Google's new business model
stratechery.com
stratechery.com
What is with the paranoia over Nest's data? Yes, google is a data-hungry company. but Nest doesn't collect any valuable data that google doesn't already have. Sure, the motion sensors in a nest thermostat can sense when somebody is in your house, and what the temperature is. But Google already has your cell phone, they know where you are at all times, that's a hell of a lot more valuable than knowing whether somebody is currently inside whatever building where you installed your thermostat in.
I suspect that the nest acquisition is about finding new uses for all the data they have, not about collecting more data. Google already knows, without installing sensors in my house, when i leave for work. they know when i'm heading home, and when i go on holidays. That all seems like information that a home automation system would love to have access to.
There seems to be a tipping point for a company when people move slowly from cheering for you to against you. I think it's both a combination of size and behavior. I do fell that Google's push with G+ has harmed their brand in some respects. It was one of the first times personally that I felt that my wants and needs were no longer aligned with theirs. Then the Gmail changes, less room for organic search, etc. I am not saying no one is rooting for Google. I am saying their brand is in a new, unfamiliar area of public opinion and there's something more behind it than their ravenous ambition.
It'll be interesting to watch how Google handles this in the coming years.
Watches, Glass, tablets: all of these are only secondary displays. Nest, it strikes me, is one of the first successful pure-play "internet of things" companies. I think that's why they commanded their price tag.
Well, in that scenario you can always change to a different thermostat...
> Having motion sensor that sense your presence and having that data on someone's server is always scary.
Is Google more scary than Nest? You signed up for that data to live on someone's server when you bought a Nest, the only difference now is that it's Google's servers instead of a small startup's.
Uh, yes. A lot scarier. Google is already collecting data on many other aspects of our lives and linking it together. Nest was just collecting data from our thermostats.
I want something that learns and adapts constantly. I'd really love something that also controlled window openings and my whole-house fan, but for now I'll take something that controls the central air/heat.
It's similar to the reaction when a promising young athlete switches to the big rival sportsteam, and the responses are similarly emotional rather than logical.
However, the sole justifications for any of that is billing and planning of capacity. It is not necessary to those ends to have individual applicances report to any outside party (as the "smart home" fans keep enthusing about), and people can opt out of things like Nest thermostats and "smart" TVs.
Is it enough to do anything with? In isolation, certainly not. Combined with everything else they can get on me? Probably still safe, but not so certainly safe that it isn't worth thinking about some.
In the first place, only a small minority seem to be seriously concerned about privacy at all.
However, there is no basis for assuming that that minority are giving Google their web or cell data. To the contrary, precisely the person who is prefers not to give Google his home data, is less likely to be already giving them his/her web, cell or other data.
Just a thought.
However, there was no mention about Google's rise to power being centered around a focused set of high-quality web services. And now they are starting their "3rd business model leg" of consumer devices before they have truly mastered their second, the SaaS market. I find it funny how the OP quickly glances over Apples unprecedented focus, althewhile highlighting and admiring Google's unwarranted diversification.
The obvious question is: can Google get away with it all, or will they fail without focus? They have managed to stay cohesive so far, but as the author rightly points out, Google's true diversification has only just begun.
It will be interesting to see how Google handles quality and customer service if it increases its efforts to sell consumer devices.
You can get away with a lot of ignoring people unhappy about the quality of your service if you're giving away that service for free in return for showing them advertising. Their only option is to stop using your service and go somewhere else, which doesn't cost you much if they're still a small proportion of your user base.
However, you can't get away with a lot of ignoring unhappy people if you sell them expensive consumer gadgets that don't work properly. They'll do things like returning the item (substantial overheads for you even if it's in resaleable condition) or charging back the purchase fee if you don't make a return reasonably easy (more immediate overheads, and if you develop a pattern of this happening it's going to hurt your long-term overheads with the card companies as well).
I'm a little surprised Google aren't going for the huge-value business model that the linked blog overlooks: being the on-line distributor/middle man. This position typically rakes in much of the profit while taking on relatively little risk and doing relatively little work to create the underlying value, and it always has; see: record labels, book publishers, app stores, cloud hosting, and of course the granddaddy of them all in the Internet age, Amazon.
Google has the platform to implement something like Gumroad, but Google hasn't had much luck with consumer services like Checkout.
People keep saying that, but is it really true? People buy lots of things from companies famous for terrible customer service all the time. I understand wanting it to be true, for sure...
It might also be worth mentioning that many places have explicit consumer protection laws that cover this kind of situation, so vendors/manufacturers can't just brush their responsibilities under the carpet because providing actual customer service people to deal with customers is expensive.
Thinking specifically of companies like Intel, Microsoft, Cisco, et al.
All spent (and continue to spend) literal billions on acquisitions and R&D and yet all still pretty much make their money from their original core competence.
