The search giant has no other choice but to go all-in on hardware if it hopes to catch up with Apple, Samsung and Amazon.
Last October, Rick Osterloh, the head of Google's newly minted hardware division, stood on stage in San Francisco and made his pitch to consumers everywhere: Google is not just for Googling anymore.
Instead, he said, come to Google for physical products that fit in your pocket or live in your house: a phone, a smart speaker, a Wi-Fi router. It was a brash sell for a company known the world over for its iconic search engine and mobile software, asking you to trust it with things usually associated with Apple, Samsung and, increasingly, Amazon.
Exactly one year later, Google is doubling down on that message and showing just how serious it is about being a contender in the crowded and cut-throat world of consumer electronics. On Wednesday, Google unveiled the second generation of its hardware products, including two new phones, a smart home hub and virtual reality headset.
The new phones are the next generation of the company's Pixel phones, first introduced last year. The Pixel 2 starts at $650 while the bigger Pixel 2 XL starts at $850. Google also unveiled new wireless earbuds, called Pixel Buds, that can do things like translate languages in real time and play a song by voice command.
The other products are the new version of Google's Daydream View VR headset, a new convertible laptop called the Pixelbook, and new versions of the Google Home smart home hub. The Home Max is a $400 premium update with high-end audio. The Home Mini is a cheaper $50 version, akin to Amazon's Echo Dot. There's also a standalone camera called Google Clips, for $250, that incorporates the company's machine learning technology.
"We've been working on software and hardware together, because that's the best way to drive the shifts in computing forward," Google CEO Sundar Pichai said Wednesday.
Up until now, Google's consumer electronics operation has had its share of fits and starts. The company's released some clunkers, including the Nexus Q in 2012, a $300 streaming device that looked like a black orb. It was quickly discontinued. Then there's Google Glass, the much-maligned internet-connected headset that became a lightning rod for controversy because of its built-in camera. The $1,500 smart glasses were technically still in prototype stage, but Google ended up halting the consumer project in 2015. (Glass is still used, though, by workers on factory floors.)
In 2012, Google bought Motorola Mobility for $12.5 billion, only to turn around two years later and sell the phone maker to Lenovo for $2.9 billion. Earlier this month, in what's probably the biggest indicator Google's recommitting itself to hardware, Pichai and his team announced a major deal with hardware maker HTC. Google had already been working with the manufacturer to make the Pixel phone. The agreement, worth $1.1 billion, brings about 2,000 HTC employees -- many of whom work on the Pixel -- to Google.
"They're fully in it for the long haul," Jan Dawson, principal analyst at JackDaw Research, said. "But it takes time to build up credibility."
Google's previous modus operandi for selling devices wasn't so much to become a market leader or make money. It was to be a showcase for Google software or to demonstrate to other hardware makers what their devices could look like. That was the goal with Google's Nexus program, a beloved but niche line of phones that ran "stock" Android -- a bare-bones version of Google's mobile operating system without the flourishes or extra apps that carriers and manufacturers usually add to the software.
Each year, Google worked with a different hardware partner, including LG, Huawei and HTC, to put out the phones. The Nexus program ended last year, when Google decided instead to introduce a branded phone, the $600 Pixel.
So why is Google going all-in now? The market has changed in the last few years. Where Google Glass stumbled, Snapchat has stepped in with its $150 Spectacles smart glasses, a less ambitious version of smart eyewear that's been better received as more socially acceptable. (Google, meanwhile, is retooling Glass under a secretive project called Aura, run by Osterloh.)
Alphabet, Google's parent, has also poured money into hardware elsewhere in the company. In 2014, it bought Nest, the smart home device company cofounded by Tony Fadell, an Apple veteran and hardware guru known as the "godfather of the iPod." Fadell left Nest last year after lots of public turmoil. But last month the company unveiled its first major new products in two years, including an internet-connected doorbell called the Nest Hello and a security system called Nest Secure.
Consumers are finally ready to make their homes smart. Amazon surprised the world and became the unlikely market leader when it released the Echo, a voice-controlled speaker and smart home hub, in 2014. Google followed suit last year with its rival Google Home. Apple plans to join the market in December with its $350 HomePod.
But Amazon is still the king of the voice speaker world, owning 70 percent of the market, according to eMarketer. Google is a distant second. And CEO Jeff Bezos continued Amazon's assault last week, after releasing five new Echo products that range in price from $35 to $150. "Amazon's event really reinforced their leadership in the market," Dawson said.
As for Google, in terms of market share, it's in catch-up mode, he added. "They've got a lot of work to do."
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