From time to time in this blog, I like to evaluate strategic moves that major tech players are making. This week, I will be breaking-down Google’s Chromecast Marketing Strategy.
My goal is to provide some insight into major tech strategies and the logic behind them so that startup and expansion-stage executives can learn from their elder peers.
Most strategy success stories were borrowed from someone else and altered or modernized to fit their context and market. Ignoring what is happening in the greater business world can lead to missed opportunities. A startup is a crash course in business just like an MBA, the only difference is that the case studies you do are real.
My hope is that these posts will draw your attention to some of the more interesting strategies taking place in the greater tech markets.
Google Taking Page From Amazon Playbook
As you may recall, over a year ago when the Kindle Fire was first released I wrote a blog post breaking down the Kindle Fire marketing strategy. In that post, I made the argument that Amazon was pricing the device below cost to encourage tablet adoption by the less affluent segments of the population, as they believed this would increase their content consumption and encourage more online purchasing and drive demand for their Prime services and e-commerce business. Amazon was betting that pre-loading their content service apps on the device and optimizing the device for Amazon’s e-commerce business and multimedia services would increase its market share among users in these categories and offset the cost of subsidizing the Kindle Fire sales. As we know now, this has turned out to be a hugely successful marketing strategy to date.
Google is making streamed television accessible to the masses by lowering the price point down from $100 (Apple TV, Roku) to $35. Google probably isn’t making much if anything off of doing this. In fact, it may even be taking a loss. The key to the Chromecast marketing strategy is all about positioning Chrome as the point of consumption for all of the content consumed in your living room just as Amazon wanted to enable the masses to consume Amazon content via its tablet.
Google believes that the price point of Apple TV and Roku is deterring the masses from giving streamed television a chance and believe that subsidizing this will lead to quicker adoption and position Google to own the key point of content consumption in a large number of living rooms.
They also believe that a network effect will come into play with the content providers if they are able to generate a significantly large user base early on that will force the major content providers to negotiate with them about providing their services for the Chromecast and future versions of Google TV that it intends to release as a secondary entry point into the living room for a different audience
Google was able to bring down the cost of this product by focusing on minimum product functionality needs to gain wide-spread adoption. This is a tactic used by Bezos, as well.
So Why Is Google Doing This and How Can It Be Profitable?
Google sees the living room as the next “Smart Medium,” and sees it as both a key component of its device-agnostic Chrome strategy and a critical battleground for next generation ad monetization. This is why Google has been focusing large amounts of R&D towards the Smart TV space. They also see many other players trying to get in and know that there are significant network effects in the television content market. They want to be the first to gain widespread adoption so that they can position themselves for the evolution of the market. Doing so will enable Google to:
- Offer highly targeted advertisements to the masses who use this service, which could make for a massive monetization opportunity.
- Ensure Chrome’s place in the living room and ensure that it can be device agnostic platform. This plays into the seamless cross device experience and its move to upgrade the mobile operating system to Chrome in the upcoming year.
- Position its content services on Google Play to take over the living room. Doing so would allow Google Play Games to compete head to head with Xbox, Nintendo, and Play Station, as these games will now be easily accessible via the TV set.
- Collect new data on user behavior to integrate into its search experience and help it maintain is near-monopoly in this space.
- Further incentive users to adopt Chrome as their browser of choice, as it will be available across all of their devices.
The success of the Chromecast marketing strategy will be highly dependent upon which services are made available through the service. Google is betting that its easily affordable price point is going to drive the masses to purchase it and force the largest content providers (i.e. Netflix, HuluPlus, Pandora, MLB TV, HBO Go etc.) to allow access via Chromecast. Without the presence of a large user base early on, the gadget will go the way of its processor, Google TV, and quickly be forgotten. So far the gamble is looking like a good one. The demand for the Chromecast was so high that Google had to pull its early Netflix 3-month free service gift-card only a day after the device went on sale due to higher than expected demand.
Please share your thoughts on how you think Google’s Chromecast marketing strategy will play-out or share your own thoughts on what startup and expansion stage management teams can learn from this case study.