I think Google's case is simply more ambitious. Android is probably their second biggest adoption success after search/web apps but it seems evident they're not satisfied with the financial ROI of it... It's a defensive thing.
tl;dr: Pivoting is very hard and history is full of brilliant companies that have tried and never been fully able to.
Forbes put it like this: http://www.forbes.com/sites/timworstall/2013/10/22/motorola-...
1. "a surprisingly large amount of Google’s ad revenue is driven by just a few adwords." links to an inept infographic pie chart organized by volume (so "keywords" that earn more money can have smaller slices) and the "keywords" are actually "keyword categories", The authors of the infographic do make the claim he repeats, they just don't seem to present any evidence to support it, since they snip the long tail of the data and are more interested in selling software to those who want to make money on the high CPC terms.
2. suggesting that Google's revenue and profit will peak when the growth rate of internet adoption peaks seems odd enough that without further explanation I'd assume basic innumeracy as the cause. The source suggest internet growth until 2040 which seems a bit more positive for those betting on the internet and/or Google given the article's premise that they're linked.
2.b Also, that growth is a binary use/don't use metric, it takes no account of e.g. someone with a laptop buying a web enabled phone, or simply using either device more.
Nest doesn't offer either of these, I see the potential to tie in with Google devices and services, but not the other way around; drastically different to acquiring a phone company. We'll definitely see Google Now cards saying "Heaters turned on at Home, expecting your arrival", I very much doubt we'll be seeing articles about thermostats posting feed updates to G+.
...or will we?
But what Ben is proposing here is that Google is actually adding a separate, additional business model that generates profits directly from product margins. If that is his thesis, then it's practicially intellectually negligent to rest on the conventional wisdom about the Motorola purchase.
Only one of these can be true:
1) Google is adding a products business model - If this is true, then everything we thought about the Motorola deal needs to be re-examined. It wasn't just about patents.
2) Google is not adding a products business model - If this is true, then the conventional wisdom is right about Motorola, but Ben is wrong in this article.
It certainly would make Google Shopping, Glass, and self-driving cars seem like legitimate business decisions.
But that has never been the case for Google, or pretty much any company for that matter. This isn't "new", and Google has always been diverse.
Do people remember what Google's original "business model" was (meaning "how can we scramble to pay the bills on the technology we've built")? They sold search appliances for business: You could buy little rack mount units that would build a search corpus of your network and allow in house searching. The search engine was largely just a demonstration that Google knew search.
They grew from there. Over the years they've sold virtual machines, mail accounts, backup storage, computer cycles, smartphones, entertainment units, laptops, smart glasses, and eventually self-driving car technology and robotics. The Nexus line started as developer units, but it grew into a mainstream set of technologies that clearly Google wishes was much more successful and lucrative. Recall the ill-conceived Nexus Q.
Because they're a big, diverse company. They want to make money however they can. While the common sentiment on the Motorola purchase is always the "for patents" line, is it not possible that they wanted to start benefiting more financially from Android, getting directly in the business that Apple was make so much money in? Success or failure is irrelevant, Google's actions have spoken loudly that they want Motorola to succeed as a device maker, benefiting Google in the long run.
There is nothing new here. Company wants to leverage their strengths to make money. In the same way Apple has never been only a smartphone or computer hardware company -- they want to make a little coin on that app you purchase, the software you buy, the movies you watch, the music you listen to, the services you use, and even the ads they feed you. In the real world businesses tend to be like that.
All of these account for less than 3% of Google's Revenue, many probably operate at a loss. What this article is saying is that Google is finally putting together a SERIOUS challenger to their Ad revenue business in the form of consumer devices. The diverse products you listed were more about Google swimming in money, being open to new ideas, and having lots of clever and creative people.
Google is now "serious" because they bought a company with $300 million in annual revenue? If you must talk percentages, that is less than 1/2 of 1% of Google's revenue. It is 1/10th Motorola's revenue last year.
That argument doesn't fly at all. Google bought Nest to continue the same strategy they've been using for many years, which is finding ways to leverage their technology and name[^1]. That Google makes enormous sums from advertising doesn't diminish those attempts, nor does it undermine the intention of the people behind them.
^1 - I've seen quite a few people talk about how "most" people are now concerned about Nest/privacy, etc, where their most is a minuscule sampling of their blogging and twittering peers. Among the mainstream public sentiments are extremely positive regarding Google, and I would wager that the overwhelming majority would see "A Google Company" on the box as a huge positive.
I agree, and I think the author of the article agrees that Motorola was another step in this direction, except it also came along with an added bonus of a large patent portfolio.
Have people not seen the mainstream Nexus 7 commercials? Chromebooks are being pitched to every-person.
There are too many write ups like this that want to take a complex and shifting reality, melt it down, and then make clear delineations and pivot points. The world doesn't work like that.