Google recently announced further advances into new territory . The company disclosed news regarding its Internet TV and wearables businesses at South by Southwest, the Austin, Texas tech conference. But what do these new ventures reveal about Google’s future strategy?
The Mountain View behemoth hasn’t abandoned its bread-and-butter business, search. But it has made traction in two different industries, announcing it will share its Android software development kit to developers in the wearables space, and revealing strong Internet TV numbers. These areas may provide avenues for growth as the digital ad space gets more crowded.
Right now, Google makes most of its money from advertising. Ad revenue stood at $14.07 billion for the fourth quarter 2013 and $50.58 billion for the whole of last year, or 89.5 percent and 91.0 percent of total revenue respectively. Fourth quarter revenue from Google websites jumped 22 percent year-over-year to hit $10.55 billion, “driven by the strength of our core search advertising business,” said senior vice president and CFO Patrick Pichette during the company’s latest earnings call. This means users have not stopped Googling, and advertisers have continued to pay the company for clicks. But if the Google empire is to continue growing, the tech titan will have to diversify its options as competitors close in on its turf. Google isn’t the only big player in the online advertising game anymore.
The search engine does battle with social platforms such as Facebook and Twitter for advertising dollars. In 2012, Google took 31.40 percent of the world’s digital ad revenue, according to eMarketer. That number increased .51 percent in 2013, while Facebook’s share jumped more than a point and a half from 4.11 percent to 5.64 percent. Twitter’s small take also expanded from 0.6 percent in 2012 to 1.0 percent of digital ad revenue a year later. In between Facebook and Twitter were companies like Amazon, Microsoft and Yahoo. Though clearly still the global frontrunner, Google has ceded territory to challengers, and may target developing markets like wearables and Internet TV as insurance against a further ad revenue share dip.
Although it has been reported LG and Google are partnering to make a smartwatch, the search giant’s first push into wearables looks to be through its Android operating system. The company will soon deploy an Android-based software development kit (SDK) — i.e. “Android for wearables,” according to Google SVP Sundar Pichai, who revealed the news at South by Southwest on Sunday. Juniper Research said smart wearable devices will drive $19 billion in retail revenue by 2018. And according to IDC’s numbers for 2013, 78.6 percent of the world’s smartphones run on Android, while 15.2 percent run on iOS.
Google probably hopes sharing its SDK with developers will jump start Android’s widespread incorporation into the next generation of wearables and give the OS a headstart over competing platforms. Samsung recently debuted Gear smartwatches that traded Android for Tizen, and rumors abound an Apple iWatch is on its way. If Android is to dominate wearables like it has smartphones, it will need developers help with distribution.
Meanwhile, Pichai also told the South by Southwest conference Google’s Chromecast sales were in the millions. The $35 device plugs into users’ HDTVs, which play music and video from platforms like Netflix, Pandora, Chrome and YouTube on tablets, smartphones and laptops. Google’s Chromecast goes up against Apple and its Apple TV, a $99 box that connects HD or enhanced definition widescreen TVs with platforms like Netflix, HBO Go, YouTube and Hulu Plus, and AirPlay, a wireless streaming service for playing content from iOS devices on HDTVs. Roku offers some streaming devices at a cheaper price than Apple, $49.99. In 2011, Global Industry Analysts, Inc. predicted that by 2017, the worldwide market for Internet television would hit $81.2 billion. Chromecast hasn’t seemed like Google’s focus in the past, so the fact that Pichai revealed numbers now may mean a big push is coming.
Many big technology companies are rushing to grab their share of the wearables market, so it is no surprise Google is trying to set a precedent with Android in the field. Meanwhile, the strong sales figures reported for Chromecast show the company’s success in another industry. Google will surely look to continue diversifying its offerings in developing segments with the same calculated efficiency displayed in both the wearables and Internet TV markets — or in new ones.