Google Strategy Teardown 2018 by CBInsights

Source: https://www.cbinsights.com/research/report/google-strategy-teardown

Google's next big thing will likely come from one of its new priority areas, like cloud, transportation, and healthcare. Each has a massive, global addressable market and plays well to Google's strength in AI.
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Google company Google S cloud invest machine learning
About Techcelerate Ventures

Tech Investment and Growth Advisory for Series A in the UK, operating in £150k to £5m investment market, working with #SaaS #FinTech #HealthTech #MarketPlaces and #PropTech companies.
Google company Google S cloud invest machine learning
I
Google Strategy 
Teardown
GO O GLE  IS  TURNING  I T SELF  IN T O  AN  AI  
CO MPAN Y  AS  I T SEEKS  T O  WIN  NEW  M ARKE T S  
LIKE  CLO UD  AND  TRANSPO R TATIO N
II
Google’s next big thing will likely come from 
one of its new priority areas, like cloud, 
transportation, and healthcare. Each has a 
massive, global addressable market and plays 
well to Google’s strength in AI.
As the digital world evolves, Google is taking a multi-pronged 
approach to maintaining its dominance in the search and ad 
business, which makes up the vast majority of its revenue.
Search is migrating across mediums, with users gradually moving 
from desktop to mobile devices and voice assistants — a shift 
that directly threatens Google’s moat in search and advertising.
As competition rises in the mobile and digital assistant space, 
and concerns over privacy and data management mount, Google 
has been forced to adapt. 
To maintain its foothold and protect its main source of revenue, 
Alphabet (Google’s parent company) is positioning itself to 
dominate adjacent sectors — such as digital commerce, branded 
hardware products, and content — and attempting to integrate its 
services into every aspect of the digital user experience.
The company is also seeking out new streams of revenue in 
sectors with large addressable markets, namely on the enterprise 
side with cloud computing and services. Furthermore, it’s looking 
at industries ripe for disruption, such as transportation, logistics, 
and healthcare. 
Unifying Alphabet’s approach across initiatives is its expertise  
in AI and machine learning, which the company believes will help 
it become an all-encompassing service for both consumers  
and enterprises.
In this teardown, we dive into Google’s multi-pronged approach to 
maintaining its search platform dominance, outlining the strategic 
investments, acquisitions, and partnerships across  
its top priorities moving forward.  
III
Alphabet’s structure and background 
Google’s priorities:
AI centricity: Embrace an AI-centric approach  
and solidify lead in machine learning
Cloud: Grow share in the cloud market
Computing: Build out a network infrastructure  
for computing
Advertising: Protect advertising business from rising 
competition in digital — especially from Amazon
Emerging markets: Expand in India & Southeast Asia, 
rebuild presence in China
Transportation & logistics: Disrupt the transportation 
and logistics industry
Healthcare: Push healthcare forward through data 
and AI
Conclusion
IV
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13
20 
25
 
30
 
35
 
39
 
44
Table of 
contents
IV
Alphabet’s structure  
and background
Alphabet is broken out into its core Google business and a 
number of other subsidiaries, which it deems “Other Bets.”
The majority of Google’s business comes from advertising  
revenues, which the company generates through its search 
engine as well as a number of other Google-affiliated and 
partnership websites. 
Outside of search and advertising, Google generates revenue 
from products including cloud and enterprise, consumer  
hardware, mapping, and YouTube.
In addition to Google, Alphabet encompasses a host of other 
subsidiaries called “Other Bets.” These companies are more 
experimental in nature, and as a result are not material to 
Alphabet’s bottom line.
V
Google’s Other Bets include:
 
· GV and capitalG, two of Google’s investment vehicles
 
· Waymo, Google’s self-driving car initiative
 
· Verily and Calico, two healthcare subsidiaries
 
· Alphabet Access & Energy, which houses the company’s  
telecommunications projects and energy initiatives
 
· Sidewalk Labs, Alphabet’s urban innovation organization
 
· DeepMind, an AI research arm acquired by Google in 2014 that 
has the company develop neural networks
 
· Cybersecurity spinoff Chronicle, which focuses on security 
solutions for Google’s cloud business
 
· Project Loon, a subsidiary working to bring internet access to 
rural and remote areas
 
· Project Wing, which is developing an autonomous delivery 
drone service
 
· Google X, an R&D facility focused on “moonshot” technologies 
aimed at improving the world
Given that Google makes up the vast majority of Alphabet’s  
business, the company’s initiatives across subsidiaries  
have largely focused on protecting Google’s moat in search  
and advertising.
In recent quarters, the company has seen notable increases 
in traffic acquisition costs (TAC), which is the largest cost 
associated with Google’s main stream of revenue, ad and search. 
As the company faces increasing regulation (e.g. the EU’s $5B 
fine on Android) and an ongoing shift to mobile from desktop, 
TAC is expected to rise.
In addition to rising TAC, competition is growing from peers like 
Apple, Amazon, and Microsoft, all of which are racing to capitalize 
on a growing digital economy to capture data and access new 
streams of revenue.
As a result, Google is doing everything in its power to capitalize 
on potential growth areas and maintain its foothold in search  
and advertising.
Below, we outline the company’s main priorities, detailing the 
initiatives, investments, and acquisitions across its subsidiaries.
1
Embrace an AI-centric 
approach and solidify lead  
in machine learning
Artificial intelligence is critical to Alphabet’s long-term outlook. 
AI is the thread that runs through search & advertising, cloud, 
autonomous driving, healthcare, and a host of the company’s 
Other Bets, as we’ll outline futher below. 
 
