Ever since the advent of the Android OS, Google has been slowly entering into the hardware business, although the basic business model of the company relies purely on ads and advertisements, it isn’t stopping the software giant to make a new market segment for its new products. The company’s line of products includes Home smart speakers, Chromecast streaming devices, Nest cameras, thermostats, and the Pixel smartphone-lineup.
In the quarterly earnings report, Google’s hardware sales still look disappointing compared to its ad-revenue sales which comprise of 85.8% of Google’s total revenue but it should be noted that Google’s hardware sales are increasing every year with profitable returns. Alphabet, Google’s parent company categorizes Google’s hardware sales in the “other revenue” category. Other than the hardware sales this category also comprises of cloud business and app store reveals. In Q3 of 2018 the “other revenue” category comprised of 14% of Google’s quarterly revenue whereas the ad-revenue comprised of a total of 85.8%.
The success in Google’s hardware in recent times can be attributed to their smart home-speakers and its expensive Pixel phones. Experts project that in 2018 the Google’s hardware products will generate a combined total of $8.8 billion (6% of gross revenue) and a profit of $3 billion (4% of gross profits). Experts estimate that the hardware sales will increase to a total of $19.6 billion (8% of gross revenue) and a profit of $6.1 billion (5% of gross profits).
Although Google is not going to turn into only a hardware company like Apple anytime soon, it’s still interesting to note that its hardware business is maturing nicely into a self-sustaining extension of their primary business model, which, for the foreseeable future, will remain advertisements.
