A staggering cost, but a bet on the future

Waymo, Loon, Wing, Access, Verily or Calico regularly make the “one” of the news around Google, yet these names of projects as innovative as they are are financial sinkholes, which make lose 1 billion dollars per quarter to the company. Real bets on the future .

Alphabet, the parent company of Google has just released its revenue for the second quarter of 2018 . And it reveals that without Google, some sectors would progress much more slowly. The phrase, the goose that lays the golden eggs may never have been so good. Indeed, the column Other Bets “other Paris”, which brings together more or less all activities at risk, is loaded with negative figures.

In this category, we find structures such as the Waymo autonomous car, the Experimental X laboratory, Google Fiber for very high speed, DeepMind for artificial intelligence or Calico and Verily for the biology aspect. In short, a tote that does not weigh much at the moment but especially that is expensive. Of course, these services have earned 145 million revenues in the second quarter (+ 33%); But it also costs Alphabet 732 million. To make matters worse, Nest, one of the profitable structures of “other bets” is now part of Google.

Results that remain very positive

On the side of Google, these numbers do not worry. On the one hand because the tests that work are going to join Google and probably to be very profitable even if it is long term. But above all, as the name suggests, it’s really about betting. The idea is to take risks so as not to miss the next very good idea or a buoyant market. Moreover, they are also able to adapt. It is noted with Fiber which has adapted to the wireless transmission. Every year, Google spends $ 4 billion on “other bets”.

Despite these figures that represent the future growth drivers of the company, Google continues its insolent growth at a brisk pace with a sharp rise in turnover, a stock market rise and a great confidence on the part of shareholders. So many reasons that encourage a smug optimism. And too bad if the bets are in the negative for a few years

Google’s boss reacts to the sanctions of the European Commission

4.34 billion euros is the record fine that the European Commission imposes on Google for abuse of dominant position. In a statement, Margrethe Vestager, European Commissioner for Competition, accuses Google of using the Android operating system to strengthen the dominance of the search engine Google Search.

More specifically, the Commission criticizes Google for having:

Required manufacturers to pre-install the Google Search app and browser (Chrome) as a condition of licensing their online store (Play Store)
paid some major manufacturers and some major mobile network operators to pre-install the Google Search app exclusively on their devices
prevented manufacturers wishing to preinstall Google apps from selling even one smart mobile device running on other versions of Android not approved by Google (the “Android Forks”)
In addition to the fine, Google will also cease the practices behind these penalties, under penalty of a penalty of up to 5% of the daily turnover of Alphabet.

But Google does not agree, Sundar Pichai reacts

The reaction of Google, who will appeal this decision, was not long in waiting. In a statement issued after the announcement of sanctions, the boss of Google, Sundar Pichai, accuses the European Commission to ignore the fact that Android smartphones must compete with iOS phones.

According to him, the decision also forgot “the choice that Android offers to thousands of phone manufacturers and mobile network operators who build and sell Android devices.” He also recalls that thanks to Android, “millions of developers” have been able to create businesses and “billions of consumers” have been able to afford advanced smartphones.

Sundar Pichai also explains that if there are indeed rules concerning the use of Android by the manufacturers, they allow to ensure a technical compatibility between the different devices. However, Amazon, for example, does not follow these rules for its Fire tablets.

For pre-installed Google apps, the boss of the Mountain View firm reminded that it is very easy to remove these and replace them with alternative apps.

“In fact, a typical Android phone user will install about 50 apps themselves. Last year, more than 94 billion apps were downloaded worldwide from our Play app store; Browsers like Opera Mini and Firefox have been downloaded more than 100 million times, UC Browser more than 500 million times, “he argues. “This is in sharp contrast to the way things were going in the 1990s and early 2000s – the dial-up era. At the time, modifying pre-installed applications on your computer or adding new ones was technically difficult and time consuming.

And if Android was paying off in Europe?

But the most important is that by banning certain practices of Google, the European Commission may break the balance of the Android ecosystem. Indeed, as Sundar Pichai explains, Google earns money only if its applications are used. Android is free for builders, but to preinstall the Play Store, they must also preinstall other Google apps. However, this does not prevent them from preinstalling other competing apps.

“A healthy and prosperous Android ecosystem is in everyone’s interest, and we have shown that we are ready to make changes. But we are concerned that today’s decision will upset the cautious balance we have found with Android, and send a disturbing signal for proprietary systems (such as iOS) against open platforms, “writes Sundar Pichai.

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