Why Google Acquired a Robot Manufacturer

Google's (NASDAQ: GOOGL  ) latest acquisition isn't your typical tech start-up. The company just acquired Boston Dynamics for an undisclosed sum early this week. Boston Dynamics is in the business of developing advanced robots and related software, mainly for the U.S. military, and it is particularly famous for developing the world's fastest legged robot, the Cheetah model.

This surprising move will allow Google to access proprietary algorithms and sensor-based controls to handle movement. But why would Google, a company with more than 60% market share of the worldwide search engine market, buy such a company? How does this acquisition help Google to consolidate its position as the world's most important tech company, beyond Apple (NASDAQ: AAPL  ) and Amazon (NASDAQ: AMZN  ) ?

Source: Boston Dynamics

Google loves robots
Google's interest in robotics isn't new. Lead by Andy Rubin, who spearheaded the development of Android, the company has acquired eight robotics companies in the past six months. Little is known about the why's of Google's robotics efforts, as the company has not commented its acquisitions, and has said it does not plan to release financial information on any of the other robot companies it bought recently.

Certainly, the company's $40 billion advertising business units won't benefit from these acquisitions. Instead, it seems Google has yet another moonshot project in mind. According to New York Times, the company may be searching to increase its competitive advantages in the online retail arena, by automating every step in the supply chain "that stretches from a factory floor to the companies that ship and deliver goods to a consumer's doorstep."

In this sense, the company could be investing in robotics to achieve package delivery automation. It has already started experimenting with package delivery in urban areas with its Google Shopping service, which is already available in San Francisco.

Moreover,because Boston Dynamics also develops tools for human simulation, Google could be interested in improving "the way people interface with computers, wearables, and information," according to Forbes contributor Robert Hof. The company has already shown its strong interest in this segment by promoting its self-driving cars, and its Google Glass product.

Apple and Amazon are also interested
However, Google isn't the only tech giant investing in robotics. The world's largest online retailer, Amazon, is already testing unmanned drones, called Octocopters, to deliver up to 5 pounds in goods to customers, within 30 minutes of them placing the order. It also bought robotics company Kiva Systems for $775 million last year, to automate its fulfillment centers. 

To get a jump on Samsung Electronics, Apple -- the world's largest tech company in terms of market capitalization -- may also use robots, as it is putting a record $10.5 billion to work in new technology, according to Bloomberg. But, unlike Amazon or Google, Apple may not be interested in automated delivery. Apple's approach to robotics may be focused on spending more on machines that do the 'behind-the-scenes' work of the mass production of iPhones, like for example, automated testing machines for the smartphone's camera lens.

Regulation matters
Google may have bought Boston Dynamics, which is said to manufacture the world's fastest running robot, to catch up with Amazon in the race for automated package delivery.

However, the key issue here is regulation. First, because both Amazon's drones and the legged robots Google recently acquired were ultimately designed for military purposes, most customers and regulators will worry about safety issues and possible accidents. Second, gift-bearing robots pose a potential traffic control nightmare. Third, to function properly, these devices may need to collect large amounts of data, raising privacy concerns. In this way, although companies like Amazon in theory may be able to deliver goods using drones, in practice many years could go by before regulation makes this legally possible.

My Foolish take
Although it's unclear how Google plans to use its legged robots, the company's culture of innovation stands out. Once more, Google shows investors it is using its huge profits to do research in areas that go far beyond its traditional business of selling ads. Finally, with Apple and Amazon also interested in robots, the clear winner here is the robotics industry, as global sales of robots are expected to grow 10.5% annually to $20.2 billion in 2016.

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  • Report this Comment On December 16, 2013, at 8:26 PM, phoenixar wrote:

    It would be interesting to see how quickly Google can get the commercial licenses for big dogs.

    Amazon has an uphill battle with the FAA clearing UAVs for commercial use. Currently, the FAA will only issue licenses for civilian and research purposes. Also, UAVs have additional restrictions near schools, parks, churches, airports.

    1. http://www.faa.gov/uas. (Memorandum on UAS Policy (05-01)

    2. http://www.faa.gov/about/initiatives/uas/reg/media/frnotice_... (page 4)

  • Report this Comment On December 19, 2013, at 5:55 PM, CatFoodMoney wrote:

    Thank you for the article Mr. Campos. However, I think that you are thinking too "inside the box." There are other companies that Google could have acquired if they had wanted factory assembly robots. The companies that Google acquired are making autonomous robots. People should think more about R2D2 and less about car manufacturing robots. I believe that this move has poised Google to be the "Coca-Cola of Robotics" once we enter the Star Wars age of droids. Search will be one of the least interesting thing that your Google robot of the future will be capable of.

    Thanks,

    Nathan

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