Google has a simple, yet subtle, reason for its anticipated push into the midrange smartphone market: there’s too much competition in the high-end one.
Next month, on the first day of its I/O developer conference, Google is expected to show off its new, cheaper Pixel 3a and 3a XL. And on an earnings call with reporters today, Ruth Porat, the chief financial officer of Google parent company Alphabet, said that industry-wide pressure on high-end phones led to fewer Pixel sales last quarter compared to this time a year ago. Porat specifically cited “some of the recent pressures in the premium smartphone market.”
While Porat didn’t specify what those pressures are, we can assume she’s referring to increased competition from Apple and Samsung, as well as high prices driving down consumer demand and leading smartphone owners to hang onto their devices for longer than the annual update cycles to which the mobile industry has tethered itself.
In a separate part of the call, Google CEO Sundar Pichai was pressed on whether investors should be concerned that the company’s hardware efforts were doing little to impact its overall revenue, which is still largely dependent on its slowing ad business. One analyst openly wondered on the call whether the Pixel line was representative of Microsoft’s failed smartphone business.
Google does not break out revenue for its hardware-related products in its quarterly earnings reports, but the segment is growing despite the lackluster phone sales, hitting nearly $5.5 billion in revenue this past quarter. That could be due to increased sales of Chromecast devices, laptops, Google Home speakers, and Nest products, among various other physical devices Google now dabbles in.
The Pixel 3, which launched with a price lower than flagships from Apple and Samsung, and came equipped with a best-in-class camera, started at $799 and came in variants that pushed its price tag up to $999. Now, less than nine months since the device launched, you can can get a brand-new Pixel 3 or Pixel 3 XL for $200 off from Google’s online store. And in what is anything but a coincidence, the deal ends just before Google I/O begins.