What’s the first thing you think about when it comes to Alphabet Inc (NASDAQ:GOOG, NASDAQ: GOOGL)? There’s a good chance that Search is at the top of your list. After all, its former namesake search site has been driving the cash flows and profits at GOOGL stock for years. Especially since it has data-mined those results to sell plenty of ads and generate significant advertising revenues.
But Google isn’t a one-trick pony.
Like rivals such as Amazon.com Inc. (NASDAQ:AMZN), GOOGL has become one heck of a device and products maker. And while it’s easy to dismiss these gadgets as “hobby business” or non-core operations, the reality is, they are paramount to Google’s underlying mission and business.
In the end, device growth — and what Google does with those devices — is the real driver for GOOGL stock.
Over 157 Products at Google
In total, GOOGL makes over 157 different products for customers. And while the vast bulk of them are Web-based applications — Gmail, Maps, Chrome, etc. — the firm has continued to plow some big-time dollars onto the physical device market.
That may make GOOGL investors a tad bit nervous considering how poorly of an investment Motorola turned out to be for Google. If you remember, GOOGL paid more than $12 billion for the cellphone manufacturer, only to sell it at steep $10 billion loss a few years later. But what Google kept in the sale — some valuable technology patents and applications — is what is going to drive Alphabet’s dominance over the device market.
In recent months, Alphabet has launched new home artificial intelligence equipment, smartphones, virtual reality headsets and home WiFi units. These products join GOOGL’s cadre of Nest WiFi-enabled thermostats and home automation products, Chromebooks and tablets. You name it.
And while many of these items are very impressive in their technology and have caught on with consumers — Nest and its Pixel phones in particular — none of these devices have become huge money makers for Alphabet. Revenues for Google’s physical tools are pretty non-existent and in some products, are actually losses.
So why would Google want even to dabble in device market? It seems that it should just be focusing on ways to continue generating ad sales from is core search operations. But building out ad sales is exactly what GOOGL is doing. To understand why we just need to look at one of its competitors.
Big Data Opportunity for GOOGL Stock
Amazon’s Fire Tablet and new Echo home device aren’t really about making your life easier — it’s about selling you that next movie or book. It’s a way to distribute Amazon’s content and products. In all of this, Amazon is collecting tons of data on your preferences — by what you click and say — to sell you more items down the road.
And that is exactly what GOOGL is doing.
If you’re not searching for something or checking your email, Google has no idea what you’re up to. But slap a home automation device on your wall, smartwatch on your wrist and AI chip in your car, and suddenly Big Brother knows what you’re all about. And in that data collection is where Alphabet is going to thrive.