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Why “Made by Google.”

Understanding the why behind so many things is perhaps the single most important knowledge we can strive for. I’ve been saying all week I was hoping Google would explain why they needed to make their own first-party hardware in a range of categories, smartphones in particular. They have just told us all we needed to know without actually spelling it out.

As I have written before, Microsoft and Google’s first-party hardware strategy is remarkably similar. Both companies are now, technically, in direct competition with their partners, with the caveat that they are playing in the market space many of their competitors do not–premium. In both strategies from Google and Microsoft, they are focused on areas dominated by Apple where their partners generally avoid. Apple has the lion’s share of premium PCs and smartphones. Microsoft and Google seem like they want to help balance the equation. With Microsoft, their focus on premium was a direct statement to the market that their partners have been letting them down in the premium Windows PC department. So Microsoft decided to fill that gap themselves. What makes this move of Google’s interesting is Samsung is doing a pretty good job in premium smartphones (exploding batteries aside) and, therefore, there is less of a void in premium smartphones as there was in PCs. Should Google be successful with smartphones here (a big if), it would actually hurt Samsung more than Apple. It is hard to know if this is by design and Google simply wants Samsung’s share or if Google mistakingly believes this move will help them take some premium share from Apple. This is, however, extremely unlikely.

Interestingly, as solid as the design and specs of the Pixel devices are, they are Google’s least well-positioned products of the bunch announced. Neither of these devices will sell in any substantial volume, so the real question we have to ponder is, how long is the long game for Google with smartphones? I’d say they are in this for the long haul and their goal is to continue to develop credibility in the high-end of the smartphone market. I’m sure part of their hope is these devices will serve as the gold standard of Android and Google integration and they hope others may be inspired to do the same. This is a page from Microsoft’s playbook with Surface and it did not work. Nor will this work with Pixels. Google and Samsung will remain the only ones going after premium.

The low-end market disruption dynamic will always be in play when companies can not meaningfully and sustainably differentiate themselves. When you ship the same software experience as your competitors, the threat of low-end disruption is remarkably high. When you ship the same software as your competition, you are only as good as your lowest priced competitor. We will see sub $300 Android phones with specs and Google cloud + AI and all the trimmings from Google’s partners. This likely would have happened anyway, even if they didn’t do the Pixel.

Nonetheless, it is a good showcase device for the best of all things Google. I’m just less optimistic of their chances here than the other two products they launched.

Daydream and Google Home
While their smartphones are the weakest positioned devices, their Google Home and Daydream products are quite well positioned. Here, Google has a chance to be in the market with first-party hardware, from this “Made by Google” initiative, and be in on the ground floor of these markets as they develop. They may be early, but they are not late. Unlike with their smartphones where they are a few years too late.

What stood out to me most about the products not named Pixel was the aggressive price points. Note their pricing lineup.

Pixel – Starting at $649
Google Home- $129
Daydream View – $79
Chromecast Ultra – $69
Google Wifi – $129

One of these things is not like the other. From the demos I saw, Google Home was the clearest expression of their AI vision, even though they pitched the Pixel as the best manifestation of that vision. The reality is, people will get a Pixel smartphone and not use it all that differently from their current smartphones. Meaning, not fully utilizing or buying into the AI due to behavioral debt. However, Google Home is the product that can create entirely new behaviours around voice and UI. That’s the product Google should push and, at $129, that seems like a good possibility.

I believe the voice platform, something I am calling the invisible platform, is a key battleground technology. Current platform companies like Google, Microsoft, and Apple, can not lose this battle or be left out of the conversation. This plus AI is a key part of the future and can strengthen or weaken current players if they aren’t careful.

When it comes to all the hot buzzwords like Voice, AI, AR, VR, etc., it is actually not anyone’s game. It is a handful of companies’ game. These markets are likely not to be a “winner take all” market either. So, while the battle will rage, it is still early and we can expect much innovation ahead in those core areas by many of our favorite companies.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

12 thoughts on “Why “Made by Google.””

  1. Quite Odd…

    “Meaning, not fully utilizing or buying into the AI due to behavioral debt. ”
    Okay, I see we’re having that one shoved down our throats! (behavioral debt)
    Followed by…

    “When it comes to all the hot buzzwords like Voice, AI, AR, VR, etc., it is actually not anyone’s game. It is a handful of companies’ game. ”
    Don’t know where to begin…

    1. Try 🙂

      My overarching point, which you will see me articulate more, is I’m increasingly convinced while looking through the data, that brands win no matter what. There are a handful of true established consumer brands and all are the predictable ones competing for the next platform. So it is reasonable the same brands are the handful of companies.

      Breakout consumer brands are super rare and its very difficult and most don’t have the money nor are venture backed companies remotely trying due to the cost and risky ROI of doing so.

      So from everything I see in the public and behind closed doors, it is reasonable the winners here are the ones already competing. Not some new entrant.

      1. If what you say is true, and I don’t doubt it is, then Samsung’s brand (batter problems notwithstanding) is much stronger than Google’s brand, at least in smartphones.

        1. I’m certain that’s true right now. Question though is if they stay at it and build great hardware could their brand be right there top of mind in 4-5 years?

  2. Why “Made by Google”?

    Because if vertically integrated ecosystems are the future (and I truly hope not), how else can Google ensure it’s future? Flipping that to the consumer’s best interests, id that is indeed the future, the more vertically integrated ecosystems, the better.

    Google is showing commitment to it’s platform, and this is just a cost of entry for that.

  3. Why the conclusion that the Pixel phones won’t sell in significant volume? I’m not doubting you but you don’t explain why you believe that. Others seem to think Google is going really clean up in the premium segment with the Pixel phones. Are you suggesting that they are just too late to the market?

    I would think anyone unhappy with Samsung but wanting to stay with Android would be interested in these phones. Is that a small segment?

    1. It’s a conclusion for the moment not a universal point. Google has no credibility in the eyes of the normal consumer yet. If they stay at this for 4-5 years and build that credibility I can see them being a top player. But consusmers don’t take chances on brands or products they feel are risky. They go with the safe bet more often than not. Right now that’s not this product. Also Verizon is the wrong carrier for this to move volume. Verizon’s typical customer skews later on the adoption curve than ATT and this product is catering to early adopters for the moment.

  4. As important as it is to see the “why”, in Google’s case it’s also important to dig into how commited they are. It is after all, a spaghetti throwing company, and their history is littered with abandoned hardware attempts. Even worse, they’ve often had similar efforts run in parallel.

    In the case of the Pixel phone, there are a couple of things that worry me. First, the initial roll out seems very limited, similar in scope to the early years of the iPhone. Second, I have read that they are keeping the Pixel division and the main Android division separate to prevent secrets from their OEMs leaking into the Pixel group, much like they did for the Motorola group.

    I agree with the “why” discussion in this article, but my concern is whether this is shared and universally committed on inside the company.

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