Why Google, a software giant, is spending billions to get into gadgets

Tech hardware is a notoriously difficult business. Companies that were once atop the world like Nokia and Motorola quickly saw favor shift in the direction of rivals like Apple and Samsung.

Google, reliant on online advertising for about 84 percent of revenue, has nonetheless chased the device business for years. Less than two years after buying the Motorola brand, with the promise of rolling out a robust line of smartphones and other devices, it sold it in early 2014 for less than a quarter of what it paid. It also bought phone maker HTC’s design team for $1.1 billion early last year.

Google’s latest plan to be a bigger hardware player, the purchase of fitness tracker Fitbit announced Friday, fits into what analysts say is a quixotic dream to climb the market share ladder with products like Pixel smartphones, smart speakers and Nest thermostats.

Analysts said the $2.1 billion acquisition will bolster Google’s nascent health-care business, providing it with valuable data about people’s waking (and sleeping) lives. Together with its Pixel smartphones and Android mobile phone software, Fitbit’s data can provide a nearly complete picture of users’ entire day.

That’s sure to help inform Google’s core advertising business, even though the company said it will not sell ads as a direct result of the Fitbit deal.

“This is about devices, not data,” said Google spokeswoman Heather Dickinson. “Devices are a different business model. We are buying Fitbit to help us with our hardware efforts. Here, the business model is primarily about selling devices and services, not advertising.”

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Despite the billions Google has spent to get into hardware, the tech giant is still a small player in gadgets. It’s Android smartphone operating the software is in more than three times the number of global devices as Apple’s, but Google continues pushing its Pixel-brand phones, a laggard in market share. Advances in hardware like GPS and radar mean gadget makers are increasingly the gatekeepers for companies that make software for mobile phones. In terms of data collection, having customers using both the device and the operating system is akin to owning the mall rather than just the department store in it.