What It’s Doing Now 
In a keynote presentation to launch Google’s new high-end Pixel 
smartphones in October 2016, CEO Sundar Pichai highlighted the 
importance of artificial intelligence to the tech landscape moving 
forward, explaining, “It is clear to me we are evolving from a 
mobile-first to an AI-first world.”
Since then, AI has become the company’s focus across its 
investments, acquisitions, and internal spending. 
Investments
Google has launched two funds dedicated solely to AI: Gradient 
Ventures and the Google Assistant Investment Program.
Gradient Ventures was launched in July 2017. Unlike GV and 
capitalG, which run separately from Google under the Alphabet 
corporate framework, Gradient Ventures is accounted for on 
Google’s balance sheet. That said, the fund plans to break off 
from the main company once it ramps up its investment pace.
So far, Gradient has only invested in early-stage deals, primarily 
focusing on the US — though a recent investment was in Canada-
based Benchsci, a medical sciences startup using AI to accelerate 
biomedical discoveries. 
Google has also launched a fund to build out its capabilities for 
Google Assistant, Google’s virtual assistant that uses natural 
language processing to take voice commands from users and 
search the internet, schedule events, set alarms, among a host of 
other tasks. Launched in May, the Google Assistant Investment 
Program is focused specifically on early-stage startups working 
with Google’s virtual assistant.
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Google is also investing internally in its machine learning  
capabilities by ramping up its R&D spend, which it largely 
dedicates to its main areas of strategic focus (such as search 
and machine learning). In 2017, Google tracked at the high-end 
of FAMGA in terms of R&D spend in absolute dollars as well as 
relative to sales. 
The company has also ramped up its capex spend, which largely 
funds its computing infrastructure. (We outline this in further 
detail below.)
Acquisitions
In addition to investing through its new investment vehicles and 
more established funds, Google has also been actively acquiring 
AI startups for the past few years.
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One of the company’s initial forays into AI and machine  
learning was its $600M acquisition of AI startup DeepMind  
in January 2014. DeepMind currently operates as a subsidiary  
of Alphabet, and has been a pioneer in the machine learning 
space, with its program beating a human world champion in  
the board game “Go.”
More recently, the company acquired Halli Labs, an India-based 
AI startup focused on deep learning and machine learning 
systems, and AIMatter, a computer vision company using a neural 
network-based AI platform to process images. The company 
also acquired Banter in November 2017 to build out its natural 
language processing capabilities for enterprise cloud services 
like Google Hangouts.
Product launches
Google has heavily emphasized the importance of building  
a superior digital assistant. The company is facing rising  
competition from Amazon and Apple, both of whom have 
launched their own virtual assistants. This poses a significant 
threat to Google’s core business, as every voice-based search  
that consumers perform using Alexa or Siri takes business  
away from Google’s search platform.
In terms of scaling its digital assistant, Google CEO Sundar 
Pichai has said that the company is working with “every major 
device brand” in the US to cover a wide range of products, from 
dishwashers to security systems.
Google’s first smart home hub with a screen, manufactured by Lenovo.
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Google is also buildling out its own hardware manufacturing 
capabilities for its in-house products, known as the Made by 
Google line. This includes the Pixel smartphone, the Chromebook 
laptop, and the Google Home smart home device.
A number of Google’s recent investments and acquisitions have 
been focused on building out its hardware capabilities, most 
notably its $1.1B acquisition of hardware manufacturer HTC’s 
smartphone division in September 2017. With the deal, Google 
gained access to HTC’s hardware engineers and also established 
a manufacturing presence in Taiwan.
Patents
The main engine for Google’s internal research on AI and machine 
learning is Google AI. Formerly known as Google Research, 
the project was recently re-branded to reflect the company’s 
newfound focus on AI.
Within Google AI sits the Google Brain team, which has led the 
charge in developing TensorFlow, Google’s open-source software 
library. The team also improves core capabilities from translation 
to voice search.
Google Brain works closely with a number of Alphabet’s 
subsidiaries, including autonomous driving division Waymo, 
where it has helped apply deep neural nets to vehicles’ pedestrian 
detection system. The team has also made inroads in the energy 
space, helping Google realize cost and environmental savings at 
its power-hungry data centers to improve power usage efficiency 
by 15%.
The team has been highly-focused on AI and machine learning, 
evidenced by a jump in AI-related patent activity starting in 2016.
5
Google is also focused on building out its deep learning  
capabilities, which is more complex than traditional machine 
learning in that it generates predictions using an artificial 
neural network inspired by the human brain. Unlike machine 
learning, deep learning algorithms do not require adjustments 
from engineers and should be able to determine on their own if 
predictions are accurate or not.
Google’s emerging focus on deep learning can be seen in the 
company’s top patent keywords (pictured below). “Neural network” 
was first mentioned in 2015 and has since climbed to become 
one of the top 3 most frequently mentioned terms.
Note: Patterned columns may be incomplete due to the delay between patent filing 
and publication.
6
Google has also focused heavily on speech recognition and 
natural language processing. The company’s IP activity around 
voice has outpaced FAMGA historically.
In 2016, Google’s patent activity related to speech recognition 
reaccelerated, reflecting the company’s mission to dominate the 
digital assistant market.
Beyond speech recognition, another area related to digital 
assistants is gesture recognition. In recent months, Google has 
upped its IP activity in the gesture recognition field.
Note: Patterned columns may be incomplete due to the delay between patent filing 
and publication.
7
Google’s patents offer clues as to how the company plans  
to integrate voice and gesture recognition into its products  
in the future.
In October 2017, Google filed a patent for “radar-based gesture 
sensing and data transmission.” The technology would allow 
users to control a suite of devices using gestures, rather than  
just voice or other control devices (like a TV remote or buttons  
on a microwave).
Note: Patterned columns may be incomplete due to the delay between patent filing 
and publication.
8
This patent hints at Google’s vision for an automated home that 
still relies on instructions from a user. 
 
