Google and its parent company, Alphabet (GOOG +1.09%) (GOOGL +1.37%), recently made a big move by making its popular AI-powered photo editing feature, Magic Eraser, widely available on any modern smartphone or tablet.
Previously, this feature was exclusive to Google's line of Pixel phones, but now it can be accessed by any Android or iOS user who signs up for Google One, the company's cloud storage service. This shift was first announced in February but has now reached actual users and devices.
I think it's a good idea, albeit somewhat unexpected. So what is going on here?
Google's big idea
If you're not familiar with Magic Eraser, the feature uses image analytics and artificial intelligence (AI) to remove unwanted objects from photos, creating a cleaner and more visually appealing image. Whether you have kids running across your perfectly planned sunset panorama, a wayward pair of sandals catching the wrong kind of attention in your best family snapshot, or telephone wires ruining that serene nature vista, Magic Eraser can take them all away in a couple of screen taps.
This functionality is particularly useful for professional photographers, social media influencers, and everyday users who want to create beautiful photos for personal or business use. It's easy to see why Google first made this powerful tool exclusive to Pixel users, giving the phones a unique selling point. The strategy makes even more sense in combination with the AI-boosting Google Tensor chips, which made their debut in the same Pixel 6 phones as the Pixel-exclusive version of Magic Eraser.
The tool might work better with a Tensor chip, but it also runs just fine on fairly modest devices without it, such as the lowly OnePlus Nord N20 5G in my own pocket. On that note, Magic Eraser also looks like a good selling point for the required Google One cloud storage service.
The move suggests that Alphabet is shifting its focus away from hardware sales and over to services, leaning into the higher-margin sales of a product that doesn't rely on manufacturing and transportation to reach the consumer.
But management has also recently stated that it is committed to Pixel phones and expects strong growth from the product line in the long run. The company is simply exploring new ideas to drive revenue, particularly in light of the challenging economy in 2023. Magic Eraser is just one feature Alphabet can leverage to drive growth in service sales.
While some users might be disappointed that Magic Eraser is no longer exclusive to Pixel phones, the move is ultimately a win for consumers. By making the feature available to a wider audience, Alphabet is democratizing access to powerful photo editing tools that were previously only available to a select few.
Also, Magic Eraser is still available to every Pixel owner, with or without a Google One subscription. That selling point isn't going away -- Google is just using it in a new way.
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Key Data Points
Plenty of irons in the fire
Let's be clear: Alphabet is not abandoning its highly successful Pixel hardware. On the contrary, the company says it is still quite committed to supporting this product line in the long run.
During Alphabet's fourth-quarter earnings call in February, management expressed its satisfaction with the performance of the Pixel line in a challenging economy. It also highlighted the success of specific phone models, including the Pixel 6A, 7, and 7 Pro. These are "the best-selling generation of phones we have ever launched," CEO Sundar Pichai said.
The company also said that strong growth in hardware revenue, primarily from the Pixel family, has been a major driver of Alphabet's recent growth.
But wait -- there's more. During an investor conference in early March, chief financial officer Ruth Porat said that the company is also focusing on the services side of its business, particularly with Google Photos and Google One storage service.
Porat cited the Magic Eraser as an example of how Alphabet is using AI to enhance the customer experience, and how the company plans to continue investing in AI to generate content and storytelling opportunities for creators. Mind you, the CFO waxed poetic about the Pixel series as a long-term growth driver, two weeks after the company said it would open Magic Eraser up to a wider audience. Alphabet is big enough to pursue several simultaneous growth strategies.
Some questions remain. Users might be wondering how to access Magic Eraser on their non-Pixel devices, or whether older Pixel phones will receive the feature. The good news is that all Google One members on Android and iOS can now access Magic Eraser, and Pixel users will also have the feature available to them. If your phone has access to this cool feature, it will pop up as a tool in the editing mode of Google Photos, highlighted with a tiny Google One logo.
Business as usual: planning for long-term growth in many markets
Those with an eye toward investing in Alphabet should see the company's wider Magic Eraser availability as part of its broader strategy to promote its AI expertise and drive growth in service offerings. Those renewable subscription fees for Google One are not only a solid revenue stream for the long term, but also an effective way to boost user loyalty.
So Alphabet's decision to make the Magic Eraser feature available on non-Pixel devices might seem counterintuitive at first glance, but it plays into a sensible strategy around AI and subscription-style services. Management is still committed to the Pixel line and expects strong growth from it in the long run, but the company is also exploring new ideas to drive revenue growth in a challenging economy.
That's just good, solid growth planning in my eyes. I'm a little nervous about buying Alphabet stock right now, but for different reasons. Still, Pixel should be a solid argument on the plus side of your Alphabet analysis, even after sharing Magic Eraser with a wider audience of paying Google One subscribers.
