The (Not So) Hidden Agenda Behind Google Glass

Apr.21.13 | About: Alphabet Inc. (GOOG)

Google (GOOG) is set to release its much-anticipated Google Glass in 2014. These wearable computers hook up to the Internet using Wi-Fi or through your mobile phone, and allow you to take photos and HD 720p video as well as use Google services like Gmail, Google + and Google Maps. With the release of this device, the company is making yet another move towards complete dominance of the web, since the device uses its proprietary Android operating system.

Google's Android Strategy

Unlike its competitor Apple (AAPL), Google allows developers to use its Android OS for free, which has resulted in Android's domination of the global market due to its wide adoption in mobile devices. For example, Android's share of the global smartphone market is around 70%, compared with Apple's 20 percent. The reason Google has opted to adopt this strategy is simple: while Apple wants people to buy its devices, Google wants them to use its web services. With a smartphone that uses the Android OS, you're more likely to use Gmail, search the web using the Google search engine, network with your friends through Google + and so on. Once more, people are using its web services; Google then hopes to monetize them through ad sales. In addition, by using its web services, Google can collect data on your web usage habits, and can then use this information to sell ads targeted specifically towards particular consumers.

A person who wears the Google Glass device is likely to be using the company's web services on a regular basis. In fact, a promotional video for the device shows four services being used - Google's search engine, Google Maps, Google Now and Google Hangouts. The reason for this is simple convenience - even if you prefer Yahoo (NASDAQ:YHOO) to Google, since Google is already the default on Google Glass, why not stick with it?

Google Could Dominate Social Networking

Similarly, once more people are using Google Glass, Google could eventually challenge the current dominance of social networking site Facebook and Microsoft's video chat IP service Skype. With Google Glass, users can use Google Hangout to video chat directly with their friends and then use the device to show them what the user is looking at. In addition, since Hangout is a feature of Google's social networking site Google +, Glass users could eventually use Google + as their default social network, which could eventually cut into Facebook's (FB) share of the market.

At present, Facebook has a commanding lead, with some 700 million users as of the fourth quarter of 2012, according to Global Web Index, compared with 300 million for Google +. Until recently, Facebook users have had little reason to shift to Google +. But if Google Glass leads more people to use Google +, Google could finally challenge the domination of Facebook.

Google Could Challenge Apple's iPhone

Currently, the Android OS is seen as the poor man's alternative to Apple's iPhone. But Google Glass could change that, if it takes off the way it is predicted to. Glass users would likely want to have MyGlass, a Google app that allows them to control the device through their smartphones. At present, the app is available only through the Android app store, although Google may choose to offer it through Apple's app store. If it does not, however, this could prove to be a serious blow to the iPhone.

Google's Glass Explorer program has enrolled 2,000 pre-early users who will serve as beta testers for the device and are paying $1,500 for the privilege. With the final retail price of the device seen to be pricey, the target market for Glass are likely to be affluent, with a lot of disposable income to spend on gadgets, and these people are Apple's best customers. If Google Glass owners find that an Android phone is required to get the most out of their devices, they may opt to shift en masse from iPhones.

What's the Outlook for Google Glass?

At present, it remains to be seen how successful Google Glass will be. Google Glass could ultimately end up being a niche item. But if the device becomes successful, then it will cement Google's dominance over web services. To reiterate, by restricting the best Google Glass experience to Android-enabled handsets, the iPhone's dominance over the high end of the market could be hit. And by increasing Google Glass users' reliance on Google Hangouts (and by extension, to Google +), it could create a powerful threat to Facebook's dominance over the social networking sector. But whatever happens with Google Glass, it is clear that for Google, the future continues to be its web services.

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.