March 6, 2021

News Analysis: Google Goes Hardware Shopping

“MOVE bits, not atoms.”

It has been the motto of the Internet age, coined by Nicholas Negroponte and popularized in his 1995 best seller, “Being Digital.” Mr. Negroponte, founder of the M.I.T. Media Lab, was saying that innovation and fortunes would increasingly be made doing imaginative things with the basic elements of computing — bits, short for binary digits — instead of working with the atoms of the physical world.

No company has followed that advice more single-mindedly and lucratively than Google. The search giant is the ultimate digital company, and its most precious assets are its algorithms — software snippets of distilled mathematical intelligence. As Steven Levy writes in his book “In the Plex,” the company’s DNA is “rooted in the primacy of algorithms” and its young leaders believe “in a future guided by benevolent algorithms.”

Yet Google announced last week that it would pay $12.5 billion for Motorola Mobility, a maker of smartphones. It is a big bet and a step into the messy physical world of selling products to people — and perhaps a sign of the times.

Even Google, analysts say, recognizes that its prosperity will depend on mastering atoms as well as bits. That is particularly the case, they add, in the new growth markets for search advertising on smartphones and tablets, where software and hardware must knit seamlessly together for a pleasing consumer experience.

The digital future, it seems, will be less a takeover of the physical world than a marriage with it. “This bits-atoms dichotomy is becoming less and less true,” said Erik Brynjolfsson, director of the M.I.T. Center for Digital Business. “And Google understands that it needs a deeper knowledge of product design and hardware to get the most value from its bits business, search and search advertising.”

Google, to be sure, is buying Motorola Mobility for more than its phone-making expertise. Motorola holds more than 17,000 patents, and that portfolio could be a formidable shield against patent-infringement claims. The industry has been rife with suits and countersuits recently, as competition in the marketplace spills over into the courts. Apple, Microsoft and Oracle, in different cases, have accused Google or the companies that use its Android smartphone operating system, including Motorola, of infringing on their patents. It is possible that the patents are the prize in the Motorola deal, and that Google will sell off the phone business sometime later.

But in a blog post, Larry Page, Google’s chief executive, mainly emphasized the business opportunity ahead. “Together,” Mr. Page wrote, “we will create amazing user experiences that supercharge the entire Android ecosystem.”

Android has proved extremely popular with phone makers, and its market share of new handsets sold is now well ahead that of Apple, the pioneer and pace-setter in smartphones. But Google licenses Android to 39 handset makers worldwide, and the operating system is free and open-source, which means the manufacturers can tweak and tailor the software.

Google’s openness comes at a cost; the phones vary widely, and some customers complain that Android phones are clunky and confusing to use.

So Google is borrowing a page from its Silicon Valley neighbor. “In fast-changing technology product markets, there is a real advantage to controlling both the hardware and the software — that’s the genius of Apple,” said Thomas R. Eisenmann, a professor at Harvard Business School.

The Motorola Mobility venture, business experts say, promises to educate Google about consumers — and just how cranky and demanding they can be.

In its search and advertising business, Google deals with consumers at arm’s length, online and through software. Users type in search queries, contributing vital raw data that Google’s clever algorithms mine to produce more useful search results and more accurately directed ads.

Google is a triumph of computer-automated efficiency. For the most part, the formula works to the benefit of all — people searching for information, advertisers pursuing customers online, and Web publishers seeking ad dollars. It works best of all for Google, which is collecting profits at the rate of about $10 billion a year.

Still, the approach can be mechanical and brittle. When Google decides to evict a small Web publisher from its ad service, it sends a computer-generated form letter with the bad news. It says the Web site “poses a risk of generating invalid activity.” Why, the publisher might ask? You will never find out from Google. The only appeal is to fill out a Web form. Good luck. You can’t talk to an algorithm.

Last year, Google tried selling its own smartphone, the Nexus One, manufactured by HTC of Taiwan, through an online store. The experiment was folded after a few months. When buying a complex gadget, most consumers want to see the product, touch it, get a little hand-holding and help.

Apple certainly knows that, as any visit to its stores makes clear. Can’t figure something out? Make an appointment at the Genius Bar, and friendly, knowledgeable Apple employees will most likely solve your problem. Buy the wrong connector cord or some gizmo, and bring it back a few days after the 14-day return policy expires? No problem. It is commerce guided by human accommodation.

No one expects Google to open stores or drastically change its corporate culture. But for the Motorola purchase to pay off, Google is “going to have to master new skills like customer service and industrial product design for consumer products,” said Mr. Eisenmann of Harvard Business School. “It’s going to be a challenge for Google, but it’s not impossible by any means.”

Google, after all, often describes itself as a learning machine.

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