Google (GOOGL) kicks off its annual I/O conference on Wednesday with plenty of goodies for software developers, but for investors it will take a lot of work to strip away the hype and find some substance.
Despite all the attention on wearables, home automation, self-driving cars and high-altitude balloons, Google remains a company making almost all its money from advertisements. And much of what’s expected at I/O will have little direct impact on the bottom line for some years, if ever.
Unlike Apple (AAPL), Google’s keynotes tend to be less focused and the products on view less complete. Earlier this month, Apple showed off a host of new software features designed to make Macs, iPads and iPhones more appealing. New uses for iPhones as controllers for home automation systems sold by others, for example, help sell more iPhones with little outlay from Apple. Microsoft (MSFT), too, filled its annual Build conference with products ready, or almost ready, for market.
But Google tends to run I/O like it's operating on a different planet. A new product or service touted at the conference may not become important for years, if ever.
It was at the first incarnation of I/O, back in 2008, that Google showed off the Android operating system for phones. More than a year after Steve Jobs unveiled the iPhone, Google’s Android looked far behind its competition. And it was – it would take almost three more years for Android to hit the big time.
Likewise, Google started showing off inexpensive laptops specially designed to run its Chrome operating system at the 2011 conference. Attendees even got a free Samsung Chromebook. But the offering was pretty much ignored by customers until 2013, when Chromebooks started to gain traction, at least within schools and large enterprise customers.
That means some of Google’s 2014 highlighted products and services could take a while to jell. The smartwatches and fitness trackers Google execs will show off as part of the company’s Android Wear initiative probably won’t sell in big volumes. But they will set the stage for further refinements and offer early competition for whatever Apple decides to announce later this year. Maybe in 2016 or 2017, they'll be as significant as Android is today.
Home-automation hardware may have a quicker payoff from an investor’s view, since Google is operating more on the Apple model in that market, making money up front on device sales. The $3 billion acquisition of Nest, co-founded by former top Apple executive Tony Fadell, gives Google its best chance to profit directly from consumer gadget purchases. Consumers already pay $99 for a Nest smoke detector or $249 for a thermostat. Soon they'll pay for automated home cameras, as Nest is buying Dropcam for $555 million.
At I/O, Nest is expected to highlight how it is opening its platform to third-party developers, letting garage door controllers and fitness trackers interact with its apps, for example. That will make Nest products more appealing and more valuable to consumers, without much additional effort by the company itself.
But for much of the rest of Google’s new offerings, the chance of any real business impact seems remote to non-existent. Making Android-compatible apps for cars, offering yet another iteration of Google TV or revamping the Nexus hardware line with the rumored Silver line all seem unlikely to bring in much revenue or increase the appeal of existing major products.
Many of the hyped products and services at I/O conferences past have ended up as total duds. In 2009, Google introduced the world to Google Wave. It quickly crashed and washed ashore on the beach of dead social networks. In 2010 came one useless version of Google TV followed in 2011 by Google Music. Neither made a dent in their respective markets.
The biggest dud factory may have been 2012, when Google gave I/O attendees a Galaxy Nexus phone, Nexus 7 tablet, Samsung Chromebox and the infamous flop Nexus Q. The four devices hit four of the biggest markets for computing – smartphones, tablets, desktops and set-top boxes – and none were remotely a hit. Meanwhile, Google+ was the highlight of the first day keynote.
With the departure of Vic Gundotra in April, who headed the Google+ effort, rumors are already circulating about the future of that former I/O darling. It didn’t rate a single developer session among the 80 Google will offer at the conference this year.
Investors are hoping to find something a bit more enticing in this year’s offerings.