I bilieve they do (I know they offer apps with domains that you can setup), but not sure if it's good or bad.
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About Sites.Google.com I don't think you need to pay for that and you don't get acesse to a control panel most people use like cPanel. I think its somethig like a script that is hosting it. like freewebs script.
I think that bluehost is one of the best for web design hosting. I've had them for 5 years now and host 5 different websites on there. I tried 1 and 1 when it first came out but never used it since. bluehost has an OK interface. Its not the best but it works for me.
"App Engine developers can now purchase additional computing resources beyond the free quota limits. Scale your application to millions of users and pay only for what you use. App Engine will always be free to get started so you can try it out with no risk."
Free is hard to beat!!!!!!!!!!!!!!
"Billable Quota Unit Cost
The cost for computing resources is as follows:
Resource Unit Unit cost
Outgoing Bandwidth gigabytes $0.12
Incoming Bandwidth gigabytes $0.10
CPU Time CPU hours $0.10
Stored Data gigabytes per month $0.15
Recipients Emailed recipients $0.0001"
It doesn't mean they can't hire someone who's got he ability to turn that around, hire and train the necessary staff etc. I'm not too sure it's something they want to do though. They've got more profitable areas to focus on.
If Google offers hosting, then surely that gives sites hosted by Google an advantage. They could give their own sites the advanatage in Google's results. I know they can do what they want in theory, but they are supposed to be the world's biggest search engine who people trust to produce fair results.