Google’s head of hardware is betting big on ambient computing
It’s time for Google to turn up the volume — metaphorically — on selling hardware. That was my takeaway from a conversation with Rick Osterloh, the head of Google’s newly named “Devices and Services” division. “We just passed our third-year anniversary as an organization,” he says, but “last year was a really pivotal year.”
It was. In 2018, Google acquired HTC engineers, released the Pixel 3, and finally integrated Nest. This year, Google is beginning to cash in on those decisions. The new Pixel 3A is the first phone to fully utilize the “Taiwan team,” as Google refers to those former HTC employees. And Google has finally made the move to merge its own Home-focused product division with Nest. “Pixel means Google’s first-party phone products,” Osterloh says, “and Nest will mean Google’s first-party home products.”
If Google hardware fails to take off in big numbers in the next couple of years, it won’t be because of a lack of resources or confusion about who makes what at Google. The runway for Google’s hardware has been straightened and cleared. But it has not, to my mind, been lengthened. Five years after founding the division is when Osterloh originally told me he expected to “be selling products in high volumes” when we spoke in 2017. So he doesn’t have a lot of time left.
This year, Osterloh says that Google’s hardware sales numbers are “good, but not where we want to be at the end of five years.” Investors seem to agree, hammering CEO Sundar Pichai about how hardware hasn’t made much of a contribution to Google’s bottom line in the last quarterly call.
So it’s no surprise that Google is looking to juice those numbers by selling a new, lower-cost Pixel phone. The Pixel 3A starts at $399, but has the same industry-leading camera found on the more expensive Pixel 3. The 3A is not only inexpensive, but also available on more US carriers — everybody but AT&T, basically.
With the 3A, Osterloh is clearly going for big volume numbers. “It’s no secret that you have to be large in the smartphone business to have a great business,” he says.
Osterloh is now in charge of everything hardware at Google, from Pixel phones to Stadia game controllers, but the “Services” part of his division is becoming increasingly important. Those services include Google One (which is mostly storage for now, but could grow to include more things), AR / VR, and the upcoming Stadia game streaming service itself. Basically, if you’re a consumer giving Google money for something, it’s likely that Osterloh’s division is in charge of making sure it’s good.
The change that’s most instructive about the future might be the newly combined Google Nest group.
Ever since it was acquired in 2014, Nest has been a hot potato within Alphabet, Google’s parent company. It was bought by Google, but then spun out to operate independently as a separate unit when the company reorganized as Alphabet before getting folded back into Google in 2018. It was still meant to work in its own lane, but then it became part of the Google Home team later that year.
It’s been confusing, and Osterloh admits that “timing” was one reason he couldn’t clean up that confusion earlier. His division was just too young to merge in an entirely different team. “We definitely have evolved our strategy,” he says. He points to the classic Google problem of multiple divisions trying to do the same thing, and says that definitely applied to Home and Nest. He says there was a “70 to 80 percent overlap” in long-term plans between the two groups and “if you bring them together, you could de-dupe it and get to the end state faster with more impact.”
The Google Nest Hub Max is the first example of this integration — it’s a Google Assistant smart display that also can work as a Nest camera. Another immediate impact is giving Nest users the option of converting their accounts into full Google accounts — which have Google’s entire security infrastructure behind them. “We’ve had challenges with security with some Nest users,” Osterloh admits, referring to users reusing compromised passwords.
There’s going to be a new set of privacy policies for users who make the switch from a Nest to a Google account, and any change like this should make users rightfully skittish about needing to pore over privacy policies. Osterloh says that Nest users who make the switch can expect that “the commitments we’re making to our users are the same commitments that Nest would’ve been making to their users if they were an independent company.” There’s a lot to cover here, and we’re doing so in a separate piece.
If you’re looking for what ties Nest, Pixel, and Google’s other assorted hardware products together, the obvious answer is that it’s the Google Assistant. And Osterloh’s larger vision is to move beyond mobile into “ambient computing.” In his last column, Walt Mossberg popularized that term and Google is latching on to it now in a big way.
Here’s how Osterloh describes it: “Our vision is that everything around you should be able to help you. And so many things are becoming computers that we think the users should be able to seamlessly get help wherever they need it from a variety of different devices.”
Read between those lines and you’ll see two things. First, Osterloh is making the case that Google products are forming an ecosystem, one where Pixels and Nest products and Chromebooks all work better together than they do apart. Second, getting into that ambient computing ecosystem will probably require you to get more than one of those devices.
So Google will try to make and sell them to you. Now that the Devices & Services group is established and Nest is finally, fully integrated, there’s nothing left in the way, no questions about what to do or what divisions should do it. Now Google just has the clear task of competing directly against Apple, Amazon, and Samsung for mobile and the home. No pressure.