Diversifying revenue sources
Amid increasing competition for advertising dollars, there is growing pressure on Google to diversify its revenue sources. In the third quarter of 2018, advertising sales accounted for 86% of Google parent Alphabet’s (GOOGL) total revenue. As part of the attempts to break its reliance on advertising revenue, Google has ventured into businesses such as providing cloud computing services and selling hardware products.
$6.1 billion in hardware profits
Cloud and hardware sales are bundled under a segment reported as Google other revenues. In the first nine months of 2018, Google other revenues totaled $13.4 billion compared to $10 billion in the similar period a year ago. According to a research note from RBC Insight cited by CNBC, Google’s hardware business alone could generate $19.6 billion in revenue and $6.1 billion in profit by 2021.
22.7% of the global smart speaker market
Google’s hardware business includes smartphones, smart thermostats, and smart speakers. In the third quarter of 2018, Google shipped 5.2 million smart speakers and captured 22.7% of the global smart speaker market, according to data from Strategy Analytics. This share placed it only behind Amazon (AMZN), which captured 31.6% of the global smart speaker market in that quarter. Alibaba (BABA) and Baidu (BIDU) captured 9.5% and 8.4% of the global smart speaker market, respectively, in the third quarter. Facebook (FB) is also pursuing the revenue opportunity in the smart speaker market with the launch of a display-enabled speaker device called Portal last year.