Google i/o 2019 – Innovation not revolution

Incremental improvements hallmark a rather humdrum keynote.

• With less to say about AI and Android, Google added hardware launches and pushed a privacy agenda in its keynote in a sign that this is going to be an ordinary developer event.
• The most relevant announcements included:
  • First, Google Assistant: A big development by Google in the last 12 months has been the ability to massively compress some of the core functions of the Google Assistant.
  • A 100Gb model has been compressed to 500MB meaning that it is now practical to run it locally.
  • This gives the assistant the ability to run much faster and also for Google to claim better privacy as core commands will not be uploaded to the cloud but remain on the device.
  • Essentially what Google has done is to work out what gets asked the most and to include those domains on the device while everything else remains in the cloud.
  • Second, Speech recognition: The same type of innovation has compressed a speech recognition model from 2GB to 80MB meaning that this too can run on the device.
  • This will give better performance, offline capability as well as more privacy bragging rights.
  • Third, Android: The shortest presentation yet on the launch of a new version of the OS really hammers home just how unimportant this has become.
  • Dark mode got the most cheers but most significant is the ability to update some of the core components of the OS from the Google Play store.
  • Updates around compatibility, privacy and security will now be enabled form the store which should substantially improve the patching of devices once flaws have been uncovered.
  • Many Android devices remain unpatched indefinitely due to handset makers dragging their feet.
  • Putting this back in Google’s hands should speed up the process and improve security on Android.
  • This will go some way to improving Android’s endemic fragmentation but much more is needed before Google can hope to mount a credible challenge to iOS.
  • Fourth, Hardware: A new cost-conscious Pixel 3a device was launched which has basically made as many hardware compromises as possible while not affecting the performance of Google services and AI.
  • The end result is a device that starts at $399 and ships with many more operator partners than it has in the past.
  • This may help Pixel ship more than the rounding error of devices that it has to date but I am not holding my breath.
  • Fifth, Privacy and security: This is a double-edged sword for Google as users who share less data with Google will result in lower revenues.
  • Hence, Google is treading a delicate balance between pushing user privacy and security and at the same time being able to generate revenues.
  • The net result is likely to be some services becoming much less useful if the user chooses not to share data with Google.
  • Facing this choice, I think that the user s likely to choose to continue to share data with Google.
  • Google’s reputation is far better than Facebook’s as it has not had a major slip-up despite having orders of magnitude more data than any other ecosystem out there.
  • Hence, I don’t think that much will change as Facebook’s ongoing strong financial performance indicates that users and advertisers have yet to care enough about privacy to vote with their feet.
• Google’s AI is clearly still the most advanced but there are limits in the uses to which it can be put.
• Most of the innovations discussed today are iterations and improvements rather than breakthroughs, giving me the impression that the pace of AI development is slowing down.
• The net result is that Google remains ahead but a slowing in the pace of innovation will give its competitors a greater chance to catch up.
• A serious challenge to Google in AI is pretty far off meaning that the outlook for Google this year is fair.
• This combined with a valuation that it is not challenging makes Alphabet’s stock a steady investment for 2019.