Tech firms gun for captive customers
Technology used to be so simple.business Updated: Feb 13, 2012 21:55 IST
Technology used to be so simple.
In the old days, you listened to music on your iPod while exercising. During an idle moment at the office you might use Google on your Microsoft Windows PC to search for the latest celebrity implosion. Maybe you would post an update on Facebook. After dinner, you could watch a DVD from Netflix or sink into a new page-turner that had just arrived from Amazon.
That vision, where every company and device had its separate role, is so 2011.
The biggest tech companies are no longer content simply to enhance part of your day. They want to erase the boundaries, do what the other big tech companies are doing and own every waking moment. The new strategy is to build a device, sell it to consumers and then sell them the content to play on it. And maybe some ads, too.
Last week's news that Google is preparing its first Google-branded home entertainment device - a system for streaming music in the house - might seem far afield for an Internet search and advertising company, but fits solidly into an industrywide goal in which each tech company would like to be all things to all people - all day long.
"It's not about brands or devices or platforms anymore," said Michael Gartenberg, an analyst at Gartner.
"It's about the ecosystem. The idea is to get consumers tied into that ecosystem as tightly as possible."
So Facebook, which has half of its users accessing it from mobile devices, has dabbled in phones. Apple, once just a computer maker, already gets most of its profit from mobile devices and is eyeing televisions to play content from iTunes.
Amazon created the Kindle Fire tablet, and there is intense speculation it is developing a Kindle Phone. Microsoft, which has tightened its relationship with Nokia to again be a major player in phone software, has placed its Xbox in millions of living rooms as a home entertainment portal.
Reports of the new Google device come just as the search giant's $12.5 billion purchase of Motorola Mobility is expected to close, giving Google direct control over one of the companies that uses its Android phone operating system.
Before the advent of coordinated systems, executives at consumer technology companies babbled endlessly about connected homes and convergence. But no one had the pieces of hardware and content that fit together seamlessly.
The pioneer - and perhaps the inspiration - was Steven P Jobs, the late Apple chief who made creating devices look easy with the iPad and iPhone. Dream them up, make the software complement the hardware, outsource the production, sell at a premium and watch your company become the most valuable on earth.
But the tech landscape is littered with the wreckage of those who tried to capture some of Apple's magic. Ask Research in Motion, HTC or Hewlett-Packard about their experience with tablets and they will not show joy.
Even when the system is successful, things can go wrong. Despite a captive audience, the management can feel an urge to force-feed, upsell or otherwise take advantage. It is probably not a coincidence that much of the lingo of these systems borrows from prison, starting with "locked in."
Sean McDevitt, a consultant with CSMG, explained Google's move into hardware as less "I want to make devices because I want to have the margins of a manufacturer" and more "I want to make devices that work the way I want them to work."
As an example of how Google will use hardware to push software, McDevitt cited Google Wallet, a cellphone payment system released late last year. All a customer would have to do to buy a pack of Juicy Fruit was wave a smartphone. It had Citigroup encourage its MasterCard holders to use Google Wallet as an extension of their credit cards.
So what stopped Google Wallet from taking off? Probably the fact that it works only with a Google Nexus phone, not exactly the most popular out there.
"The next new Motorola phone will undoubtedly come preinstalled with the Google Wallet near-field communications chip," McDevitt concluded in a report. "And where Motorola leads, the other handset manufacturers using Android are likely to follow."
Where the entertainment player will fit into the Google landscape is unclear. When Google introduced Google Music last November, the company marketed the service as a way for its users to share and discover new music with its social media feature Google Plus. But it has failed to sign up Warner, one of the top four music labels, and users have criticised the sharing feature as confusing.
"Who knows how the model is going to play out?" said Andrew Murphy, an analyst at Piper Jaffray. "Google doesn't know yet. But if you aren't building it today, then you aren't winning in five years."