Written: January 24, 2017
In late 2016, Google introduced a slew of new first-party hardware at a dedicated event, including its Pixel phone, its Home speaker, its Daydream View VR headset, and its WiFi product. And yet Google’s history with hardware is littered with at least as many failures as successes, and so there was reason for skepticism about how this new hardware would fare.
Perhaps the worst previous Google hardware product was the Nexus Q, which never actually even made it to market, but the Pixel Chromebook and Pixel C tablet both sold in small numbers, and other than the Chromecast there really hasn’t been a breakout success. Google had had more success working with its OEMs on hardware, as with the Nexus program, which delivered modest but decent sales, and the OnHub routers, on which Google worked with two different partners.
In the end, the new hardware introduced in 2016 is all really solid – I’ve tested everything but Google WiFi myself, and found the hardware to be nicely designed, high performing, and competitive with some of the best products in the field in each category. Google has been thoughtful about each of these products, and the Daydream View in particular is head and shoulders above the Gear VR in usability. These are great products, especially if you treat them as Google’s first in several categories (though of course it has that long experience working with partners). Early sales have been fairly good too, though we don’t have any exact numbers yet – we should get some indication from Google’s results later this week. Supply constraints have hampered Pixel sales in particular, and none of these products is going to sell in massive numbers just yet.
However, Google’s hardware push has two big strategic downsides. The first is that it risks its relationships with OEMs, which have been strained already as Google tries to clamp down on Android customizations. Though the Pixel was aimed squarely at the iPhone (and even looks like one), the main competitive threat is actually to the high-end phones made by Samsung, which arguably has the most complex relationship of any OEM with Google already. The second strategic downside to Google’s hardware strategy is that Google has tried to differentiate its hardware by making Google Assistant integration exclusive to the Pixel. This directly disadvantages OEMs, but it also limits the distribution of the Assistant among end users, in contrast to Google’s historical approach of maximizing distribution.
The big question is therefore whether Google’s pursuit of first party hardware will deliver enough benefits to Google to offset the tension it introduces in its OEM relationships and the downsides for its services and the ad revenue and stickiness associated with them. At this point, it’s far from clear that this will be the case.