Why Google Struggles With Hardware

Why Google Struggles With Hardware


Our mission is to bring a
more helpful Google for you. Google’s hardware business
is really confusing. It means creating
products like these. They’re like history, so confusing. You can almost like put
funny music to it. It considers companies like Samsung,
both a partner with services like Android and a competitor with
hardware like the Pixel 4. It has branded devices under Nexus, like
the Nexus One and Nexus Q, Chrome, like the Chromebooks and Chromecast,
Pixel, like the Pixel 4 and Pixelbook Go, Nest, like the Nest
Home Hub and Nest WiFi, and its own name, like the Google
Home and Google Glass. And only a few of these products
have gone on to take a successful share of their respective markets. Google’s a real hardware competitor
in some markets, especially when you think about education and
laptops with its Chromebooks. But in general, as a player against
Apple and Samsung and phones and other places, it’s not considered a
major player in this space. For a company with an
almost $900 billion market capitalization, Alphabet, Google’s parent company, just doesn’t
make a lot of that money from its hardware. But through acquisitions, partnerships,
internal design and developments, Google has stitched together
a product line that makes the company’s complete vision
hard to see. So if the company can’t rely on
hardware as a major source of income the same way Apple and Samsung
do, what is Google’s ultimate goal? The hardware’s true sort of value is
the fact that it helps Google collect information that can be used
for advertising and then to serve you ads anywhere
you might be. I don’t view Google as a hardware
contender because at its core it’s an advertising company. It’s easy to miss Google’s hardware
strategy in its current lineup. Google says it wants to create
products that can exemplify Google’s software and services like Android,
Chrome, Google Assistant and others. But let’s be very clear. Google is not a hardware company. Of its $38.94 billion revenue in quarter two
of 2019, only about 16 percent came from Google’s so-called
“other revenues” category, which includes Google’s hardware sales, Google
Play sales and cloud revenue. The vast majority
of that $38.94 billion income comes from
its ad business. Google captures 20 percent
of all U.S. ad dollars, both online and
offline, and a whopping 74.6 percent of all U.S. search ad dollars. The hardware business has to serve the
rest of the business, which is an advertising business. Where it’s collecting profiles, it’s
collecting data on you. Looking at its history, Google has tried
hard to clean up its product line, like Steve Jobs famously did when
he returned to Apple in the 90s. But it’s still
struggling in general. Google creates its hardware in
three ways: through partnerships, through acquisitions and through
its own in-house efforts. Google’s first big hardware partnerships
were thanks to its operating system, Android. When we talk about flagship best
Android devices, the Motorola Droid was really probably what put Android
on the map in the consumer’s mind. In fact, to this day when
people talk about Android, you still hear them refer to it as droids. It wasn’t the first Android phone, but
it was the first Android phone that got a tremendous amount of
attention and drove a tremendous amount of sales. But the Nexus line
of phones signified a change in the way Google looked at hardware. So the Nexus line was originally
developed, sort of showing what you can do with an Android phone
with the latest version of Android. It was for developers to build their
apps for the platform so that partners in the Open Handset Alliance
could then launch phones based on that. The Nexus One only sold
about 20,000 units in 2010 compared to Apple’s iPhone 3GS,
which sold 1.6 million units in the same year. The next hardware for Google to
tackle was the computer itself. Chromebooks used to be laptop-like
internet terminals that Google developed during its shift to
cloud-based computing and storage. Originally, these laptops just accessed
the internet via Google’s Chrome browser, nothing else. Everything was stored on Google’s
servers, even the applications. The hypothesis is that you were
always connected because at the time when they first came out, there
was very little storage on the device. You had to be connected
for it to do everything. The first Chromebooks were manufactured by
Samsung and Acer and got the products off to a rocky
start, leaving reviewers wondering why Google made these
glorified netbooks. But by 2016, Chromebooks were outselling
Macs, thanks in part to their popularity in schools. In fact, Chromebook took 60
percent of the U.S. educational market share by 2018. It was in 2012 that it really decided
to want to put a lot of money behind hardware. It acquired Motorola Mobility
for about $40 a share for $12.5 billion, marking a
huge investment in Google’s hardware strategy to build its own phones,
instead of partnering with other people to build its phones for it. In a blog post, then CEO Larry
Page said the combination would offer consumers accelerating innovation, greater
choice and wonderful user experiences. The biggest value that the company got
out of it was its patent portfolio so it can go
toe-to-toe with companies like Microsoft and Apple. Then in 2014, CEO Larry Page decided
they wanted to get out of the mobility business and ended up
selling Motorola Telenova for $2.9 billion, which was vastly less
than what they paid for. $9.5 billion less to be exact. I can only classify the Motorola
acquisition as a complete bust. One of Google’s most lucrative investments
was in the company Nest, which was originally acquired by
Google’s parent company, Alphabet. That was sort of the start into
this home hardware foray and at the time it was just
a smart thermostat. I mean, how many houses do you
walk into or apartments where the Nest is the featured element? With its eye still on the
