Why does Google need hardware?

By Shira Ovide / BLOOMBERG

So MANY Internet and software companies make gadgets now. Amazon. com Inc, Microsoft Corp, Google Inc and Facebook Inc all make some type of Internet-connected computing gear. Even Uber Technologies Inc has started to engineer its own electric scooters.

The one thing all these newcomers have in common is that their hardware businesses are irrelevant.

That’s important to remember with Google’s introduction on Tuesday of the latest in its growing line of gadgets, including a new model of its Pixel smartphone, a tablet-like computer and a voice-activated video screen for the home.

A central fact gets lost in the hardware hype at Google, Amazon and other tech giants: These hardware neophytes are definitely not setting sales records.

And the strategic value of wading into well-established or novel hardware areas is uneven at best.

In 2017 and the first half of this year, Google shipped about five million Pixel smartphones worldwide, according to the research firm International Data Corp.

Apple Inc sells as many iPhones in about eight days as Google did in 18 months — and even Apple has a relatively small minority market share in smartphones. It would be generous to call Google a niche seller of smartphones. Small numbers aren’t confined to Google, either.

Journalists like me can’t stop talking about the “runaway success” of the Echo devices, Amazon’s rapidly expanding line-up of voice-activated home doodads. Amazon sold about 3.6 million of the two most popular Echo models from April to June, Strategy Analytics estimated.

Fitbit, a company that journalists like me stopped talking about long ago, sold 2.7 million motion-tracking gadgets in the same period.

Yes, Amazon’s hardware sales are growing and Fitbit numbers are shrinking, but you get the point.

For most software or Internet tech empires, hardware is a niche hobby, and it will remain so for the foreseeable future. That leaves the question of why tech companies that built fortunes on areas other than computing hardware are bothering at all.

I wasn’t sure about Microsoft’s Surface line for a long time, but I have been convinced that the company successfully spurred new ideas in what a computer could and should be, even as Microsoft sells relatively few personal computers on its own.

I’m not completely sold on the strategic merits of Amazon’s Echo gadgets, but it’s clear that the company wants a pole position if computers controlled by voice become the prevalent form of human interaction with machines.

As for Google, I was unsure of the merits of the company jumping into hardware with both feet when the Alphabet Inc unit unveiled its first self branded smartphone two years ago, and I’m still not sure what the company is doing.

At an event on Tuesday to show off its gadgets, Google talked about some features that seemed clever and useful.

Executives talked about an improved Pixel smartphone camera that can pinpoint the ideal frame from a family photo shoot, even if you happened to press the button when grandma was blinking and the dog was misbehaving.

The voice-powered Google Home Hub — with a video screen but no video camera, to make it less creepy — can play music, display recipes, show off photos and give people a quick peek at whether they locked their front door.

The Google unit of Alphabet generates the vast majority of its revenue from selling digital advertisements.

Like Amazon and Microsoft, it seems as if Google is trying to spread its promising ideas on computer features and interactions.

But it’s not clear why Google can’t press its best ideas through Android, the software brains of more than one billion new smartphones sold every year, or through the company’s ubiquitous smartphone apps, Chrome web browser, YouTube on the web and more.

Google technology is already everywhere, and it didn’t need its own hardware line to make that happen. To the extent that there is special sauce when Google designs itself a unified package of software, computer chips and computing hardware on which company technology runs, the relatively dinky sales of Google’s homegrown gadgets limit the influence of the company’s most promising experiments.

Alphabet’s Google unit generates 86% of its revenue from advertisements on web searches, YouTube videos and other spots all over the digital world. Google’s dominant and highly profitable ad empire gives the company plenty of room to branch out into new areas, and today’s hobbies in areas such as life sciences, driverless cars and cloud computing could very well become the foundations of Alphabet’s future empire.

But Google’s best ideas in consumer computing can’t become dominant from leaning on the company’s hardware.

That feature only works, of course, if households have Internet connected door locks — another niche business.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its