Is Google Ready to Enter Into a Price War With the Likes of Apple?

 
 
By Don Reisinger  |  Posted 2012-02-14
 
 
 

Google Getting Into Hardware: 10 Reasons It's a Bad Idea


When Google first started as a search company, it wasn€™t immediately clear what the company would become. Its founders, Larry Page and Sergey Brin, had an idea to make it much easier for Web users to find desired sites, and they set out to achieve that while not being €œevil.€ It was a concept that worked, and it helped Google become one of the most dominant online companies the world has seen.

That dominance has aided Google in expanding far beyond search and advertising. Now, the company is delivering an operating system for mobile devices, a cloud-based operating system for lightweight notebooks, and has acquired Motorola Mobility. Meanwhile, it€™s trying to control the living room with Google TV, and it has cornered the online video market with YouTube.

Now, though, there€™s speculation that Google might eventually launch hardware of its own. The company could deliver tablets, and with Motorola Mobility€™s help, smartphones. In just the last two days, Google has received approval from both U.S. and European regulators for its Motorola deal.

Beyond Motorola, there€™s even talk of Google launching its own home-entertainment device to take on the Apple TV.

What in the world is the search giant thinking? Hardware is not where it should be competing. Here are several reasons Google should stick to what it knows best.

1. It confuses customers

Unfortunately for Google, the search company is, well, just that: a search company. Consumers today aren€™t expecting Google to launch new hardware or come up with an HDTV; today€™s consumers expect firms like Apple and Samsung to do that. Google should stick with search, Android and advertising, and not try to confuse customers with hardware.

2. Taking on Apple? Not a good idea

By getting into the hardware business, Google would need to compete with Apple on its own turf. Some Google fans might not think that€™s a big deal, since Android has handily beaten iOS. But that€™s software. Hardware is where Apple makes its money€”and it€™s a place Google won€™t want to compete in with the iPhone maker.

3. It hurts vendor relations

If Google ever delivers the tablet that has been rumored for months or gets too close with Motorola Mobility and delivers smartphones, the search giant could hurt vendor relations. Upon doing so, it could watch some of its key partners, including Samsung and HTC, work closely with other operating systems, like Samsung€™s own Bada OS or Microsoft Windows Phone. Google must be like Microsoft and keep to software. It€™s the only way to keep vendor relations intact.

4. More patent issues come into play

Currently, the majority of patent lawsuits ravaging the mobile market revolve around Android. Although Google developed Android, it€™s only getting hit by one lawsuit from Oracle. However, if the search giant gets into mobile hardware, it won€™t be long before it enters Microsoft€™s and Apple€™s cross hairs. For now, being a hardware maker in the mobile market means fielding lawsuit after lawsuit from tech giants. And Google just doesn€™t need that.

Is Google Ready to Enter Into a Price War With the Likes of Apple?


 

5. The investment is too high

Although investing in a new operating system is expensive, it€™s no match for the research and development and production costs that go into hardware. Hardware is extremely expensive to produce, and in far too many cases, delivers small margins. It€™s best for Google to stick with high-margin businesses and let Apple try to make profits on expensive equipment.

6. A price war Google can€™t win

Following that, Google should be ready to enter into a price war with Apple if it ever decides to try hardware. Apple will press the envelope on design and features, forcing Google to catch up. Meanwhile, the iPhone maker€™s margins will stay strong. Plus, Apple can dump billions of dollars into research and development without even thinking twice about it. Getting into a price war with Apple is something the search giant just won€™t want to do.

7. Too many competitors

Right now, Google is doing well in markets where it has little competition. In search, its only real concern is Microsoft, and Bing has little market share. In the OS space, Android is the only suitable choice for any vendor not named Apple. In the advertising market, Google is pretty much the only company that matters. But in hardware, the company would be facing off with a slew of competitors. And there€™s no telling if its devices will shine or get lost amid all the others.

8. The Sony model is dangerous

The latest rumors surrounding Google seem to suggest that the company is trying to become more and more like Sony and get into every market that it can. It€™s a bad idea. Sony today is floundering because it took too many risks and tried to do too much. There€™s something to be said for sticking with core competencies. And for Google, that means search, advertising, and Android€”not tablets, smartphones, and home-entertainment devices.

9. Home entertainment issues are enough to make trouble

What makes Google think that it can be successful developing a home entertainment device? The company is trying to appeal to consumers in the living room with Google TV, and so far, it€™s failing. Delivering a device that will likely work with Google TV won€™t change the fact that the entertainment platform falls short on many levels, including content support.

10. It all comes back to advertising

When it€™s all said and done, Google does everything to enhance its advertising initiatives. What€™s not clear is how advertising will play into its decision to get into hardware. Chances are, its ads will be running on the software included in its hardware products. But how will consumers respond to that? Hardware and advertising don€™t necessarily play nice with each other€”and Google should accept that.

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