Where It’s Going Next 
Google’s recent investments and activity suggest that the com-
pany is prioritizing deep learning and natural language processing 
so that it can more effectively process and manage growing 
amounts of information from both consumers and enterprises.
As CEO Sundar Pichai said at the Google I/O conference, Google 
is rethinking “all” of its products for an AI-driven future.
With AI as the priority, the company is focused on developing 
sophisticated machine learning capabilities through both outside 
investments and in-house development.
News
Based on the CB Insights Trends tool, which aggregates news 
mentions across press sources, mentions of Google and AI, 
machine learning, or deep learning have picked up substantially  
in recent months.
9
On the digital assistant front, Google is making notable headway 
to differentiate its assistant from Amazon’s Alexa and Apple’s Siri.
Recently, the Google Assistant has been more top-of-mind than 
both Alexa and Siri — news mentions of the Google Assistant 
outpaced mentions of both virtual assistants for the first time  
in its history.
10
Earnings transcripts
Though artificial intelligence has been a key focus for over a year, 
Google’s mentions of “AI” and “machine learning” on earnings 
calls reached a new peak in Q2’18. 
Ultimately, Google wants to “help users get things done” through 
a combination of search and assistant. In Q4’17, Pichai noted  
that the company has room for improvement on the user 
experience end:
“…at a high level the next big evolution 
we are doing as part of mobile search 
and Assistant is to actually help users 
complete actions, to help get things done. 
And it’s really hard to do at scale, and 
that’s the work we are doing.” 
 
At its I/O conference in May, the company outlined a future 
capability for the Assistant: a voice system that can carry out 
phone calls on a user’s behalf.
Called Duplex, the technology is the first of its kind among even 
the most advanced digital assistants and ushers in a new stage  
in the race for voice and AI supremacy.
11
The below image — taken from Google’s 2017 patent application 
for similar technology — outlines a simplified version of one of 
these conversations.
Google’s vision to dominate the smart home market and own the 
entire stack of hardware devices ties in closely with the digital 
assistant. The company has focused on its presence in hardware 
to build out its devices end-to-end, in part to relieve rising costs 
from third-party hardware manufacturers and also for more 
seamless integration between its software and hardware. 
The decision to bring its Nest business back under Google’s 
hardware division signals Google’s interest in integrating all  
its products with a simple assistant, which would provide 
the company with more channels to advertise and provide 
information to consumers.
Ultimately, the more Google is able to scale its virtual assistant 
technology across its suite of products — in everything from 
mobile devices to the Google Home to other connected personal 
devices — the better the foothold it will gain in the search and 
advertising world.
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Why Is This A Priority?
AI substantially impacts just about all of Alphabet’s  
businesses and stands to upend a number of large industries. 
By differentiating itself across its businesses through machine 
learning, Alphabet can better solidify its dominance in search  
and advertising.
Market sizings
The market for AI and machine learning is hard to size, given 
that the technology is ubiquitous and has the potential to tackle 
inefficiencies across a wide array of industries.
The digital assistants market (which is simpler to size) is 
expected to reach $12B by 2024. Additionally, Google’s foray  
into smart home devices could tap into an estimated $122B 
market by 2022.
Building out the most sophisticated digital assistant helps 
strengthen Google’s dominance as a search platform provider.  
As a result, search and the Google Assistant — projects that 
Pichai said sit at the “heart” of Google’s business — are intricately 
tied together in Google’s future strategy.
13
Grow share in the 
cloud market
Google currently ranks third among cloud providers, after Amazon 
and Microsoft. However, the company has built out its presence 
in the space through a number of investments, acquisitions, and 
internal efforts. It has also launched multiple initiatives to better 
compete with other tech giants. 
What It’s Doing Now 
Though it trails Amazon and Microsoft in the cloud space, Google 
has made notable inroads and is currently growing the fastest of 
the three services.
On its Q4’17 earnings call, the company announced that its cloud 
business is now bringing in $1B per quarter. The number of 
cloud deals worth $1M+ that Google has sold more than tripled 
between 2016 and 2017, and G Suite, Google’s set of cloud-based 
productivity applications, had over 4 million paying customers.
Investments
Google has ramped up internal investments for its cloud business.
For four quarters in a row, the company has attributed its 
headcount increases to hires for cloud, including both engineers 
and go-to-market strategists.
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CEO Pichai has also attributed rising capex spend — which 
includes the cost of data centers, machinery, real estate, and 
information technology — to building out the cloud business. As 
he detailed on the Q1’17 earnings call:
“On the Cloud stuff, in Q1, our largest 
growth in head count and CapEx was in 
Cloud. The heavy lifting, I would say, is 
around how we meet enterprises in the 
market. We have reorganized so we have 
one face to the customer. So it’s not 
just sales reps. We’ve been thoughtful 
about how we have built out the entire 
go-to-market organization.” 
This heightened spending has driven the company’s capex above 
both of its cloud rivals, Amazon and Microsoft.
Google has made a few investments in cloud startups through its 
investment funds. Most recently, in March 2017, it participated in 
a $14M Series E round to cloud storage startup Avere Systems. In 
January 2018, Avere was acquired by Microsoft.
15
Acquisitions
On the M&A front, cloud is Google’s primary focus, as it veers 
away from its historical preference for moonshots (e.g. AR/
VR, space exploration). As Alphabet CFO Ruth Porat noted in an 
interview at Recode’s Code Conference:
“The acquisitions that we’ve talked about 
really in particular fill in holes in cloud, 
and that’s been really valuable.” 
 
