Earlier this month, Google announced disappointing earnings, and its stock immediately dropped 5% (Disclosure: I own Google stock through a fund). Most disturbingly, the company’s core revenue driver, the revenue it gets for each click on an ad, decreased 6% while traffic acquisition costs increased.
Ordinarily, rising costs amid lower revenues is no recipe for success, but Google keeps plowing forward and last week launched Chromecast, a $35 device that does essentially the same job as the $99 Apple AAPL -0.14% TV and allows you to control your TV screen from a smartphone or tablet (including iPhones and iPads).
It sold out almost immediately.
The company also recently announced that it has activated 900 million Android devices and has 750 million users on its Chrome browser. Taken altogether, the message should be clear. While earnings might zig and zag, Google is taking over the digital experience. Here’s a quick overview:
I use Chrome rather than Safari, Google Maps rather than Apple Maps, Google Now and voice search rather than Siri. If I watch a video, it’s most likely on YouTube. While others’ behavior may differ than my own, it’s clear that Google owns at least some part of the experience of the vast majority of smartphone users.
TV: Although Google’s earlier efforts in TV weren’t particularly impressive, Chromecast looks like a winner. For only $35 (and with the promotional offer of 3 months of Netflix NFLX -3.2% for free, the actual cost is $11), I can make my TV do what I want it to, stream video from online services made for the small screen and transfer it to a big screen.
Again, while my mobile devices are made by Apple and my TV by Samsung, Google has somehow managed to insert itself and early reviews are very positive. Forbes’ Jeff Bercovici called it a Trojan horse for television.
Productivity: Despite what critics say, Microsoft MSFT -1.79% maintains its stranglehold on productivity. For any business executive, Microsoft’s Office suite is a must. Operating without PowerPoint and Excel would be a serious professional liability.
However, I still find myself using Google Docs a lot and my younger friends tell me they use Google for simple spreadsheets too. The reason: Sometimes, portability and the ability to collaborate on the cloud trumps functionality. Microsoft’s Office 365, despite improvements, still feels clunky.
Google X: Google’s super secret innovation lab is helping the company insert itself even more thoroughly into our lives. From autonomous cars to Google Glasses to who knows what else they’re cooking up, it’s getting hard to think of any facet of our lives which the guys at Mountain View don’t plan to insert themselves in.
Put it all together and it becomes clear that there is now a Google layer lying just beneath the Internet. But what’s most exciting (or creepy, depending on your perspective), is what the company is using that layer to do.
A New Strategic Paradigm
The common explanation for the extraordinary breadth of Google services is that it helps the company target ads and that’s certainly part of the equation, advertising provides the revenue engine that drives the business. However, even more important are the thousands of experiments Google runs.
The massive breadth of Google services allows it to collect information on just about every human activity you can think of, from how we surf the Web to how we travel through a city and now, how we watch TV. It can then use the data to build simulations that help it determine how consumers are likely to act in the future, which allows Google to create better and better products.
Google has shown that it is not afraid to fail. However, in the new world of big data, failing fast and cheap is becoming too slow and expensive. Running thousands of simulations means that it can fail in the virtual world before if fails in the real one. With no marketing, inventory, or retooling costs, bits are vastly cheaper than atoms.
While Google is not the only one exploiting big data in this way (Facebook and Amazon have impressive efforts as well), no one can match its vast reach into our digital lives and that’s gives them a serious advantage. Chances are, next time you go online, you’ll be helping to test Google’s next breakthrough product without even knowing it.
source : www.forbes.com