The Only Way Google can be Successful in Consumer Electronics

Yesterday I detailed how Google IS the tech news of the day and folks, this search leader is ambitious – more so than Microsoft ever was. In addition to a Dropbox killer and massive Google+ growth I outlined in this recent post, the company is also getting into the home entertainment business through its Motorola Mobility acquisition. Specifically Google will release a self-branded line of consumer electronics allowing you to stream music throughout your home.

Google already has a cloud-based music service so obviously there is synergy there but the only way I see this strategy working is by Google doing things differently.

My loyal readers know I am a fan of Sonos – they sell an in-home audio streaming service which integrates with Slacker, Pandora, Sirius/XM, Spotify and even integrates with iOS devices and iTunes libraries stored on computers. In-short, you have access to all your music and favorite radio from any room. But Sonos products although they are great, are not cheap. The company’s Play:5 for example will set you back $399 and the company’s Bridge which you’ll also need adds another $49 to the total.

Sure this is cheaper than wired alternatives but at just over 1,000,000 rooms the company has a long way to go before it becomes the audio equivalent of Apple.

Moreover the palindromic Sonos taps into existing ecosystems – it doesn’t get involved with them. In other words you have the option to pay for the ad-free or premium versions of each radio service you are interested in.

Google execs woke up today and realized Apple’s market cap just surpassed the combined value of it and Microsoft together. It understands the ecosystem is the future. And Google’s strength is selling ads.

What this means is that Google needs to have its own streaming radio station and moreover needs to get into the radio advertising business again – the last time it tried it had disastrous results but I would liken this sort of radio ad model more similar to YouTube than traditional radio advertising. All of this is great news for Google because they excel at on-demand as opposed to real-time ad selling – for the moment.

So what I see Google having to do is integrate radio ads into its music streaming service but more importantly it needs to one-up Siri by speech-enabling all the devices in the house before Apple beats them to it. Remember that in December of 2009, Apple purchased streaming service Lala and at the time I surmised it was to Get Apple into the in-home streaming business.

The race is on.

Back to Google – it obviously would want to integrate Google+ into any of its new offerings allowing users to share the music they are listening to, the programs they are watching, and everything else.

Sonos for its part has nearly-perfected home audio. Google should think about picking them up rather than reinventing the wheel. Moreover, if Google is really serious about this market it should consider an acquisition of Bose – if the privately-held company would consider such a deal. That way it could have an established brand with retail stores which will allow it to go head-to-head with Apple in malls worldwide.

So I see the only viable future for Google in home entertainment being a subsidized model like the Amazon Kindle Fire. It is just unclear if advertising will generate enough revenue to offset the hundred dollars or more I believe the company will have to discount each product to gain the massive traction it needs in the market. As we know, Google hasn’t been successful in retail and Motorola Mobility has had some moments of brilliance in the past but got its teeth kicked in by Nokia, RIM and Apple.

The Kindle Fire model – “we will give you an awesome deal” is the only one I see working here. The question is can the company really monetize this hardware effectively? Time will tell.

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