Google Sacrifices Partners to Pursue Hardware Ambitions

Google today announced a range of new hardware devices, from the Pixel phone to Google Home, Google Wifi, and a new Chromecast. The comments below may be attributed to Jan Dawson, Chief Analyst, Jackdaw Research. Jan is also available at or (408) 744-6244 for further comment.

Google today demonstrated that it’s finally serious about hardware. It now has own-label products in a handful of major categories, from phones to tablets to laptops, and from WiFi routers to home speakers and TV devices. After several years of both abortive organic efforts like Nexus Q and short-lived ownership of Motorola’s device business, Google seems to have finally committed to building its own hardware broadly. In and of itself, that’s a huge capitulation to a notion Google had long resisted – that both hardware and software are better when they’re built together by the same company. Given Microsoft’s similar strategy around the Surface and phones, we now have all three major companies in this space pursuing the same strategy, after many years of Apple ploughing this furrow alone.

Among the companies who won’t be happy about this are Google’s major OEM partners. Google’s relationship with OEMs like Samsung has always been complicated, but today’s announcements made it even more so, especially given that Google appears to be aiming both at the premium smartphone and VR headset spaces which Samsung currently dominates when it comes to Android. Unlike Microsoft, Google made no attempt to justify its entry into first-party hardware in competition with its partners – there were no claims of merely showing OEMs the way, merely a displacement of erstwhile partners in the value chain. Google is building its own relationships with carriers and supplanting device partners (with the exception of HTC, whose name was never mentioned). With Google Wifi, too, Google appears to have sucked all the value out of its year-long partnerships with Asus and TP-Link in order to leave them in the dust as it creates its own hardware in this space.

The hardware itself was solid, probably the best set of hardware Google has ever introduced. Google always seemed a promising player in the home speaker space pioneered by Amazon, and the Home doesn’t disappoint, at least on paper. Google has always been very good at voice recognition, and its knowledge base is second to none, so it’s in a very strong position here. The lower retail price and unique features like Chromecast and Google service integration, as well as the broader availability of the Google Assistant are all positive differentiators over Echo.

The Pixel phones are clearly being positioned as peers to the iPhone, which the Nexus devices never were – even the pricing is identical. And the fact that the cameras look very good is a critical counterpoint to the iPhone. And yet in most respects Pixel won’t be any better than most other Android smartphones out there – rounded icons and faster software updates won’t be enough to offset the premium pricing, narrow carrier distribution, and consumers’ familiarity with Samsung and other existing vendors. Google is still fighting an uphill battle when it comes to mainstream adoption of its hardware beyond Chromecast, and there’s little here to suggest that this will change anytime soon.

Daydream View is an interesting new entrant in the VR space. Google has clearly thought through some of the design challenges of existing devices in the market and come up with some useful innovations. Given that such devices will mostly be used at home, the external colors likely aren’t that important, but the consideration Google has given to comfort and ease of use will be a useful differentiator. The pricing is aggressive, too – among the major players, only Google’s own Cardboard, which is the very definition of a minimum viable product – is cheaper. But of course for now the Pixel is the only phone that supports Daydream, and it’s not clear when other devices will hit the market.

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