Although there are already many startup advices that ask entrepreneurs to identify who is their customers, it is only until recently I understand what it really means.
Customers are the people who pay you money, and products are the things that your customers is paying for. People who *don't* pay you are not your customers, and things that you give away for free is not your products.
Web technology companies have more complicated business models because it is usually not just about building something that you call "product" and sell it to your customers. Instead, most web sites use their core technology to build something that is free and give it away to people, who we call the users. When there are enough users, the websites turn the users into products and sell it to their customers.
Google is a typical example of such business model. Almost all of the Google "products" that we know today, including the search engine, Gmail, Google Maps, YouTube, Android, Chrome, etc are NOT Google's products - because Google is giving them away freely. Free services are NOT products because there is no way to get money from it. To understand what is Google's products, we have to see where it's revenues come from - Adsense, that's right, is Google's real product.
But if Google Search et al. are not Google's products, does this mean that they are not important? No, because those are what allows Google to make great products - it's users. Google will continue to provide more free services to it's users as long as the added cost is believed to directly bring more revenue to Google.
Ok but everyone understands that, but what's the point of identifying what is product and what is not? Well, the notion of products and non-products is very important when it comes to competition. When a non-product enters an existing market to compete with other products, it becomes disruptive and can potentially make many competitors out of business. This is because non-product can be given away free but products can't.
This is why Gmail was disruptive to the email market because it was the first email service that do not rely on pro accounts as their product. Google identified that Gmail is not their product and therefore willing to provide so much storage space and features because they believed that doing so allows them to build better products (more users) and get more revenue from their customers (advertisers). When Gmail competed as a non-product, it became almost impossible for competitors to compete unless they changed their business model to something else other than pro accounts.
The same could be say for Microsoft IE vs Netscape. While Microsoft could be partly blamed for their anti-competitive practices, it is also clear that Netscape had a fatal business model of identifying the wrong thing as their product, making it failed to compete with IE when it became a non-product.
I had a hard time to understand how YouTube really works as a business, because it's so hard to understand how to pay for so much bandwidth just for users to watch free videos. But the answer is actually quite simple - YouTube is free because it is NOT Google's product.
If something is not your product, do NOT ever think of getting your money back from your users. Just give up your damn mind and give it away free generously, as long as you can make a product out of it.
You should have also realized that Android is not Google's product. But there is an important distinction on the business model between Android and iPhone - Google do realize that Android users are the product to sell to the App developers, who are the customers; but for Apple it's products are the iPhone and it's apps, and it's customers are the consumers who buy iPhones. The difference in business model makes it obvious how Android is different from iPhone - that Android developers are Google's top priority while Apple treats it's iPhone developers badly; Apple's iPhone is designed such that it can be sold expensively to it's customers, but Google does not care about the price of Android phones and do not try to make money out of the phone buyers. The two different business models currently creates different market segmentation for Android and iPhone, and as the market gradually merges, Apple would start to feel the pain of competing with a non-product.
So the most important lesson that we should learn is that, the reason that Google can become so disruptive in so many markets is because they have a disruptive business model that allows them to turn a traditional product into non-product to compete with other products.
Every entrepreneurs should now understand that it is extremely important to identify the right product, and never let that product has chance to directly compete with non-products, ever.