hardware prize, Google announced in 2017 that it would spend $1.1 billion on a cooperation agreement
between itself and longtime partner HTC, a company that
previously developed several Nexus phones and even manufactured a
few Pixel models. I believe this was a reaction
to post, spinning off Motorola, realizing they didn’t have enough
of their own employees or contractors to do what they needed to
do, and they just they needed experienced bodies. Google acquired about 2,000 HTC employees,
many of whom worked on the Pixel team while at HTC,
and the acquisitions continued. In 2018, Google decided to absorb
Nest fully into its own lineup, making it no longer an
independent company under Alphabet. In 2019, Google closed a $40
million deal with watch group, Fossil, and most recently, Google
acquired Fitbit for $2.1 billion. For smaller, more niche
projects, Google turned inward, like with Google Glass, which
was a wearable device. Kind of goes down and is infamous
for not really making much of a breakthrough in the market like
the company had hoped. Glass was advertised as a pair
of augmented reality glasses that could provide users with turn-by-turn
directions, read messages and emails and take
pictures and videos. But the real-life functionality was much
more limited due to its small battery. I personally went out
and bought Google Glass and I was pretty sure at the time
it was going to revolutionize everything. The product was such a flop
that adopters of the glasses were referred to as “glassholes.” Google really didn’t understand the
personal ramifications they would have on its users. That was very negative. Google discontinued the product for consumers
in 2015, but they live on in the workplace. In 2016, it decided to reverse
course again and it made another aggressive stride into hardware. This gave way to incredibly successful
products like the Google Home, which was the most popular smart
speaker lineup in the United States in 2018. I think Google’s best
performing device is likely the Google Mini. And with this new Google-centric
frame of mind, the company nixed Nexus to create its very
own Pixel line of phones, Chromebooks and tablets. They’re not co-branded with
people like Huawei or LG. The Pixel phones have been critically
acclaimed, but pulled a dismal 2.25 percent of the smartphone market
in North America, less than Samsung, LG, Huawei and
even former subsidiary Motorola. I think when you see Google
Pixel commercials and see the YouTube videos with millions of views, you
might get the impression that this is a huge phone and has a
very vocal and dedicated fan base. But when you look at shipment
figures around the United States particularly, it’s not even among the
top five, although we’ve seen in past years that
the Pixel is growing. So besides products like the Google
Home Mini, now the Nest Home Mini, why would Google continue to
sell hardware that is failing to bring in big bucks?
The unspoken interaction or contract between the consumer and Google
is that I’m going to make these devices do amazing things, I’m
going to know things about you so it’s going to do things that I
know you wanted to do and then we’re allowed to advertise
back to you. Google knows a surprising
amount about you. Whether you’re using an Android phone or
just use a bunch of Google apps like Google Maps, Gmail, YouTube
and Chrome, Google has built a profile for you that includes
a lot of information. Google knows that I
don’t have kids. Google knows that I work for a
very large employer that has more than 10000 people. Google knows that I’m
a renter, not a buyer. It does know some details that
you probably know that you’ve never sort of explicitly told them, but
it’s inferred these things through all of your behaviors on Google. Google uses this profile to provide
you with more accurate search results and the like, but more
importantly, it uses that info to serve you targeted ads. Obviously, there’s these Google Homes,
there’s these smart home sensors and all of these things
are also collecting data on us. They also say that all of this
collection is to just make your experience with their
products easier. So they want to be really relevant. They want to be fast. They want
to know that when you’re talking to your home device that you want things
that are in your town or if you’re asking for, you know, a pair
of shoes that they’re going to give it to you and your size. And Google isn’t shy about the information
it collects or how it uses it. Just check out Google’s
privacy and terms page. It has a video
explaining all of this. So it’s very easy to find all
of this information and see what they have available about you. And it’s very easy to opt out. There’s a little button that says,
“turn off my ad targeting.” It’s very easy to do that. It’s a little less easy to
understand from a third-party player perspective what information they have
collected that has now gone out to these third party players. The network is
probably extraordinary. Now when it comes to software,
there are few that rival Google. Android holds a huge majority of
the smartphone market worldwide, and Chrome OS currently powers more than
half of the mobile computers in U.S. schools. When you look at phones, Android’s
the real winner here, not necessarily Google Pixel. When you look at laptops, it’s
Chrome OS made by Google’s partners, not necessarily
Google’s Pixelbooks. But when it comes to putting that
software in every nook and cranny of your life through hardware, it
gets a bit worrisome for consumers. It still has issues that
it has to overcome. It has to convince consumers that
it’s actually serious about making technology and being in
the hardware space. It also has to convince consumers that
they can trust them with being in the most personal areas of
their lives and having hardware that will protect the user’s
privacy and security. It’s hard to say exactly what
the future will be for Google’s hardware business. But one thing is
for sure: if you’re using a Google product, you are helping
Google sell you better ads.