In 2018, the company has already made several acquisitions in 
the cloud space, including Cask Data and Velostrata in Q2’18 and 
Xively in Q1’18. Its other recent acquisitions in the cloud space 
include the following:
Product launches
Google initially built out its enterprise business by focusing on 
SMEs, consumers, and students, but it failed to gain traction at 
larger, more established enterprises.
Now, Google sees the most opportunity for its cloud business 
on the enterprise side. The company brought in VMWare’s Diane 
Greene to run its enterprise offering, which has given birth to a 
number of enterprise-focused products, including G Suite.
As its built out its enterprise business, the company has landed 
several reputable partnerships with major corporations, including 
Cisco, Salesforce, and SAP, and is focused on strengthening  
its capabilities not just in cloud services but also in its go-to- 
market strategy.
16
As CEO Pichai noted on the company’s Q4’17 earnings call:
“These collaborations span our entire 
company, from engineering integration  
to marketing programs to joint sales,  
and they cover Google Cloud Platform,  
G Suite, and Google Analytics.” 
 
To gain further ground in the enterprise space, Google launched 
a number of new products and services at its Cloud Next 
conference this July.
One of the most celebrated releases was Google Cloud  
Services, a family of services that allows users to extend the 
Google Cloud Platform to in-house servers or edge devices, 
catering to businesses that prefer to use a blend of public and 
private cloud services.
Google also announced a specialized chip called the Edge TPU, 
which can carry out machine learning processes in IoT devices. 
The chip is intended for use to manage larger-scale workloads.
Cloud-supported blockchain applications have historically been 
a less-explored area for Google. However, at its cloud conference 
the company announced the planned integration of blockchain 
technology into its cloud platform, through a partnership with 
blockchain startups Digital Asset and BlockApps.
Google’s Edge TPU
17
Where It’s Going Next
News
Google has successfully established itself as a major player in  
the cloud space, with its cloud products increasingly gaining 
media mentions, despite still lagging Amazon and Microsoft.
Earnings transcripts
Even though cloud has been top-of-mind for Google for several 
years now, mentions of cloud and cloud-related products 
reached a new peak in Q2’18, suggesting that the company sees 
increasing opportunity in the space.
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Google sees a number of opportunities to leverage its expertise 
across other verticals (like content and digital commerce) in order 
to get its foot in the door with enterprises facing a growing need 
for cloud services.
The company also sees an opportunity for its cloud business 
within regulated industries like financial services and healthcare. 
When asked about the company’s approach to heavily regulated 
industries, CEO Pichai said:
“That’s where a lot of our investments 
have gone, getting certifications needed, 
depending on the industry and building 
the features that you need… And that’s 
clearly starting to have an impact,  
both on GCP, but as well as G Suite.  
We definitely are going to continue to 
build out our capabilities. And we’ll be 
going after the opportunities in these 
areas very seriously.” 
 
Cybersecurity, which is critical for the cloud business,  
has become another area of focus for Google and other  
tech giants. Google spun off its cybersecurity arm, Chronicle, 
from Google X in January 2018 to work on detecting threats  
to enterprise security faster that current systems. Ultimately,  
the spin off is intended to create what Google X chief Astro  
Teller calls a “digital immune system.” 
 
Why Is This A Priority?
An increasing number of businesses are generating more 
information, and as a result need incremental computing and 
processing power to make sense of it.
All of this will require more complex computing and additional 
computing infrastructure, which Google believes it can handle 
through its machine learning capabilities.
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Despite trailing behind Amazon and Microsoft in the cloud space, 
Google has an opportunity to capture some business from these 
competitors as customers seek expertise in machine learning, an 
area where Google remains differentiated.
Market sizing
Google’s presence in the cloud industry allows it to tap into a 
number of growing markets in the cloud space, including cloud 
computing, which is expected to reach $513B by 2022, and cloud 
storage, which is expected to reach $90B by 2022.
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Build out a network 
infrastructure for computing
What It’s Doing Now 
Investments
Google is heavily invested in developing a network infrastructure 
to handle higher levels of computing. The company has cited 
that one of the main drivers of its capital expenditures is building 
out compute capacity, as more complicated machine learning 
capabilities increasingly require more processing power.
As Ruth Porat explained on the Q2’18 earnings call: 
 
“We’re focused on capex as a lens into 
the outlook for growth for additional 
compute capacity, which has a number 
of growth drivers, including supporting 
growth in our search and ads business  
as well as newer businesses.”
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On the network infrastructure front, Google has built out a data 
center network to support its growing cloud business. The 
company currently operates 15 data centers across the globe  
(8 in the US, 4 in Europe, 2 in Asia, and 1 in South America) which 
house its compute, storage, and data replication services.
Additionally, Google has invested heavily in a number of subsea 
cable projects to support its computing capabilities. In July, the 
company announced a private subsea cable project that will 
cross the Atlantic Ocean. Dubbed the Durant cable, the system 
will be the first private trans-Atlantic cable built by a non-telecom 
company. The cable is intended to increase network capacity 
across the internet and also support the growth of Google Cloud.
Where It’s Going Next
Looking ahead, it’s clear that Google aims to pioneer the most 
advanced computing technology, which at the moment seems  
to be quantum computing.
Quantum computing provides substantially more processing 
power than a traditional computer, processing more information 
and at a faster rate. As co-founder Sergey Brin outlined in the 
company’s 2017 Founder’s Letter:
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“For a specialized class of problems, 
quantum computers can solve them 
exponentially faster. For instance, if 
we are successful with our 72 qubit 
prototype, it would take millions of 
conventional computers to be able to 
emulate it.” 
 
