At the opening of the Google IO 2019 the day before yesterday there were new services, a lot of machine learning and software. But there was also room for new mid-range Pixel smartphones : Pixel 3a and the Pixel 3a XL. When the Pixel debuted in 2016, many argued that Google was upgrading its hardware faster than Apple was upgrading its services. And that it would soon surpass the level of the iPhone causing a consumer turnaround.
Three years later, reality is once again showing its stubbornness in the technology sector.
Why Pixel is on the iPhone (and Galaxy)
Launching a smartphone and succeeding in the market is a high-caliber challenge. And as we will see, it is not an easy task even for a company with as many resources as Google. So, why get into this mess? What powerful reason is behind Google wanting to make life difficult for itself with this company? The answer can be found on the iPhone and, to a lesser extent, on Samsung’s Galaxy.
At the end of last year, Counterpoint published an analysis of manufacturers’ allocations according to price range. As can be seen, Apple dominates the $800+ terminal range with 79% while the $600-800 range is shared (somewhat) with Samsung.
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It is clear that Apple has enormous control over high-end users . Although they represent a smaller proportion of the total number of smartphones sold, the truth is that they are delivered to users with greater purchasing power. This means that they are a preferred “target” for advertisers of certain products or services. That’s exactly what Google’s business is all about. According to Sundar Pichai, Google’s CEO, in the last shareholders’ conference:
Let’s be honest here: Google is annoyed that Apple has such an influence on such an important segment. The company would love to be able to have those users to analyze and monetize them as they wish, without having to do so through apps limited by the constraints of the iOS or Samsung App Store on their Android terminals.
The best way to stalk those users is to convince them with a series of terminals fully controlled by Google and not by a third party (including Android manufacturers). Here is the raison d’être of Pixel .
Not only from cameras lives the smartphone
Over the years and as the great leaps in hardware become increasingly difficult to achieve, the camera has risen to the absolute prominence of the smartphone. Partly because it is a perfect testing ground to apply automatic learning techniques, partly because it never hurts to have a better camera, the truth is that it is where the technological advances are best noticed nowadays.
Once it was determined that Google needed to have its own smartphone, photography was the best way to make it stand out. And they succeeded. Features like Night Sight allow you to take pictures in poor light conditions, with amazing results. Better than an iPhone in certain circumstances.
After a handful of years, Google has managed to place its smartphones among the best in terms of photography against much more experienced manufacturers. Which is quite an achievement . However, this has not translated into a turnaround in sales. In fact, the Pixel business has not only remained unstuck but has also significantly regressed. According to the CFO of Alphabet, Google’s parent company, in the same conference:
Later, he states the following:
Clearly, Google is more proud of its smart speakers than of the performance of its smartphones. It is striking that Pixel has not grown year on year and that the blame lies with market conditions. The iPhone has also declined, but does so with a broad base that puts it at $31,051 million after a 17% decline in the last quarter.
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Pixel goes back even if it has a small base, whose exact amount we don’t know because Google doesn’t give data on income or units . It is clear that having a big camera is only part of the puzzle of success. The new Pixel 3a and Pixel 3a XL focus on an even more competitive price range and gain a greater presence in operator distribution.
It remains to be seen if these changes will improve the situation of Pixel, but there is not much reason for hope. The most valuable iOS and Android users can still enjoy the free Google services without buying a Pixel .
Apple services: the other side of the debate
“Google is improving its hardware faster than Apple is improving its services. Variations on this statement have been around since at least 2012. And are resurfacing from time to time on the occasion of the launch of new Pixel, Surface, iPhone or iPad Pro.
The contrast between the opinion of technology enthusiasts and reality becomes apparent just by looking at Apple’s financial results:
Segment distribution according to changes made by Apple in Q1 2019; growth percentages in previous quarters completed with the old system
Services has generated over $43 billion in the last 12 months. It is on track to meet its goal of reaching 50 billion by 2020. Meanwhile, on the hardware side of Google we don’t know how the hardware business is doing beyond a few pessimistic comments shared at the shareholders’ conference. It wouldn’t be surprising if it generated a tenth of what Apple’s services generate today.
Definitely, Google is not upgrading its hardware at enough speed . And Apple has increased its potential in services in a very significant way, placing new initiatives such as Apple TV+ or Apple Arcade that will continue to push this segment forward.
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