Google Glasses Key to Establishing GOOG as a Serious Gadget Maker

Google‘s (NASDAQ:GOOG) secret projects lab, Google X, works on some far out projects. One of the most widely publicized in recent months is Google’s self-driving-vehicle technology. The company converted a whole fleet of Toyota (NYSE:TM) Priuses so that they could navigate roads all by themselves.

Here’s a question, though: Can a person use a smartphone while operating Google’s auto-automobile? Of course not. “Driving” the car does require occasional human intervention to ensure its safe operation. A shame: Google would certainly love it if you could safely use your Droid phone while riding in your Google car. Then again, Google may have a new mobile device in production that you can use anytime, anywhere, and that could create an entirely new market segment that stands alongside tablets and smartphones. Here come Google Glasses.

According to a report posted Tuesday by The New York Times, Google is preparing to release a pair of spectacles that run on the Android operating system and display all kinds of information to the person wearing them via a small, semitransparent window that streams information directly to the eyes.

These glasses will be connected to 3G and 4G networks, providing GPS information, social network data about nearby friends, and data on your surroundings, from reviews of restaurants to directories for buildings in the vicinity. Word is, the glasses, intended for occasional use and not as prescription vision aids, already work, but Google X is debating privacy infringement problems created by the eyewear. The glasses will cost “around the price of current smartphones,” the Times story notes, which would place them in a pricey but still consumer friendly range of $250 to $600, not unlike Apple‘s (NASDAQ:AAPL) iPad tablet.

Potential to create a new market

The iPad’s stature in the business landscape is certainly not lost on Google. Its Google Glasses won’t necessarily be copying iPad features, but it likely is part of a push to permanently reshape the market for gadgets. Google has the potential to literally create a whole new market segment with these glasses, convincing consumers to spend on yet another gadget in addition to smartphones, tablets, and even PCs. While Google has its official phone, the Samsung-made (PINK:SSNLF) Nexus line, and rumors have swirled that the company is preparing to enter the tablet market, potentially with a device by future subsidiary Motorola (NYSE:MMI),  Google Glasses represent the company’s first and best opportunity to make Google a gadget player and not just a software maker.

Consider the niche the iPad has carved out over the past two years. IHS iSuppli puts total tablet sales worldwide in 2011 at around 65 million, 40 million of which were iPads. This was in addition to 472 million smartphones sold over the course of the year. While much has been written about how the PC market is in peril—research firm IDC said 2011 was the PC market’s worst year of growth in 10 years—PCs continue to sell. The rise of tablets didn’t disrupt the growth of the smartphone market even though the devices fill nearly identical roles, and it didn’t cause the PC market to disappear. The key to diversifying the overall computing gadget market is to find how that market isn’t already being served.

Google could potentially create a new niche for totally hands-free connected devices in the form of apparel. It won’t have to worry about competing with giants like Apple, which already have obsessive followings among consumers, because it will be the only game in town. It will also, as a result, hold the many patents that define the technology of that new connected apparel market segment. This is how Google creates its billion-dollar hardware business—by getting you to wear its technology.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.

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