Why Google Needs Gadgets – WIRED
You’d think having dominated search and email, created Chrome and YouTube, plus a self-driving car project, a handful of save-the-world enterprises, and the greatest advertising business in the history of the universe would be enough to keep Google busy. You certainly wouldn’t think the folks in Mountain View would suddenly feel the urge to get into the smartphone game, a remarkably mature market where nobody but Samsung and Apple makes any money, and where Google’s already ubiquitous thanks to Android.
And yet, tomorrow, Google will reportedly launch the next generation of its smartphone with the Pixel 2 and the Pixel 2 XL. At the same time, the company will reportedly introduce a new Chrome OS-based laptop called the Pixelbook, a small smart speaker called the Google Home Mini, and new hardware for the Daydream VR platform. The announcements come on the heels of Google’s $1.1 billion acqui-hire of 2,000 HTC engineers, who will help Google make more hardware, more quickly. Right or wrong, smart or stupid, Google’s a hardware company now.
Of course, Google’s made hardware for a long time. The Nexus team built phones; the Pixel team worked on Chromebooks, tablets, and then also phones. The Ara team, within Google’s ATAP division, built its own sort of phones. Another team worked on Chromecast, another on Google Wi-Fi, another on the Daydream View. Remember the Nexus Q set-top-box-doorstep thing? That was Google. All these products had the same goal: to show developers and users how good Google’s software could be, running on the right hardware. But they were small-time, limited-run products that rarely led to market-wide innovation. In 2016, something finally clicked, and Google took its fate more firmly into its own hands.
As they say, hardware is hard. It’s a ruthless and low-margin business, but it’s also an important one. Building gadgets in-house gives Google an opportunity to assert itself beyond what any of its partners can offer. More importantly, it gives Google a chance to control its destiny in an increasingly uncertain time. “As new technologies spin out of mobile, Google wants to make sure its own high-end hardware highlights that—whether it’s Assistant or Daydream or Tango, even the Internet of Things,” says Avi Greengart, a devices and platforms analyst for GlobalData. “Google needs Samsung, it likes Samsung, but as the platform driver it doesn’t want to be entirely dependent on Samsung.”
Depending on Samsung is a dangerous game. Galaxy products are the most popular Android phones by far, and the prime iPhone competition. But every year, you can feel Samsung leaning a little further away from Google. It built the Bixby assistant, which competes directly with Google Assistant, and gave Bixby prime placement on its phones. Samsung builds its own browser, email client, and messaging app, which seem utterly redundant unless Samsung’s trying to wean its reliance on Google products. Samsung mostly eschews Daydream in favor of Gear VR, and has a home-grown smart-home platform competing directly with Nest, Android Things, and all the other Google connected-home products. Over the last few years, Samsung’s been hammering away at Tizen, its own operating system, which already runs on the company’s wearables. Save for the Play Store’s un-replicable app selection, Samsung barely needs Android at all.
Soon enough, Android’s power might wane for everyone else as well. New platforms like Amazon’s Alexa pose something of an existential threat to Google. Alexa can give you directions through Google Maps, or another mapping app. You can listen to Google Play Music, or Spotify. If you buy an Echo, you might someday never use Google, and you might not even notice.
Google could go to the HTCs and LGs of the world, build phones and speakers with them, and try to grow competitors in the wild. Except that doesn’t work—Google’s been trying for years with the Nexus program to inspire and convince others to build better, cleaner, more powerful Android phones, but everybody just keeps buying Galaxies.
So that’s the danger in not making hardware. There’s also opportunity in doing so. Just look at Apple, which spent the last decade taking the idea of vertical integration to its extreme. It doesn’t just design and assemble its own phones, it’s also responsible for many of the most important parts inside. By any measure, the latest crop of iPhones are the most powerful smartphones on the market, thanks to Apple’s own A11 Bionic processor. As other companies converge on identical performance metrics, commoditizing a “Good Phone,” Apple’s jumped to a whole different level. That’s why its augmented-reality tech works so well, why its cameras are consistently the best on the market, and even enables minor-but-crucial things like rock-solid Bluetooth connection.
As the next phase of tech comes into the market, that kind of power and control become even more important. “Tiny EarPods, Smart Watches, Augmented Reality, Adaptive Acoustics require wrapping your arms around all parts of the problem,” the analyst Horace Dediu wrote recently. “The integration and control it demands are in contrast to the modular approach of assembling off-the-shelf components into a good-enough configuration.” Think about the next version of Google Glass (or whatever non-flashback-inducing new name Google gives its face-puter). Making that work will require highly specific work in batteries, processors, screens, cameras, and more. The off-the-shelf version looks like, well, Glass. The custom version, built in-house and in tandem with the software, firmware, and wireless teams at Google, could be much better.
Right now, the company’s making a smartphone for the same reason Andy Rubin’s Essential started with a smartphone, the same reason anyone talks themselves into entering this preposterously huge market: It’s the most important device anyone owns. Google seems to believe it’s big and popular enough that it can wedge its foot in the door of the market, and at least take a piece of the high-end smartphone universe. But that’s actually the easy part—the last Pixel was great, and HTC made it. The real reason to take everything internal is to be able to control and improve what comes after.
Saying “we’re a hardware company!” and actually becoming a successful one are two radically different enterprises, though. That HTC group Google just bought? They’ve made great phones for a decade, but thanks to some bad carrier-exclusivity decisions and a truly terrible marketing plan, its products stayed under the radar. (Meanwhile, Samsung’s marketing department bought the radar and trained it to only recognize Samsung products.) The Pixel, which is a great phone, didn’t exactly take the world by storm either. Google hasn’t reported exact sales, but one estimate showed a million Pixels in the market; another said between three and five million. That’s due in part to Google’s total inability to keep the phone in stock—another downside of not managing your own hardware—but doesn’t inspire much confidence. Either way, Greengart says, “it certainly hasn’t been a dominant player in the high-end of the market. It doesn’t play at all in one of the biggest markets, China. I can’t see Huawei or Xiaomi or Oppo being worried.” Apple and Samsung haven’t lost sleep either.
But Google has to try. As we’ve learned time and again, the best products come from companies that make both hardware and software, each working to optimize and improve the other. Samsung knows it; Apple knows it. As we enter the next phase of tech, where smartphones give way to smart watches and smart speakers and smart lightbulbs and smart cars, there’s no room for too-big parts or inefficient software. The winners will be the companies who figure out how to do everything right: hardware, software, marketing, everything. Apple nailed it with phones, and became the richest company in the world. There’s another chance coming.