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When Rick Osterloh, Google's senior vice president for devices and services, greets me in his office and takes me down a flight of stairs to a second-floor conference room, he says, He did not start our discussion by reminding me that the equipment team he's been leading has been busy. The fruits of his work are all there, neatly arranged on two islands of wooden shelving outside the room, where they look like the merchandise in a tasteful store that sells only Google gadgets.
On April 18, Osterloh celebrated its third anniversary at the head of the Google Appliance branch. However, the serious investment of the company in the manufacture and sale of its own computer equipment still has not the advantage to take shape. "Google has an incredibly incredible story as a software and services company," he says. "And we are fortunate in our lives to try to help add new capacity to society. We had a good start on this road, but there are miles to come and we are really excited to travel. "
It's not easy to measure Google's success as a hardware manufacturer. Alphabet does not disclose Osterloh Group figures, which are grouped into a line called "Other Google Income" which accounted for a total of 15% of the company's revenue in the first quarter. An analyst estimated that Google had made a profit of $ 3 billion on hardware in 2018, up from $ 900 million in 2016, the first year of Osterloh's business. For example, Google prefers to share less specific information reflecting the dynamism of various products: Pixel is the fastest growing smartphone brand in the US and Google Wi-Fi is the country's best-selling mesh router system.
But Google's foray into hardware has never focused solely on the profitability of gadget sales. Although she remains at the heart of a cloud computing company – whose services are used by virtually everyone, on devices of all kinds – she concluded that sometimes it was necessary to create what Steve Jobs called everything. the widget. "A lot of innovations will require the development of a service and often a new hardware product," says Osterloh. "Sometimes, even silicon is developed together to achieve a final result. And you can see that in our work in data centers, you see it in our work in consumer electronics. It's a whole new era.
Osterloh's explanation on the overall mission of his organization remains in sync with the presentation he gave in October 2016, while he had held his position for a few months only and that he had just presided over a product launch event containing devices being processed. when he arrived, including the original Pixel phones and the Google Home speaker. This launch was "a kind of future, that is, we will be much more consistent in the way we produce the products," he told me at the time. "We will tackle key software initiatives, which will take shape with the co-design of hardware and software. You've seen it a bit with Pixel and Google Home in particular, with Google Assistant in the middle. "
The fact that Osterloh is still at Google, expressing the same vision he had at the beginning of his term, is a sign of progress in itself. Before the company created a single hardware group and put it in place, its consumer electronics efforts consisted mainly of a series of bizarre montages and startups, characterized by the famous Google Glass AR glasses. In reality, Google has never delivered its first consumer gadget, the whimsical spherical audio streamer Q. Most of its Nexus phones and tablets were quite thorny, but since the rotation between hardware partners, the line has never evolved in the same way as the iPhone and iPad. The company also spent $ 12.5 billion to buy Motorola's mobile business and assign responsibility to Osterloh, but then sold it to Lenovo two and a half years later.
Google's most serious hardware gambit was paying $ 3.2 billion for Nest's smart home pioneer in 2014. But in August 2015, when CEO Larry Page disassociated non-core business from arm's length a new holding company called Alphabet, Nest stopped being part of Google. This spin-off, which took place about eight months before Osterloh was named to run the Google hardware, was a striking act of decentralization.
In February 2018, however, Nest became a member of the Osterloh group, canceling the arm's length relationship and giving Google a much more comprehensive range of gadgets it could associate with technologies such as Google Assistant. "If we wanted to participate more broadly in solving the problems of users, we realized that we had to have a broader portfolio, and that was pretty much Nest's mission," he says. This merger is proof that Google really wants to give as much strength as possible to a unified approach to consumer electronics.
Pixel progress
Nest's reinstatement in Google was the second major expansion of the Osterloh estate, less than five months after the acquisition of most of HTC's smartphone design group to strengthen its ability to build world-class smartphones without outsource most of the heavy tasks. This has added 2,000 Taiwanese engineers to the Google device team all at once. (Osterloh will not provide full staffing for the operations it oversees.)
Of all Google branded devices, Pixel phones have benefited the most from the kind of iterative progress that occurs when a company engages in a product category. The original Pixels 2 from 2016 and 2017 received respectful reviews. But the range proved successful last fall with the Pixel 3 and Pixel 3 XL, which received praise and were widely known for owning the best cameras on the market. "We now have an ability that the company had never had before to create an end-to-end phone," Osterloh says.
Although Verizon remained the only US mobile operator to sell the Pixel, a recent report showed that Google exceeded LG's ability to become the third-largest seller of premium smartphones in the US, after Apple and Samsung. On the eve of my interview with Osterloh, however, during the Alphabet quarterly earnings conference call, Financial Director Ruth Porat said Pixel 3 phone sales were lower than Pixel 2 a year earlier. .
According to Osterloh, the decline in competitiveness is not so much related to the competitive position of Pixel as to fundamental problems for the smartphone market. "It's slowing as users spend 24 to 36 months on their purchases," he said, adding that phone sellers had offered special promotional offers in the first quarter, sacrificing revenue for sales. at the unit. He also notes that Apple's recent quarterly results showed a 17% drop in revenue compared to the previous year for the iPhone.
