The Strategy behind Google entering the cell phone market

Google had “Don’t be evil” in its employees’ code of conduct until mid 2018

Have your friends ever asked, “Why did Google enter the mobile phones market?” No? Mine neither. Anyways, if they did, below is the process I would go through to answer. There are three questions we need to answer:

  1. What are Google’s goals? 
  2. What do I know about the product, company and market?
  3. What do they inform me about Google’s plans to acheive its goals?

Question 1: What are Google’s goals? 

Google’s mission is to organise the world’s data and make it universally accessible and useful. We’ve seen Google doing this through Google Search using Pagerank and Google Maps using drivers’ data to recommend routes. Moreover, like all other business entities, Google has to be economically sustainable. Google does this mainly through Google Ads, which is also data-driven.

Question 2: What do I know about the product, company and market?

To understand the product, company and market better, I’ll look at 5Cs:

  • Company: As elaborated above, Google is data-driven and wants to use it to bring values to users. It is also worth noting that Google’s portfolio of products already include Android, the world’s most used mobile OS and Google Fi, Google’s new mobile plan. These can help Google cut costs of breaking into the mobile market. 
  • Customer: Almost everyone in the US has a smartphone. The smart phone market in India and SEA is also growing rapidly. While these emerging markets seem to be very attractive and I think Google should try to penetrate them, it seems currently the Pixel is being marketed very vigorously in the US. The price tag also suggests a higher purchasing-power market. Some of the ads suggest that Fi+Pixel is targeted at travelers, cosmopolitans 
  • Competition: Google’s main competition would be other Android phones. It might also be possible that Google is competing directly with Apple. This is harder though. The Pixel will have to improve a lot in terms of specs and battery life to drag Apple users away from the Apple ecosystem. Google’s high spec camera is definitely a move in the right direction.
  • Collaborator: Fi and Android are google owned. Google also sells the Pixel with other telcomm providers.
  • Climate: Regulations: Nil, cultural change: Apple is seen as a luxury product

Question 3: What do they inform me about Google’s plans to acheive its goals?

  1. Probably the biggest reason for Google’s entrance into the mobile market is data. Google’s main revenue earner, Google Ads uses shiploads of data to make ads relevant to users. Besides improving google’s economic sustainability, data is used to facilitate efficient commute (Google Maps), recommend relevant content (Search and Youtube) and help businesses grow (Ads and Analytics). With the Pixel, google could capture data that would have previously been lost to phone companies. It is worth noting that topic of data collection is controversial. Until recently, Google Web Crawlers still collected data from emails on Gmail. This was stopped due to backlash from Gmail users. Data remains, however, a main driver of the many useful free services that Google offer.
  2. Google’s cost of entering the mobile market is relatively low compared to other non-mobile company. This could be explained in 2 ways: 
    1. Google owns Android: Although Android is open source, most of the development of Android happens on Google’s campus. With expertise on Android, Google can easily integrate it into the Pixel without incurring further engineering costs
    2. Google is bundling Fi and Pixel to offer lower prices. Fi specifically targets people who travel a lot as it offers coverage in over 200 countries. As demand for Fi increases, Google can upsell by bundling Fi and Pixel for lower prices
  3. The last reason is one of revenue diversification. With the advertising market constantly challenged by Facebook and new entrant, Microsoft Advertising, Google has to ensure its future sustainability by diversifying. In the US, Google will be challenging Apple and Samsung who owns about 60% of the market collectively, so it will be challenging.

Conclusion:

Whatever Google’s true motivations are, I’m certain that data is a main driver for Google’s entrance into the mobile market. There will be many challenges in Google’s way to uproot Apple and Samsung’s dominance in the US mobile market. In the long run though, as long as Google stick to “don’t be evil” and deliver value to consumers, the Pixel will surely find its place.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s