As a result, Google is investing substantially in quantum 
computing, and has come to be seen as one of the leaders  
in the space, along with Intel and IBM.
Google’s Quantum team sits under Google AI. The team is  
working on advancing quantum computing by developing 
quantum processors and novel quantum algorithms.
In July, the Quantum team launched an open source software 
platform called Cirq. The platform allows users to run quantum 
algorithms on Google’s simulator. The below image, called 
Hofstadter’s butterfly, shows how electrons would behave in  
such a simulated magnetic field.
Quantum computers use qubits, which are more sophisticated 
than standard digital bits that represent either 1 or 0. Qubits, 
however, can be in both states at once (1 and 0) thanks to a 
phenomenon known as superposition.
23
Google has also developed hardware that can support quantum 
computing. For example, its Bristlecone chip currently holds the 
record number of “qubits.”
Ultimately, quantum computing can be used to run a wide variety 
of machines more efficiently.
News
Media mentions of Google’s quantum computing efforts have 
recently come to exceed mentions of Intel’s and IBM’s efforts  
in the space. 
Earnings transcripts
On Google’s company earnings calls, quantum computing has 
yet to enter the conversation. That said, senior management 
prioritizes computing hardware, namely Google’s tensor 
processing unit (the TPU), which has been built specifically for 
machine learning and tailored for TensorFlow, its open source 
machine learning software platform. In February 2018, the 
company announced that it was making TPUs available in beta on 
the Google Cloud Platform.
According to Google, the TPU is faster and substantially  
more energy efficient than contemporary processing chips  
such as CPUs (central processing units) and GPUs (graphic 
processing units).
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Why Is This A Priority?
As Google increases its capabilities in machine learning and 
cloud, it will need to build out the infrastructure to support it, 
such as fiber-optic cables. According to the company’s SVP for 
technical infrastructure, Urs Hölzle, Google needs to double its 
transmission capacity each year to maintain its core businesses.
Fiber-optic cables have traditionally carried telephone traffic, but 
lately, content and cloud computing flows are dominating traffic 
flow, making up 77% of data traffic across the Atlantic Ocean 
and 60% across the Pacific Ocean in 2017. As a result, Google is 
investing in submarine fiber-optic cables (as mentioned above), 
most notably to connect to areas with growing internet usage, 
such as China.
In addition to network infrastructure, the company also must build 
out the computing capabilities of its own hardware so that it can 
own the computing stack from end-to-end.
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Protect advertising  
business from rising 
competition in digital — 
especially from Amazon
What It’s Doing Now 
With Amazon’s recent rise to the top of e-commerce, Google has 
lost a substantial amount of its product advertising volume, which 
makes up roughly 60% of the company’s ad clicks. Additionally, 
both Amazon and Apple have spent billions on content and music 
services to make their media/app platforms stickier, posing 
a direct threat to Google’s ability to dominate its advertising 
business across platforms.
Now, Google is fighting back, making a notable push in the digital 
commerce and content arena. The company’s efforts here reflect 
its attempts to take back its leadership in product search and 
prevent share loss in other advertising channels. 
Product launches
One examples of Google’s recent attempts to reclaim its territory 
in product search includes its March 2018 launch of Shopping 
Actions, a tool that integrates the retail experience across 
Google’s platforms (including mobile, desktop, and voice-powered 
devices). Early tests suggest that the project is increasing online 
shopping cart sizes by as much as 30%.
In 2017, Google partnered with a number of major retailers, 
including Walmart, Target, and Costco, to bolster its delivery 
platform, Google Express. The platform allows users to  
shop across a number of retailers with free delivery over a  
certain threshold. 
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Google has also launched several services in the content space 
to make its broader platform stickier. Through its Google Play 
platform, users can access the Android app store, as well as 
music, magazines, books, movies, and television programs — 
competing with Amazon’s multitude of Prime services aimed at 
content consumption and Apple’s suite of content offerings.
Google has seen substantial growth in its YouTube business, 
through which it has started to offer paid channel memberships. 
It can also tap into revenue from merchandise shelves on 
YouTube channels and other endorsement opportunities.
Parallel to its efforts to build out content delivery, Google has 
launched a number of initiatives related to improving internet 
connectivity (as discussed above).
Google Fiber was the company’s initial foray into providing 
broadband internet to the masses. The project offered faster 
internet access to businesses and residents of a few select cities 
throughout the US. However, given how capital intensive it was to 
scale its fiber-optic infrastructure, the company eventually stalled 
plans to expand.
While Google’s telecom division, known as Alphabet Access, has 
struggled to scale and gain market share from major incumbents 
like AT&T and Comcast, Google’s attempts to disrupt the network 
connectivity space have spurred innovation from incumbents, 
which has allowed Google to broaden content delivery capabilities 
and reach.
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Where It’s Going Next
Earnings transcripts
Capturing digital commerce is critical to Google’s strategy moving 
forward, as it allows the company to recapture a portion of the 
product searches it has lost to Amazon while also providing 
another valuable avenue for collecting consumer data.
In Q4’17, CEO Pichai spoke to the importance of building out 
Google’s presence in digital commerce: 
 
“E-commerce is evolving a lot and  
we continue to invest there. Google 
shopping is doing well. And we work  
hard to make sure we bring the best 
experience possible, which is why we 
partner with companies like Walmart 
for example to make it easier to buy 
products. Consumer behavior is  
changing but we are comfortable  
given the breadth of how we do  
things and how we are focused on  
user experience there.”
 