If consumers are keeping their phone longer, it may be because the recent focus by the industry on super-luxurious models with matching prices has prevented the yen from modernizing. According to Osterloh, smart phone makers "have been looking for ways to innovate and create exciting new features for users. Many of these capacities are expensive and prices have increased. And in this process, many users realize that they can not afford it. "
More than most companies, Google could be well positioned to offer attractive phones with no price tag for luxury items. Already, most of the most interesting things about his devices involve software rather than hardware advances, such as Pixel's Night Sight camera mode. "In our opinion, a lot of future innovation will come from software and AI, and that's a pretty interesting dynamic," says Osterloh. "We see an opportunity to offer more affordable products with a great user experience." This is a response to leaks and rumors about cheaper Pixel phones that are coming. (Osterloh acknowledges that Google will post material information at its I / O conference next week.)
Beyond the phone
From the beginning, one of Osterloh's main goals was to design smartphones that were not only successful, but also showed the rest of the industry the finishing quality of an Android phone. That, says Osterloh, "is a goal forever." Equally important, the company wanted to take a fully Google-y approach to emerging categories of connected gadgets, perhaps best characterized by Amazon's Echo products developed by Amazon. "Computer terminals exploded at that time," says Osterloh. "There are just tons of new types of client computing devices, from smart speakers to smart screens to wearable devices."
Since their launch in 2016, Google Home speakers, which provide Google Assistant access to the environment, have become a credible competitor to Echo. The Voicebot research firm estimates that Home holds 24% of the US market (compared to 61% for Echo) and added more US users in 2018 than Echo. According to Google, 1 of 7 new consumer-enabled Google Home devices is a Google Home Hub, which displays a screen for Google Photos and YouTube videos (but no cameras, eliminating the privacy concerns associated with Amazon's Echo Show ).
Osterloh tried to focus his efforts on those who were clearly committed to Google's global priorities: one of his first achievements when he joined the company was the closure of Project Ara, an effort ambitious but unlikely to build modular smartphones with components as simple as Lego. . But the products that the company considers essential to the mission have survived, even if they are not likely to sell in large quantities. Top-of-the-range Chrome OS laptops and tablets such as the PixelBook and Pixel Slate are still part of the mix: "We see an important place for these products and we will continue to make them because we expect to get a lot out of them. , Says Osterloh.
Then there's Stadia, an upcoming service that will broadcast console-level games on phones, tablets and TVs, which Osterloh says, "has a real opportunity to transform the games, to do it so that you can have the richness of an AAA game on any computer. device. "Whether it changes or not, it looks like both classic Google and something that has the power to appeal to the masses.
Some of the products of the Osterloh group still have a smell of the older and more specific era of Google hardware, usually to their detriment. In 2017, when Apple's AirPods were about to become ubiquitous, Google's Pixel Buds got mediocre reviews that were intriguing but clumsy. But Osterloh points out that even products that do not take off can serve the main cause. Google Clips, a tiny clip-on camera designed to cleverly capture children's and pets' videos, has gone nowhere, but it has helped the company develop some of the Pixel 3's feature-specific photographic capabilities. " It's not a product sold in the millions, and that's not what we expected, "says Osterloh. "But it really helped us improve our advanced learning and the machine for photography."
With respect to emerging computer experience categories that are not as far apart as loudspeakers and smart screens, Osterloh is particularly excited about Augmented Reality (AR) because it often involves providing useful information at the moment. where users need it. seems to be playing on Google's strengths. At some point, an appealing AR call headset – essentially Google Glass well-designed – should arrive, whether it comes from Google or from someone else. Even once that happens, Osterloh considers the AR as a way to enrich all kinds of features on all kinds of devices. "If you use Google Maps, you want the RA to be part of that," he says. "If you're using a camera, you'd like to see image recognition as part of that native experience. You might even want to invoke it in different ways, which you had not thought of today. "
However, when I ask questions about virtual reality (VR), the exuberance of Osterloh fades. Google has helped democratize technology with its card reader, but Daydream, the company's rival against Oculus on Facebook, has not gone much farther and does not seem to be a current priority. "We are still in the early days of virtual reality," he warns. "I'm sure we'll continue to invest in different ways, but Daydream remains to be seen."
Another thing to see is how Google will earn money from the wizard and other services deployed on its hardware. It will be difficult to find an effective way to deliver advertising through a voice-centric service, such as Google Assistant, but Google Assistant has started struggling with strategies. Additional revenue could come from Google One, a new paid service that was initially used primarily to increase Google Drive storage. "We believe that this can become something more important than that, where we are starting to offer a premium status to our users with Google One, offering them new features that the company has not yet developed," says Osterloh.
For all the freedom that Osterloh needs to invest in new areas with un-optimized monetization models, he says Google sees hardware as "a business, and we're trying to manage it that way." a part of Google, which means that expectations are high, the trail of critical initiatives is long and that the future, whatever it is, is not boring.
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