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Abu Dhabi, UAESaturday 23 June 2018

Google must expand its Pixel phone business despite small sales

There are many reasons why Google shouldn’t – and in fact can’t – close up shop on the Pixel

Google's vice president of product management Mario Queiroz speaks about the Google Pixel 2 XL phones at a Google event at the SFJAZZ Center in San Francisco. AP/Jeff Chiu
Google's vice president of product management Mario Queiroz speaks about the Google Pixel 2 XL phones at a Google event at the SFJAZZ Center in San Francisco. AP/Jeff Chiu

If you were to open a lemonade stand just down the road from a competitor and managed to achieve only 1 per cent of his sales after a year or two, you might be tempted to call it quits.

That’s the position Google currently finds itself in with smartphones, with a new report revealing that the company is selling a minuscule number compared to rivals.

According to analysis firm IDC, Google shipped 3.9 million phones – including the original Pixel and larger Pixel XL from 2016 and the corresponding Pixel 2 successors introduced last Autumn – in 2017.

By way of comparison, Samsung shipped 317 million smartphones while Apple moved 215 million iPhones. That’s more each week than Google managed in a full year.

To make matters worse, a number of users reported in online forums last week that their Pixel devices were running warm and experiencing a loss of battery life since getting their February software update.

Combined with earlier display and microphone issues, it hasn’t been smooth sailing for Google’s flagship mobile device. On the surface of it, the results look woeful.

But smartphones aren’t lemonade, which means there are many reasons why Google shouldn’t – and in fact can’t – close up shop on the Pixel.

On a subjective level, it’s an innovative phone despite its foibles so far.

The original Pixel and Pixel XL were the first to get Google Assistant, the company’s voice-controlled, artificially intelligent helper that is now migrating into all manner of electronics, from other phones and speakers to vacuum cleaners and cars.

The original Pixel also outdid the competition with its camera, earning the top score for smartphones from influential rating site DxOMark.

The Pixel 2 repeated that feat despite having only a single front-facing lens. With AI augmenting, processing and improving its photos, the Pixel 2 handily beats the more hardware-centric dual-lens approach taken by Samsung, Apple and others.

So what happens when AI augmentation eventually gets paired with dual lenses?

That’s just one of the intriguing questions that only Google may be properly equipped to answer thanks to its AI lead over competitors. Smartphone photos, perhaps starting with the inevitable Pixel 3, will likely be better for it.

But more than just a platform on which to push features, Google also needs the Pixel as a defensive measure against the future.

Although it’s hard to envision a time in which the company isn’t a dominant online force, the advent of voice AI has in fact opened the door to the possibility.

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Voice interaction represents a potential paradigm shift that could someday become the primary method by which people use and navigate the internet.

If Google doesn’t own that method, somebody else will – and become an existential threat to a company that makes most of its money through search-driven advertising on Web browsers. Amazon, via Alexa, is just such an emerging threat.

Google has a growing presence in voice through Google Assistant and could arguably rely on its various hardware partners to maintain its dominance as this usage shift unfolds, but that would be a dangerous bet on its own.

Samsung, for one, is forging ahead with its own voice assistant Bixby, pushing it into its phones, televisions and appliances. The South Korean company doesn’t want to be more reliant on Google than it has to be and the same holds true in reverse.

Google thus needs its own smartphones in case its current Android partners eventually develop their own software and AI alternatives. Boosting the Pixel business was likely the main driver behind the company’s US$1.1 billion purchase of HTC’s research and development division last year.

The good news for Google is that its comparatively small share of the market is growing. The 3.9 million Pixel phones shipped in 2017 was actually double the previous year’s amount, according to IDC, so momentum is growing.

Another positive is that the company achieved those results despite making the devices available in only six countries - the United States, Canada, United Kingdom, Australia, Germany and Puerto Rico.

They aren’t yet sold in several big markets, including China and India, as well as plenty of smaller ones including the UAE. There’s reason to believe that will soon change as Google Assistant – one of the Pixel’s flagship features – grows to support more languages.

Expansion of both is a matter of when, not if, which means that Google’s phone sales could be set for even better growth.

As for the Pixel’s technical problems, they are the unfortunate but expected growing pains in virtually any new product line. Both Apple and Samsung had to weather disastrous malfunctions – from "Antenna-gate" to exploding batteries – on their way to dominance.

If anything, Google deserves credit for so far avoiding the major malfunctions that have plagued its competitors. That, or the company has been lucky.

In most cases – as in the cut-throat lemonade business – having only a sliver of a market is usually grounds to assess whether it’s worthwhile continuing. But when it comes to smartphones, Google must play the long game.

Its primacy at the centre of the internet hangs in the balance.