Should-Read: Ben Thompson: Google’s Search for the Sweet Spot: "What was most striking... was Google CEO Sundar Pichai’s opening... https://stratechery.com/2017/googles-search-for-the-sweet-spot/
...We’re excited by the shift from a mobile-first to an AI-first world. It is not just about applying machine learning in our products, but it’s radically re-thinking how computing should work.... We think we’re in the unique moment in time where we think we can bring the unique combination of AI, and software, and hardware to bring the different perspective to solving problems for users. We’re very confident about our approach here because we’re at the forefront of driving the shifts to AI.
Note that last line: Google’s confidence comes from the Company perspective: artificial intelligence, at least its machine learning manifestation, fits perfectly in Google’s wheelhouse of acting on massive amounts of data. Simply being good at something, though, is not enough: you need the market and value chain fit as well. Indeed, this is why startups often beat incumbents: incumbents have resource advantages, but everything about their company is focused on a solved problem — the one that propelled them from startup to incumbent in the first place....
So how does Google fare? Start with value chains: I actually found the breadth of Google products to be impressive, both proof that my suspicions about hardware being the best way to monetize Google software was correct, and evidence of a real commitment on Google’s part to realizing that opportunity. The idea is straight from Apple’s playbook: monetize software by selling integrated hardware at a healthy margin (products competing directly with Amazon excepted). The breadth is also necessary: for Assistant to reach its potential it is necessary that it be available everywhere, and everywhere happens to hit on both Apple and Amazon’s achilles heel — Apple, the devotion to the phone as the center of everything, and Amazon’s lack of a phone platform of its own.
The question, though, is the market, and this is where I appreciate Pichai’s perhaps inadvertent honesty: Google is excited about AI because Google is good at AI; the success of AI as a differentiator, though, depends on whether or not there is a market for it. That remain to be seen. That said, perhaps the most surprising news from yesterday came from an interview Pichai did with The Verge’s Dieter Bohn:
As ambitious as Google is with its own hardware, it’s still a tiny drop in the bucket compared to the company’s online business. Pichai won’t say when we can expect to see hardware sales become a big, broken-out part of its financial calls, outside of saying it’ll definitely happen in the next five years.
That’s no small thing: I have hammered the company repeatedly for its failure to break out different business units, particularly YouTube, so a pledge to disclose hardware sales is significant. It also hints at a deeper commitment: specifically, I wouldn’t be surprised if Google announced dedicated retail stores sooner rather than later. AI may be the future, and Google may be the best at it, but sometimes markets need to be made, not simply seized.