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GOOG Hardware Diversifies Revenues, Boosts Mobile Ads

The push into hardware is a great long-term play for the company

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Google (GOOG) was once completely reliant on ad revenue. Today, it’s a technology giant whose stock trades above $1,000. It’s no longer just a search engine, but a leading provider of cloud-based productivity software, social networking and video streaming.

Its Android operating system is on more than 80% of smartphones and the majority of tablets, while Google Play is the world’s biggest app store. With Chrome OS, Google has a PC operating system to challenge Microsoft (MSFT) and Apple (AAPL). Over the past few years, GOOG has pushed to diversify, which has included a growing emphasis on hardware. The purchase of Motorola Mobility and high-profile products like the Nexus smartphones and tablets and its Project Glass augmented reality glasses have signaled Google’s intention to be consumer electronics provider, too.

Google’s forays into hardware reduce overall reliance on advertising and help the company to grow its ad revenue at the expense of competitors. While GOOG is the biggest player in this market, companies such as Yahoo (YHOO), Facebook (FB) and Microsoft all have big chunks too. With 41% of online ad revenue and 53% of mobile ad revenue, Google not only has a lot of turf to protect, it still has plenty of opportunity to grow.

Enter Hardware

Google continues to release highly competitive hardware in existing product categories — think the Nexus line of smartphones and tablets and the Motorola division’s new Moto X smartphone — and it also invests in futuristic technology. The self-driving car may not come to anything anytime soon (I think of that one as a PR exercise as much as anything), but Project Glass has thrust augmented reality and wearable tech firmly into the public spotlight.

Seeing Google’s Sergey Brin wearing prototype AR glasses in public may have been dismissed as a stunt, but GOOG now has thousands of people who shelled out $1,500 each to be Glass Explorers wearing the high tech specs. The program is expanding with a bigger round of users and new hardware in advance of what’s expected to be a 2014 retail launch.

The Google glasses would then join the smartwatch the company is reportedly close to releasing, putting GOOG in a strong position to lead the wearable technology market. It’s no coincidence that wearable tech provides a big opportunity to capture mobile ad revenue.

The Moto X smartphone from Motorola was hardly a surprise, but Google’s smartphone division recently dropped a bit of a bombshell with news that it’s developing a platform for modular smartphones. Project Ara would see smartphone hardware open sourced, a la Android, allowing consumers to build their own phone and swap out components at will.

Article printed from InvestorPlace Media,

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