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About the Author: Oren Garnes

100 Comments

  1. Their problem is that if their margin with their hardware isn't big enough they may as well use the resources on their more profitable software projects. Unfortunately Android users are used to having more options not like the brand/status chasing Apple users

  2. I like google hardware ,but without a watch there entire eco system has stalled. Also, their events and presentation sucked. Nobody on stage looked like they even wanted to be there. Lay off the ambien and pick up some meth.

  3. Google is not good at supporting their products. Unlike Apple, I feel safe buying their products because I know they always have support. Same with Samsung. They need retail presence and an actual customer service phone number.

  4. My take – Google doesn't want to be in hardware business, they prefer software. But Apple's closed ecosystem approach forced them into it, for fear of losing control and bring pushed out.

  5. I don't think that Goggle's Pixel strategy is a complete flop. It's more like the device has a very targeted market: premium user, app developers, and to generate news.

    More than half of the tech team in my company owns a Pixel device, which is rather unusual when you consider that for the rest of the world Pixel are pretty much unheard of.

    For Google Pixel strategy to be successful, it does not need to capture a large market share. In fact, if Pixel captures too much market share, that'll actually threaten to destroy Android ecosystem, as other Google's partners would start looking into other operating system.

    Pixel is the gold standard that all other Android phones and competing operating systems are compared against. Pixel is the device that Android developers get for themselves. Pixel is the device that other manufacturers are trying to emulate. That's all its roles need to be, not to be the market share king.

  6. If google wants to be fairly successful they need to make a real budget pixel phone that is structurally tough and with it's stock android 10 that will bring constant updates and the magnificent google camera it will be a steal. But then again i am not an executive that calls the shots i am just simply a consumer.

  7. even though google has a lot of information, IDK why but I still think it's better google than Baidu (chinese "google")

  8. Just got ride of my Galaxy s9 the pixel 4 is one of the best phones I have ever owned. On top of that it's really smart compared to my s9. Very happy with this purchase.

  9. In my opinion, I think inside the Google everyone wants to stand out. Showing off what they can do, everyone wants to be on top not giving way in vision first. That how I can see google. They have actually good potential to be neck to neck to Apple and Samsung. Someone needs to be firm in something and focus.