Digital commerce is also inherently tied to Google’s cloud 
business. The more retailers that Google partners with on the 
digital commerce front, the more opportunity it has to extend  
its expertise in enterprise cloud services. Pichai touched on  
this in the Q2’18 call:
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“On the commerce front, obviously, it’s 
a natural sector I think for us to drive 
partnerships. We already have deep 
advertising relationships with many of 
these providers, increasingly. Shopping 
is an area where we are beginning to 
work together. And finally, I think cloud is 
another important way by which we can 
start working together.”
 
In its attempts to become a content provider, Google has 
prioritized YouTube — mentions of YouTube now outpace  
those of Google’s largest business, Google Search, on  
company earnings calls. 
In addition to new streams of ad and subscription revenue,  
innovation in content also stand to benefit Google’s cloud 
business, as faster streaming capacity and reduced latency 
will require higher levels of computing power. Notably, music 
streaming service Spotify and video streaming service Netflix 
have moved away from AWS and Azure in favor of Google  
Cloud Platform (GCP) services.
29
Why This Initiative? 
 
When it comes to digital commerce, Google’s main objective  
is to protect its advertising business from all angles. Product 
search is a critical component of Google’s business, and the  
company cannot afford to lose more of that business to 
e-commerce giant Amazon.
On the content side, Google’s ability to engage with consumers 
in gaming and media streaming could present another avenue to 
deploy its advertising business, as well as an additional source of 
data collection to improve its search and advertising capabilities.
30
Expand in India &  
Southeast Asia, rebuild 
presence in China
A number of Google’s recent investments, partnerships, and 
internal projects suggest an interest in building out a presence 
in India and Southeast Asia, two regions that are experiencing 
outsized growth in internet usage.
Google’s recent activity also suggests that China is on its  
radar, despite historical tension between the tech giant and  
the Chinese government.
These emerging economies offer incremental revenue streams 
as connectivity improves and more and more consumers gain 
access to the internet. 
 
What It’s Doing Now 
Google has ramped up its investment in emerging markets in 
recent quarters, namely in India and Indonesia — two countries 
seeing explosive growth in digital commerce.
Building up its e-commerce presence allows Google to capitalize 
on the growth in these regions while also maintaining its foothold 
in search and advertising.
Investments
In January, Google participated in in a $1.5B tranche of Series  
C funding to Indonesian ride-hailing giant GO-JEK. Similar to  
Uber, GO-JEK also offers food delivery services and a mobile 
payments platform.
The GO-JEK investment was Google’s first investment in 
Indonesia. The deal came less than a month after Google  
made its first investment in India, contributing to personal 
concierge and delivery service platform Dunzo’s $12M Series  
B round in December.
In addition to India and Southeast Asia, Google has set its eyes  
on China, despite historical setbacks in the country.
5
31
While many view China as a missed opportunity for Google, the 
company has stepped up its investments in the region. Recent 
investments include a $550M investment in JD.com, China’s 
second-largest e-commerce platform, and a $76M investment  
in China-based gaming firm Chushou.
Google’s return-focused investment arm capitalG has also made  
a number of investments to companies based in India and China.
According to Kaushik Anand, the head of capitalG’s operations 
in India, capitalG looks to back “sustainable business models 
operating in large markets.” India serves as a substantial  
opportunity on that front, given that the country has the  
second largest internet market in the world after China,  
with over 450M users.
CapitalG’s recent deals abroad include investments in India-based 
fintech company Aye Finance’s $21.5M Series C in June – the 
fund’s first fintech investment in India – as well as in Chinese 
truck-hailing platform Manbang Group’s $1.9B round in April.
Google has also dedicated internal resources to connecting 
remote parts of the globe. Loon, Google’s moonshot project for 
remote telecommunication projects, recently graduated from X 
to became its own company under the Alphabet umbrella. Loon 
can launch balloons 12+ miles into the stratosphere to provide 
cellular coverage in remote areas or areas affected by natural 
disasters. In July, Loon announced that it will launch its first 
commercial service in Kenya next year, offering 4G coverage via 
its high-altitude balloons.
Product launches
Google launched mobile payments platform Tez in India in 
September 2017. Tez is a free mobile wallet that allows users to 
make payments directly from their bank account. Through Tez, 
Google is ultimately attempting to become an integral part of 
commerce in India, which offers a huge opportunity for growth.
Where It’s Going Next
Google has only just begun its foray into India & Southeast Asia 
and its re-entry into China, but expansion in these markets seems 
to be crucial to its strategy moving forward.
32
News
Google’s partnership with JD.com will likely give it an opening to 
re-establish itself in China, given that JD is the second-largest 
e-commerce player in China (after Alibaba) and has a notable 
hold on the consumer space in the country. 
More broadly, the JD.com partnership could offer Google the 
opportunity to strengthen its hold on product searches and 
voice-driven e-commerce, even as competitors such as Amazon 
chip away at its foothold.
Google has also made headlines in recent weeks amid rumors 
that it has been tracking search queries to develop a censored 
search engine in China. Google has historically had tense relation-
ships with governments and consumers in China, withdrawing 
its desktop search engine from the country roughly 8 years ago 
following a phishing scandal.
Despite these tensions, China presents a unique opportunity for 
the firm: the company’s internet market has grown substantially 
since Google pulled its search platform, and the majority of its 
770M+ internet users are accessing the web through Google’s 
Android operating system.
Google is also looking to take advantage of China’s growing 
cloud market and is seeking to offer its cloud services out of data 
centers run by local companies, according to recent reports.
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Earnings transcripts
India and Indonesia came into focus on the company’s Q2’18 
earnings call, given the company’s recent investments. 
CEO Pichai outlined the importance of these regions in more 
detail on the call:
“I want to highlight the work that we’re 
doing to build great specialized products 
for the next wave of people coming 
online for the first time in countries 
like India, Indonesia, Brazil, and Nigeria, 
many of whom experience the web only 
through their mobile phone. This is a big 
area of focus for us.” 
 
