They all want the same thing. Another hit product. Then another. And another. In general, the public stock market rewards growth companies and punishes one-trick pony outfits. Apple’s iPhone was so dominant to the company’s coffers that the market humbled the company and rewarded Google for at least trying to diversify. What about now?
Hardware Is Hard
As much as I do not care for Samsung’s market antics and lack of business ethics, I reward them for doing business the old fashioned way. They make hardware. Lots of hardware. They sell bullets– hardware– to competitors. Apple competitor and frenemy Google has failed to diversify itself beyond the core business. Search engine advertising. Let’s compare the two.
Google has devoted many tens of billions invested in acquisitions to diversify beyond advertising. For the most part, despite a cloud business, mobile apps, and hardware, most of Google’s efforts have failed. Google just isn’t very good at hardware.
Wait. What about the Pixel 3 and Pixel 3 XL?
Failures. Most guesstimates put total sales at around 4-million or so units. Less than Apple sold new iPhone 11 models last week. What about Home and Nest? Nope and nope. Check out Google’s financials. The star is advertising. Nothing else Google sells makes it to the Fortune 500.
What about Apple?
Few technology companies will ever have a hit product to match iPhone. Apple may have 1-billion iPhone customers now, and sold about 2-billion since the launch in 2007. Success? Name a more successful product. Recently, iPhone revenue dropped below 50-percent of Apple’s total revenue for the first time in many years. That’s a good thing because it exposes what Apple watchers have known for many years.
First, Apple is a hardware company. Second, Apple is highly diversified.
iPhone tops the revenue and profit list, yes, followed far behind with Services (App Stores, AppleCare, Apple Pay, Apple Music, et al), then the Mac, followed very closely by Wearables (think Watch, AirPods, Beats headphones, accessories), followed very closely by the iPad. All total, Apple has five very profitable revenue streams.
iPhone, Services, Mac, Wearables, and iPad. That also means about 1.5-billion devices in customer’s hands. That’s diversification, folks. Apple is highly diversified and Google is not. For whatever reason, Google’s executives seem to want to be like Apple. A hardware company. So far, Google hardware has been a huge failure.
Alexei Oreskovic tells a tale:
Steve Jobs famously called Google’s Android mobile software a rip-off of Apple’s iPhone.
It was. Android befoe iPhone was a nothing product. Android’s engineers stopped everything they were working on when iPhone was introduced in 2007, and started over. iPhone was that good.
Even though Google’s Android was basically a me-too product that came out more than a year after the iPhone, it went on to dominate the market by providing an operating system — Android — that Samsung, LG and every other hardware maker could use to create their own smartphones.
For free. Android is given away free to cellphone makers– except Huawei, of course– so Google can make money the old fashioned way. Old fashioned for Google. Advertising.
How bad is Google at hardware? Almost laughable.
When it comes to smartwatches, the situation is almost exactly reversed. Google released its Android Wear software for smartwatches a year before the Apple Watch came out.
Which smartwatch dominates the industry?
Google beat Apple to the punch but lost the war. Apple is better at hardware. Google is better at advertising. And not even all that good at software.
Google’s cloud business may still be playing catch up to Amazon Web Services and Microsoft Azure, but new boss Thomas Kurian is not the kind of guy who likes to be in third place. The Google Cloud business is now on an $8 billion annual run rate
Or, put another way, about the same as Apple Watch.
Not much has changed since Google entered the market as a search engine. Advertising rules Google. Hardware rules Apple.