of making blog services free. Google can afford to do it now, and perhaps come to dominate the blogging industry in the process. There will be various revenue streams to make up for the lost blogging revenues, such as text ads on blogs, and, no doubt, more clever ideas to come.

This may be Google's best shot for maintaining its current momentum as a major Web site.
3:08:31 PM    

Worth a read if you're interested in the issue.

Update: Here's how George Hotelling says he completed the sale of the song, from his blog.
1:25:07 PM