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Will This Move of Google Take It Higher?

April 23, 2014 | About:

Google (NASDAQ:GOOG), the search engine behemoth, recently revealed plans to enter the mobile devices industry in the realm of wearable devices.

The Opportunity

Google plans to capture the vast opportunity in the Android ecosystem and is looking way beyond conventional devices such as smartwatches and gaining a head start in a space that is believed to have immense potential. The research firm IHS revealed that Google’s wearable devices market is expected to have $20 billion in projected sales by 2016.

Hence a big question arises: Does this move automatically make Google the undeclared winner (and one of your best possible investment options) in the tech category? We need to find out if this is a great opportunity by looking into Google's recent history of hits and misses.

Looking to Diversify

Google has already witnessed a relative slowdown of its core business of online advertising revenue generation. It recently declared an earnings figure for quarter four that revealed a profit that fell short of analyst estimates, primarily due to an 11% decline in ad prices. The decline is mainly due to a major shift in the consumer usage pattern.

Google’s close competitor Facebook (FB) is actually doing quite well when it comes to advertising. Facebook’s recent purchase of mobile messaging service WhatsApp is an obvious indication of its active efforts to boost its mobile business. Google’s fourth quarter mobile advertising accounted for only 53% of the social networking giant's overall ad-based revenue.

Google's sale of Motorola's handset unit to Lenovo has indirectly helped Google create a powerful peer with the potential to offset Samsung's current market dominance into the handset business which is the biggest manufacturer of Android-powered handsets.

The Competition

Samsung recently unveiled its Gear 2 smartwatch lineup powered by the new Tizen operating system to counter Google's plans to secure the presence of its Android OS within the wearable devices category. With Google already having a strong rival like Apple (AAPL)'s iOS, it is certainly not in a position to fight Tizen as Samsung is involved in the process.

Apple also has its own set of problems that include a perceived lack of innovation in recent years. The CarPlay feature in automobiles integrates iOS with a range of in-car entertainment and navigation systems through which Apple is also moving into newer areas, such as automobiles.

The research firm eMarketer survey reveals that Google ended 2013 with a commanding global market share of 48.76%, with Facebook finishing way behind at second place with a 16.91% share even though it faced the problem of declining ad prices, all because its early entry into online advertising continues to secure its dominant position in a number of areas today.


However, Google's real cause for worry is probably its declining Android's current market share, gradually being captured by Apple's iOS with 41.6% market share very close to Google Android's leading figure of 51.7% as revealed by comScore survey. Hence, Google's move to expand into the wearable devices category seems like a perfect counterstrategy. So, smart investors must keep a very close watch on its near-term performance.

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