Google Stock Stakes Its Future on "Android Everywhere"

One theme that became abundantly clear during Google Inc.'s (Nasdaq: GOOG, GOOGL) flurry of announcements yesterday (Wednesday) was the company's determination to put its Android operating system on every device imaginable.

What wasn't as clear was how this strategy will affect Google stock.

But make no mistake. What the Mountain View, Calif.-based search giant unveiled at its I/O developers' conference yesterday is destined to have a huge impact on GOOG stock over the next several years.

Let's first take a look at just what Google is doing.

Yesterday Google said it was expanding Android to run not just on tablets and smartphones, but also on wearable tech like smartwatches, in-car entertainment systems, and its own Android TV. The software on Google's Chromebook laptops will also be better integrated with Android.

But there's more to Google's Android plans than just having Android everywhere. Devices running Android will also be able to "talk" to each other. Actions taken on a notification on a smartphone will be mirrored on another device, like a Chromebook.

That's not all, though. An Android smartwatch could communicate the presence of a user, triggering another Android device to take a particular action.

google stock

"If I go and pick up my kids, it would be good for my car to be aware that my kids have entered the car and change the music to something that's appropriate for them," Sundar Pichai, the executive who oversees Google's Android and Chrome software projects, told The New York Times.

This "Android everywhere" makes a lot of sense for GOOG - when you control a platform, you want it be as pervasive as possible.

But doesn't Google give Android away for free? How will that help the company - or for that matter, Google stock?

Ah. It may be true that Google doesn't make any money from Android directly, but the platform is absolutely vital to Google's overall business.

Here's why...

Why Android Is Critical to Google (Nasdaq: GOOG, GOOGL) Stock

Android has never been an act of benevolence on Google's part. The idea has always been to seed the world with a platform that would drive people to the company's real money-makers, search and advertising.

Along the way, Android delivered a bonus - app revenue via the Google Play store. Like Apple Inc. (Nasdaq: AAPL) with the iTunes Store, Google takes a 30% cut of each app purchase.

So while Android itself generates no revenue, it's vitally important to Google's overall business - and particularly to GOOGL stock.

But even that is only half the story...

When Apple introduced the iPhone in 2007, Google looked into the future and did not like what it saw.

If Apple had been allowed to dominate mobile computing with its iOS operating system, it would have had the ability to cut Google out of the loop. And Google would have been powerless to stop it.

Apple has shown its willingness to do this when it dumped Google Maps on iOS for its own Maps app that it developed in-house. Apple has also launched a mobile ad service, iAd, to compete with Google's AdMob.

In that sense, Android also serves as an insurance policy against Apple, or any other rival, becoming so dominant in mobile that they could siphon customers away from Google's profitable businesses.

So far, the strategy has worked. Android has been wildly successful - the operating system recently surpassed 1 billion users worldwide, mostly through the spread of moderately priced smartphones.

But Google needed to raise the stakes with Android everywhere because the world of mobile computing is about to get much, much bigger.

Preparing for the Internet of Things

Android everywhere is how Google intends to preserve its position as mobile expands from just tablets and smartphones to watches, cars, thermostats, and anything else into which you can stick a sensor.

"I love this strategy of extending Android everywhere," said Money Morning Defense & Tech Specialist Michael Robinson. "With its foray into homes through Nest, robotics, self-driving cars, and the top-secret futuristic research they have going on, GOOG is becoming as much a high-tech ETF as a stock."

Looking at what Google announced at the I/O conference, it's hard not to see how closely it parallels what Apple announced at its WWDC conference just a few weeks ago.

Apple, too, wants its iOS platform everywhere, with all the devices talking to each other. That's what the tech pundits mean when they refer to the "Internet of Things."

The trouble is, customers need to commit to one platform or the other to get the full benefit of this inter-device communication. Mixing iOS and Android devices won't work.

The stakes are enormous for both companies. If one can get the upper hand - and make its platform dominant - there will be a snowball effect as more users gravitate to it and away from the loser.

"It's a land grab," Sameet Sinha, an analyst with investment bank B. Riley & Co., told Reuters. "The person who gets a platform which controls the devices could be the dominant operating system, not of just devices, it could be the operating system of your home."

Right now it's impossible to pick a winner. While Android has far more users, Apple has the advantage of vertical integration in that it has total control of the hardware, software, and services on its platform.

But if Android does end up winning the battle for control of the Internet of Things, it would be an enormous catalyst for Google stock.

Which platform has the best chance to win the battle for the Internet of Things? If you think its Android, are you sure enough to buy Google stock right now? Let us know on Twitter @moneymorning or Facebook.

UP NEXT: While Apple and Google tend to dominate the headlines these days, the former "king of the hill" in tech - Microsoft Corp. - has quietly been regrouping. Here's why Michael Robinson thinks Mr. Softy is poised for a huge comeback...

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About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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