Why is Big Tech still trying its hardware?
Why is Big Tech still trying its hardware?
The world's largest technology companies are selling more devices than ever, but only
Earn a lot of money doing it.
It is unlikely that this harsh reality will change soon, despite a series of new devices coming from Google,
They include smart phones, smart speakers, tablets, laptops, headphones and even a voice activated microwave oven.
It is also being incorporated into the game with the Portal, a video chat device that assumes that there are still people willing to trust the company enough to put one of its cameras in their home.
The success of all these new devices will vary widely depending on your segment. Amazon and Google currently lead the smart speaker market, while Microsoft has achieved a respectable niche in tablets. Meanwhile, despite having the leading mobile operating system, Google has he barely made a dent on smartphones But for all these companies that are not called Apple, hardware is still a secondary spectacle for much larger and much more profitable core businesses. Even unexpected success with your latest offers will not change that.
Consider that if Google sold 14 million units of its the new Pixel 3 smartphone during the next year, more than double what IDC estimates the company sold in the previous two, that would still be less than 10% of the parent company
Alphabet
From Inc.
GOOGL 0.66%
The advertising revenue projected during that time. The revenues of Microsoft Surface during the fiscal year that ended in June amounted to only 4% of the company's total. And, while details are scarce for Amazon's hardware sales, it would take a whopping 100 million units of its smart Echo flagship speaker of $ 99 to represent 4% of the projected revenues of the e-commerce giant this year. .
So, why bother? The motivations vary slightly from one company to another and probably include a bit of pride and fear of getting lost. However, one thing that the world's largest technology companies have in common is that they all came to where they are developing services that have made deep inroads into the lives of users. Their continued growth depends on the expansion of that commitment, and the sale of devices has proven to be a good way to do so. Brent Thill of Jefferies calls Amazon, Google and Microsoft devices "on access ramps to subscriptions".
Use intelligent speakers, a market segment that Amazon essentially created with the launch of its first Echo four years ago. Many of the devices that Amazon and now Google sell in this segment cost only $ 50 and occasionally even less. They promote the use of the central services of companies. A recent survey by the ComTech service of Kantar Worldpanel found that 56% of Amazon Echo owners subscribe to the company's streaming music service. This segment is growing rapidly. Market research firm Canalys expects the global intelligent speaker market to double 1008 in 2018.
Other device markets are much harder for even large companies to crack. Microsoft's Surface devices effectively developed a lucrative niche for business-focused tablets. It is likely that the recently developed Surface Pro 6 tablet and the Surface 2 laptop are based on that niche. But the premium design segment of tablets and laptops is also found on Apple's platform, which makes it a much more difficult market. While Microsoft Surface revenues increased a respectable 16% to $ 4.7 billion in the fiscal year that ended in June, that's only 10% of what Apple generated through the sale of iPads and Mac computers during the same year. period.
Microsoft's surprise offer this year was a pair of $ 350 wireless headphones that will also have to compete with Apple's Beats brand, which is currently the best-selling brand of wireless headsets in the US. UU., According to NPD.
No market has been more difficult to decipher for a stranger than smartphones. Amazon and Microsoft have both effectively waived In the meantime, Google's Pixel phones, considered by some to be the best Android phones on the market, have obtained barely a tenth of 1% of the global smartphone market since its first launch at the end of 2016, according to IDC .
Investors may wonder if it's worth the effort. However, participation in the device market is not the true point of the exercise. These technological giants need as many points of contact as they can to drive user commitment. Google and Amazon in particular are competing to build the voice-controlled platforms of the future, which means that both need to sow the market with all the microphone devices they can. In that sense, even a few million phones help more than they hurt.
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