Google's Spring Cleaning And New Additions

Mar.14.13 | About: Alphabet Inc. (GOOG)

Google's (NASDAQ:GOOG) "second spring of cleaning" is a sequel to the company's house cleaning campaign that started in 2011. The 2013 list of closures brings the number of features and services shuttering down to seventy, some of which reflect Google's poor choice of acquisitions. In August 2011, Google decided to dissolve Slide, an independent social application that it acquired for $200 million and a week after, it shut down the Aardvark Q&A service that was bought for $50 million.

In the current list however, it includes Google Reader, probably the most popular of all Google services to be shuttered down since the house cleaning process was started by Larry Page.

Google Reader, launched in 2005, made it simple for users to monitor their favorite websites and had a "loyal following". Has Google gone too far with its cleaning?

Deep down It Is All about Competition

Although the Google Reader had a "loyal following," it had ceased to attract new users, probably the reason why Google is withdrawing it. However, the company has ensured that it retains its client base. Users have four months to get a copy of their Reader data through Google Takeout, the service that allows taking data, including subscription lists, out from Google products.

The second spring of cleaning contains seven other services/features being closed. Google has taken care to give ample time, wherever necessary, and alternatives to users so that they are not inconvenienced. For example, it is shifting focus on improving Google Shopping as it is taking off the Search API for Shopping.

If Google is trying to shed flab that it had accumulated, it is probably shaping up for being better prepared to take on the competition.

Look at Apple (NASDAQ:AAPL), which seems to be changing its stance towards competition. Phil Schiller, Apple's marketing chief, chose aggression over the company's previous low-key approach. Citing Google's as well as Apple's internal data, he lambasted Google's Android claiming that only 16% users are on Android's Jelly Bean OS and the number of people switching from Android to iPhone was four times more than vice-versa.

The fact that this comes just a day before Samsung (OTC:SSNLF) is to hold an event for its Galaxy S IV speaks volumes about what Apple thinks about losing its dominance to Android. Android has 69.7% share against iOS' 20.9%.

With Samsung having 40.5% share of the Android market, its Galaxy brand becoming almost synonymous to Google's Android. Both Apple and Google have reasons to worry about Samsung's rise.

Google Glass

If on one side Google is getting rid of some of its well-known products, it is also underway developing new products such as Google Glass. Glass will be among the few Google offerings that will generate revenues for the company through sale of hardware rather than software and advertisements. According to the technology writer and TV science presenter, David Pogue, it is "an absolutely astonishing feat of miniaturization and integration".

It is called Google Glass simply because it is worn like one. It is basically a glassless device with a memory, a processor, a camera, speaker and microphone, Bluetooth and Wi-Fi antennas, accelerometer, gyroscope, compass and a battery that can be worn on the face just as one would wear normal spectacles.

Success of Google Glass depends largely on its price and consumer acceptance. With a price tag of $1,500, give or take a few dollars, it is likely that the first users will be technophiles and businesses that need to give instructions to their computers or scan information even while they go about using their hands for other tasks.

Although, it has all the making of a revolutionary product just as the cell phone was three decades back, there is a fair amount of controversy surrounding the product over concerns about privacy encroachment and health risks.

However, wearable computers from most of the big players in the market - Google, Apple and BlackBerry (NASDAQ:BBRY) - is not a far-fetched dream. In fact, with the unveiling of a prototype of Telepathy One, the Glass already has a competitor.

Vuzix, a company that specializes in Video Eyewear and personal display devices for mobile video, defense, entertainment and commercial markets, is also developing a comparable product that will compete with Google Glass. There are also rumors that Apple is developing iWatch. Microsoft (NASDAQ:MSFT) too has gaming goggles on its radar.

Normally, path breaking products suffer delays. However, considering the stakes and the speed at which technology is evolving, things are happening in this space at a much faster speed than many investors realize. Increased competition is likely to bring the price down and in a few years the product might even be offered free with subscriptions to cellular and other services. Then applications will drive adoption.

Analysts estimate the market for wearable devices to grow to $485 million by the end of 2018. Sooner than later we will be talking about how many units were sold in a year and revenues from wearable devices accruing to not only Google but also its competitors and component suppliers.


Despite the hype, Google Glass seems to have very limited functionality. It may hold some attraction for early adopters who are likely to be technophiles rather than businesses as they would like to wait before they know more about its functionalities.

However, Google is a big a company that has many things cooking at any given point in time. It is very unlikely that it will be affected by success or failure of one single product. If its major hardware offering fails to catch the fancy of consumers, it can always withdraw it the way it has its other features and services. It may even find other ways to monetize it.

If Google Glass proves to be a hit, it will obviously reflect in returns to investors; if not, then it will probably see a temporary downside. The company's revenues are primarily advertisement driven and there is no reason yet to believe that they will not continue to be driven the same way in future as well.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.