Alphabet’s (NASDAQ:GOOG, GOOGL) subsidiary, Google, is now directly competing in the smartphone hardware market with the launch of its new device called the Google Pixel. The handset is aimed squarely at the high end of the market, targeting potential customers of Apple’s iPhone and Samsung’s Galaxy S series, with price points of $650 for the Pixel (in line with iPhone 7 and Galaxy S7) and $769 for the bigger screen Pixel XL (similar to iPhone 7 Plus). With the Pixel, Google is adopting the proven Apple model that a well designed, high-end handset that is tightly integrated with its own software and services garners a premium in the highly competitive smartphone industry. While the device marks an important first step for Google in the smartphone market, it remains to be seen whether the device will bring in sizable volumes yet or pose a legitimate near-term threat to Apple and Samsung.
Click here to see our complete analysis of Google
How Is Pixel Different From Nexus?
The new offering is unlike Google’s Nexus, which was manufactured by outside Android OEMs such as LG and Huawei. Here, innovation for the phones centered around new versions of the OS every alternate year. With the Pixel line, Google has given up the software-centric approach. Instead, the company will now directly manage procurement of components, supply chain deals, distribution and inventory. This mimics Apple’s strategy and could be a potential game changer for Google. By adopting this strategy, Google could improve the performance of its devices and battery life, thus, improving the user experience.
What Is Google Aiming To Achieve With Pixel?
Much of the profitability in the smartphone market is comes from the high-end. Apple’s iPhone generated 94% of the industry profit despite accounting for under 15% of the market as of Q3 2015. Given its premium price points, the Pixel could prove profitable for Google, if it sells in sufficient volumes. Moreover, with the smartphone market saturating, a greater portion of sales are likely to come from customers upgrading to newer and more capable devices, providing opportunities for growth in the high-end of the market.
The Pixel could also be a part of Google’s larger strategy to defend its mobile search ad business. A 2015 report from Goldman Sachs estimated that three-quarters of Google’s mobile search revenues came from Apple’s iOS devices, despite the fact the iOS accounts for less than 20% of the smartphone market. This is because Apple users are typically more affluent and advertisers consequently pay more per ad impression on iOS devices versus Android devices. Earning a bulk of revenues from a key rival’s platform poses a significant threat to Google and Apple has recently been making moves that could hinder Google’s business on iPhone. For instance, over the last year, Apple introduced third-party ad blockers on iOS while promoting its own search capabilities.
With the introduction of the Pixel, the firm is looking to create a solid Android alternative to the iPhone, potentially allowing it to win over affluent customers. More importantly, Google could be looking to make the Pixel a standard bearer of sorts in the Android sphere, competing with its key partners such as Samsung and LG to improve the overall quality of the Android experience. Having a better overall experience on its mobile OS would be beneficial to Google’s core advertising business.
No comments:
Post a Comment