  10. Google infuriated me when, without warning, it stopped supporting the Nexus 7 (2013). And if you’re picking up a Chromebook soon, know that they have Auto Update Expiration (AUE) dates.
    https://support.google.com/chrome/a/answer/6220366?hl=en

  11. I spent like two hours trying to find out what google knows about me and the I realized I have premium I don’t get ads Bich

  12. The pixel could of had a bigger impact… but when you roll out the phone and its exclusively sold on Verizon, many consumers weren't willing to switch mobile phone carriers. I wanted the pixel when I first saw it advertised. But was left out because I use tmobile as my phone carrier.

  13. I have a Samsung Galaxy S9. I like Android but I would never buy a Pixel phone. I also would never buy a Chromecast. It's very confusing compared to other streaming media devices like the Roku. Same with the Chromebooks. I'm more of a Windows person myself.

  14. Google went from a browser to palpable hardware that will listen and spyb on you un order to improve itself.
    … i just want the browser…
    stop pushing this down our throats.

  15. Nexus was their best project. I used 3 of those devices. Batteries were bad, but the hardware was kick-ass. Too bad they killed it.

  16. Great idea for a news coverage, it's just that it has so much inaccurate information. I feel embarrassed just to hear it. I had expecting a lot more from CNBC. In my book, CNBC reputation fell.

  17. Simple, they put in a weak battery and forgot a wide angle camera. With these two, it will blow most phones out of the water

  18. The problem with US companies is they charge too much for their brand, profits, marketing, royalty and advertisements leaving hardly any scope for a quality product to reach the End Customes for what he/she has actually paid for.

  19. first reason is android sucks. second reason is design by comity is like ruling people with people…. it always turns to poop.

  20. Screen is dim
    Volume is low
    Hardware is weak
    Battery life is weak
    All turn offs for me.

    But for some reason I still want to buy it.

  21. Google ADS is most idiotic!!
    say I search and buy a pair of shoe… They will be advertising that sh**t for a looong time. And I buy a new shoes only once a year.

  22. Come on! I was not expecting you guys to pull the "Google is not a hardware company" card. I wanted some more detailed explanation about why some of their devices have been so bad and so blind to the current market, like the Pixel 4. Also, how the hell did they go from mocking the lack of headphone jack on the iPhone to removing it in their very next phone?

  23. I have the Pixel 2 XL and it's a nice phone IMO it would have sold better if Google did two things:
    1. They calibrated the screen correctly out of the box
    2. They sold it with other carriers and not just Verizon

    The reason I bought it was because it was the only phone with CDMA and an unlockable bootloader which allowed me to use the unlocked version of the phone on Verizons network (the Verizon model is unacceptable, they lock the bootloader)

  24. Come on guys, GOOGLE purchased MOTOROLA just for the phone patents so they could make their PIXEL devices. The MOTOROLA phones have never been the same since. (especially the camera quality)

  25. What? Chrome OS? I’ve lived 22 years of my life and i never seen average people use chrome OS in my country, maybe only in US?

  26. Because of stocks they want people to buy more stocks to increase revenue and worth. Remember they are still a company and wealth managers do not want to stick to the same wealth every year

  27. There’s not that much impact on the customer unlike Apple or Samsung. But it’s still there for sure. But Google is aiming for something else

  28. I don't see why all the infomation and research tools they have access to. Lol Can not Google themselves google "Hardware issue Solutions"?

  29. Hey: for once no fake news?
    Me: I approve this one, Google's pixel is raw ass cheeks, trash, garbage and an iPhone clone. No thanks!

  30. Google hardware is effectively end of life within 2 years. Products, both software and hardware have short lives and often die.

  31. Google is in the long game with hardware , most schools are using Google Docs along with chrome books.Those kids grow up already in the google ecosystem and will choose android phones

  32. Google's business is harvesting consumer data from its users. The hardware is secondary. Google's main product is selling consumer data to its advertisers.

  33. Crome books are winning in education??? Yes because us university students are broke af. If I could afford a good computer I’d go down to the Apple store. But I can’t so I use a crome book ? it’s slow af

  34. So, they aren't necessarily making money on hardware. They're making money from your data that they collect from the hardware's apps such as gps, web browsing, and proprietary google software integrated into the play store, google account, and the OS itself.

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