Why Is This A Priority?
As internet access improves globally, a number of emerging 
markets are seeing outsized growth in internet usage and 
growing demand for connected devices. Southeast Asia, for 
example, reportedly has rising internet adoption across more than 
600M consumers.
34
This presents a substantial opportunity for Google’s expansion.
CEO Pichai has cited emerging markets as a notable avenue for 
growth: 
 
“The user growth there is extraordinary. 
And we are seeing it across all our 
products, which have over a billion  
users each and we are all doing well  
in these markets.” 
 
Market sizings
The revenue opportunity in these spaces is substantial. According 
to consensus analyst estimates, the e-commerce markets in India 
and Southeast Asia are expected to reach roughly $200B and 
$88B by 2025, respectively.
Alongside growth in digital commerce is an opportunity in 
payments. In India, the payments industry is expected to  
reach $1T by 2025, and in Southeast Asia, analysts estimate  
the market could reach $200B. Establishing a presence in these 
more nascent markets could pay off for Google, and capturing 
even just a segment of these markets could serve as a notable 
revenue opportunity.
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Disrupt the transportation  
and logistics industry
Alphabet has placed a number of strategic bets in the  
transportation space across its investment arms, and its  
several ongoing internal projects suggest the company is  
seeking to capitalize on the future of transportation. 
 
What It’s Doing Now 
Investments
Google has ramped up its mobility investments in recent months, 
with both GV and Alphabet investing in scooter company Lime’s 
$335M Series C in July. As mentioned above, Google participated 
in a $1.5B Series C follow-on tranche for Indonesian ride-hailing 
company GO-JEK, the largest deal it has participated in to date  
in 2018 (8/15/18).
Alphabet’s other investment arms, GV and capitalG, have invested 
in ride-hailing giants Uber and Lyft, respectively.
Product launches
Google has a number of transportation-related projects running 
in-house. Autonomous driving remains a critical part of Google’s 
Other Bets, as Alphabet’s self-driving arm Waymo continues to 
gain traction.
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36
Waymo is widely recognized as the industry leader in autonomous 
driving technology. The company has logged an unprecedented 
number of miles driven (a closely watched metric in the 
self-driving technology space). Presumably, the more driver data 
a car’s software has to process, the more informed the car will be 
and the fewer mistakes it will make on the road.
At Google’s I/O conference this past January, Waymo CEO John 
Krafcik announced that the company had reached 7 billion 
simulated miles driven, an industry high. In July, Waymo reported 
that it had reached 8 million miles driven on public roads, and that 
the company has reached a rate of 25,000 miles a day.
Waymo is the first AV company to launch a commercial fleet 
of autonomous vehicles. The company plans to operate a 
self-driving taxi service in Phoenix, Arizona by the end of this 
year, leveraging a partnership with Fiat Chrysler. Waymo has 
also partnered with Jaguar Land Rover to add up to 20,000 
autonomous I-Paces to its fleet by 2020.
Waymo has taken an in-house approach to developing its 
autonomous vehicle technology, building out its own software 
and sensors to limit dependency on outside suppliers. On the 
computing side, Waymo has leveraged Google’s TensorFlow 
and tensor processing units (TPUs) to train its neural networks. 
Waymo claims that developing its technology internally allows  
for more efficiency and tighter integration.
Outside of ride-hailing, Waymo is also looking to leverage  
its strength in self-driving technology for freight delivery,  
which ties into Google’s larger ambitions for disrupting  
the logistics space. In March, Waymo said that it will start 
deploying semi-autonomous trucks to deliver freight to its data 
centers in Atlanta, and Waymo CEO Krafcik has expressed 
interest in pursuing public transportation projects.
Beyond these initiatives, Alphabet’s ambitions also span urban 
development, with its Sidewalk Labs unit leveraging technology  
to tackle urban challenges from transportation to sustainability  
to cost of living.
Google’s drone delivery company, Project Wing, recently 
graduated from Google X to become an independent company 
under the Alphabet umbrella. The company has performed some 
of the first drone deliveries in Australia, and its graduation from X 
suggests that it may soon be ready to introduce its technology to 
the world on a commercial scale.
37
 
Patents
In addition to these transportation efforts, Google is also looking 
to double down on logistics. Looking at IP activity related to 
delivery methods, Google is closing the gap with Amazon, which 
has established a notable lead in logistics.
This uptick in activity suggests that in addition to the number of 
partnerships Google has announced on the logistics front, the 
company is also working on efforts to innovate in-house.
Where It’s Going Next
Earnings transcripts
Waymo has been a popular topic on Google’s earnings calls. 
Mentions of “Waymo” and “autonomous driving” reached a new 
peak in Q4’17 and have maintained an elevated level since then, 
suggesting that the project will continue to be a priority.
38
 
Why Is This A Priority? 
 
