This week, Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) was looking a lot like Apple Inc. (NASDAQ:AAPL) — not just because Alphabet stole the tech media’s attention with a highly anticipated event, but because that event was all about hardware.
Arguably the biggest news to come out of the event was the company’s new smartphone, called the Pixel. This has been dubbed the first “real” Google phone, and I could spend an entire article discussing the pros and cons of its features.
But that would be totally beside the point.
I’m not saying that because of the laundry list of other devices Google revealed either, which include a fashion-forward virtual reality headset, a smart home speaker, a Wi-Fi router and more.
I’m saying it because GOOGL stock investors need to remember their north star.
Don’t Forget What Makes and Breaks GOOGL Stock
This tech behemoth may have its moonshots, but the end game — especially from a business perspective — is always the same. Whether we’re talking software or hardware, Google feeds on data.
Remember, revenue from Google is, by and large, ad revenue. Ads, in this day and age, rely on targeting. And targeting relies on data.
It’s no coincidence, then, that Alphabet is highlighting the AI capabilities of its individual products and the “Internet of Things” they together form. AI feeds on data just like ads do. While GOOGL may say it’s connecting disparate devices into one network for the sake of consumer convenience, and while Google may tout a “personalized experience” for each and every user, there’s a four-letter word at play here.
I say four-letter word because, while Alphabet’s business may depend on data, questions around tracking and storage are already being raised in the wake of the company’s latest hardware announcements. This is important for GOOGL stock investors to realize. While there are plenty of specs to dissect — the phone, for instance, sports a 12.3 megapixel camera, can be powered for seven hours by a mere 15-minute charge, comes with unlimited cloud storage and more — the biggest question mark around the phone and other pieces of hardware is privacy.
TechCrunch was especially critical of the “sweeping breadth of [Google’s] ambition to own consumer data” in an article called “Not OK, Google.” The article didn’t just look forward, but backward, noting that other products relying on AI (such as Google’s Allo messaging app) already pose privacy concerns.
Bottom Line
Consumers love convenience and have see-sawed toward it over privacy for some time. But conversations and questions about that opportunity cost continue to grow, and we could see a tipping point. Alphabet investors must remain aware of this narrative.
Don’t let a hardware reveal distract you. Specs are cool, cameras are cool, VR is cool. But for GOOGL stock, it’s all about data.
Consumers will have to continue being cool with that for any of these hardware products to gain traction.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