Both the transportation and the logistics industries are ripe  
for disruption.
In transportation, the rise of shared mobility services and the 
prospect for autonomous vehicles have allowed non-traditional 
players like tech companies to establish a notable presence in the 
space. Shared mobility has seen explosive growth in recent years, 
and Alphabet’s investments across its funds in Uber, Lyft, and 
most recently Lime suggest it’s interested in capitalizing on the 
next generation of mobility services.
In logistics, Google is likely investing heavily to defend itself 
against drone delivery and other logistics initiatives by Amazon, 
which is well ahead of Google in e-commerce and threatens to 
capture share away from Google’s main line of business, search 
and advertising.
Market sizings
Shared mobility still has potential, especially on a global basis: 
analysts estimate the market for shared mobility will reach  
$2.6T by 2030.
Additionally, Google leads the pack in autonomous driving. If it 
can establish itself as a major player in the space, it could reap 
the benefits of the industry’s estimated value of $70B by 2030.
39
Push healthcare forward 
through data and AI
As we highlighted in our Google in healthcare report, Google  
has attacked the inefficient healthcare industry from a number  
of angles.
What It’s Doing Now 
Disease detection is an crucial part of healthcare. Alphabet’s life 
sciences subsidiary Verily has partnered with a number of other 
technology and pharmaceutical companies to develop tools to 
improve disease detection.
In December 2016, Verily partnered with Nikon subsidiary Optos 
to tackle diabetic retinopathy, a condition where high sugar levels 
cause damage to blood vessels in the eye.
Investments
GV has shown a notable interest in the healthcare sector.  
GV founder Bill Maris inspired the investment arm’s focus on 
healthcare, which now makes up roughly a third of GV’s deals 
(up from just 6% in 2013).
In recent months, the VC arm has taken an interest in AI 
applications in medicine, participating in Viz.ai’s $21M round  
in July and investing $5M in a Series A follow-on to Owkin in May. 
Viz.ai uses AI to detect early signs of medical conditions, while 
Owkin’s platform uses deep learning to help clinical researchers 
develop drugs and predictive models.
GV is also interested in pureplay healthcare, investing in 
healthcare providers (One Medical), genomics (Editas, Foundation 
Medicine, 23andMe), and biotechnology (Celsius Therapeutics, 
IDEAYA Biosciences), and digital health (Oscar Health, Quartet 
Health). In August 2018, Alphabet made a $375M investment  
into small health insurer Oscar and announced that longtime 
Google executive and former YouTube CEO Salar Kamangar 
would join the board.
Google subsidiary Verily makes its own investments, most 
notably a $500M joint venture focused on diabetes management 
with pharmaceutical giant Sanofi. The joint venture, called Onduo, 
is working on an “all-in-one” insulin patch pump that’s prefilled 
and connected to the internet.
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40
Product launches
Google is leveraging its capabilities in AI to drive efficiencies 
in healthcare data management. The company’s AI-focused 
subsidiary, DeepMind, has developed an app called “Streams” 
that helps detect kidney injuries from lab results so that doctors 
and nurses can be alerted immediately via a mobile app. The 
technology helps escalate more urgent cases. 
Google is using AI both for disease detection and for new data 
infrastructure. DeepMind is working on a data infrastructure plan 
that could be sold to other companies.
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Where It’s Going Next
As mentioned before, Alphabet views healthcare as a strategic 
priority moving forward, most notably through new applications 
of AI and machine learning technology.
Earnings transcripts
Even though healthcare has been part of Google’s strategy for 
years, the company has grown increasingly focused on the 
space, with mentions of “healthcare” and Alphabet’s healthcare 
subsidiaries reaching a new peak in Q2’18. 
Google’s approach in healthcare moving forward is a pragmatic 
one. The company has chosen to work with existing incumbents 
in the healthcare system and is looking to new applications for its 
AI technology.
Additionally, Alphabet sees an opportunity for its cloud business, 
building out its own healthcare-specific cloud services to 
differentiate itself. Historically, because the healthcare industry 
is so highly regulated, it has been an arduous process to digitize 
health records and store them on the cloud.
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CEO Pichai highlighted the opportunity in cloud on the Q2’18 
earnings call: 
 
“Across healthcare, we see a big oppor-
tunity for both Google and Alphabet. It’s 
a vertical that’s very important for Cloud. 
And we are obviously helping a lot of 
healthcare partners across their needs.” 
 
He went on to hint that there would be much more to say about 
cloud’s role in healthcare in the months to come.
There’s also an opportunity on the hardware end. Apple is 
currently developing technology for the iPhone that can screen  
for disease. Google could do the same with Pixel or even the 
Google Home, from at-home health assessments to wearables 
that can be used for diagnostics. 
Google is also looking to utilize its data management abilities in 
the R&D space, most recently in clinical trials. Project Baseline, a 
new initiative that Google launched to utilize patient-generated 
data to eliminate the need for a control group in drug trials, 
stands to reduce recruiting bottlenecks and make the overall 
clinical trial process more efficient.
43
Why Is This A Priority? 
 
The inefficiencies in the healthcare system present an opportunity 
for Google to implement its expertise in AI to tackle diseases.
There are a number of areas across healthcare that Google 
could tap into to access new streams of revenue. For example, 
Google could serve as an R&D engine for large medical device 
and pharma companies. Additionally, it could develop its own 
digital health services, which it could integrate into its already 
established suite of connected hardware devices. Services like 
diabetes coaching could stand to gain from AI, and in turn be sold 
to employers or insurance companies.
Market sizing
Google could potentially amass new cloud customers by getting 
further involved in the healthcare space. The healthcare system 
works with massive amounts of data and computing power, 
serving up an opportunity for Google to market its Google Cloud 
services. Analysts estimate that the healthcare cloud computing 
market could reach $15B by 2022.
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Conclusion
Google’s efforts to defend its moat in the search and advertising 
space span a variety of initiatives. The company is tackling the 
consumer and enterprise experiences from multiple angles,  
many of which have already shown themselves to be proven 
areas of growth.
Alphabet’s restructuring and a pragmatic investing philosophy 
instilled by Ruth Porat have helped the company more efficiently 
deploy its capital to more lucrative opportunities. In addition to 
developing new technologies, its focus on tackling the outsized 
growth in emerging markets is also promising.
On the whole, Google is taking a comprehensive approach — 
though what will matter in the future is whether its capabilities 
across businesses and its developments in machine learning  
are enough to differentiate it from its rising competition.