GOOGLE STADIA: Over the years, Google has had some spectacular
failures from Google Glass and Google+ to Google VR and the Google Nexus. But, while unfortunate,
these failures are what made Google. It was always their willingness to experiment and shoot for the
moon that created so many successes along the way whether that be Chrome, Android, YouTube, or
Gmail. But, one failure that was unlike the rest was actually one of their most recent failures:
Google Stadia. If you’re not familiar with Stadia, it was Google’s attempt at entering the gaming
space and more specifically the cloud gaming space. The idea was that instead of spending
hundreds of dollars on a console or thousands of dollars on a PC, you could just stream 4k games
directly from Google. You simply pay an upfront fee of $130 for the starter kit and then a $10
per month subscription afterwards. From the very beginning, Stadia didn’t quite live up to
Google’s expectations. For example, in 2020, they were targeting 1 million monthly active users,
but they ended up falling a short at 750,000. This was nothing to scoff at though as it gave them a
5-10% share of the entire cloud gaming market within just 2 years of launch. We should also
mention that Microsoft and Sony’s cloud gaming marketshares are largely skewed to the upside
because their offerings come along with Game Pass Ultimate and PlayStation Plus Premium. As such,
a lot of these subscribers did not even use Microsoft and Sony’s cloud gaming offerings
but they’re nonetheless counted for market share purposes. So, within the niche of cloud gaming,
Stadia was actually doing really well. It garnered some rather strong reviews
despite being a subscription model and being from Google, two things that people are usually not
the biggest fans of. And while it obviously had it’s issues like any other new product,
gamers were rather optimistic about the upcoming Stadia exclusives and the cloud gaming space in
general. But for whatever reason, on September 29, 2022, Google announced that they would be
shutting down Stadia at the start of 2023. This was a direction that even Google’s own
internal Stadia team wasn’t aware of. In fact, the Stadia team was publicly assuring users that
Stadia wasn’t going anywhere just 2 months before this. As such, shutting down Stadia was very much
an executive decision that was made as part of a broad effort to cut costs across the company. So,
here’s the story of the time that Google idiotically killed a promising product.
PROMISING BEGINNINGS: Taking a look back,
the story of Stadia takes us back to the beginning of 2018 to a man named Phil Harrison. Phil was a
lifelong gaming executive having entered the industry with his own game studio back in 1986.
Since then, he had risen to be the president of Sony’s worldwide playstation studios and a
VP on Microsoft’s Xbox team. He also held board member seats at several gaming companies. So,
when Google started of 2018 by hiring Phil as VP, it was clear that Google was entering the
gaming space. They would spend the rest of 2018 attending a bunch of gaming events to recruit
game developers who could make their ambitious visiona reality. You see, Google wasn’t just
trying to create a game streaming service but a game streaming service that could be run on Chrome
itself. And somehow, Google’s new engineers would make this wizardry viable by the end of
2018 itself when they quietly launched a limited beta of Assassin’s Creed Odyssey. A couple months
later in March of 2019, Google would host a more formal unveiling of Stadia, and later that year,
Google would officially launch Stadia on November 18, 2019 with a total of 22 launch titles. The
consensus of the launch was pretty ubiquitous. Almost all reviewers agreed that the technology
itself was nothing short of revolutionary. With the right internet connection, Stadia truly did
deliver a revolutionary gaming experience, but that was also their biggest critic, you
needed the right internet connection preferably fiber which most people simply did not have. So,
while the tech behind the Stadia was heavily praised, reviewers were skeptical regarding
whether that tech was actually applicable to the average person. But, this was nothing unique to
Stadia. This was the case with every cloud gaming solution, most of which Stadia was far ahead of in
every other aspect. Aside from some concerns from reviewers, there were also some diehard gamers who
weren’t the biggest fan of Stadia. Usually though, these were just enthusiasts with unrealistic
expectations for a brand new cloud streaming service like this person who took to Reddit rant
about how much Stadia sucks. They didn’t find much support on reddit though. In fact,
almost all of the replies to this thread were in support of Stadia. “I play almost exclusively
on Chrome. Maybe I'm just not as fussy as most people.” “200 hours in Borderlands 3 on Chrome,
I had no idea it sucked the whole time.” “No it doesn't suck. No issues here whatsoever. Maybe
your setup/internet/isp just sucks.” “I think this is more of a you problem and not a Chrome
problem. Everything I've played looks great in Chrome.” “I have no issues on chrome.” “Weird,
I've been playing on chrome and it's fantastic.” This isn’t to say that the OP didn’t have valid
concerns. It’s basically a certainty that Stadia was inferior to dedicated gaming rigs worth $1000s
of dollars. This, however, wasn’t the target market for Stadia. The target market was casual
gamers who were looking for a cheap way to enjoy decent gaming, and that’s exactly what Stadia
offered and a lot of people loved it. That’s why Stadia was able to reach 750,000 monthly active
users by the end of 2020 itself. For any new game company, these would’ve been insane numbers, but
for Google, they were rather disappointing leading us into Google’s main dilemma with Stadia.
JUST NOT ENOUGH: If you look at
any of the public statements Google has made about Stadia, you’ll immediately see one common thread:
just not enough. It wasn’t that Stadia wasn’t profitable or that the tech didn’t work or that
their core users didn’t like it. Rather it was simply that everything that Stadia had achieved
was simply not enough. Honestly, this is extremely confusing from Google because historically,
they’ve had to wait several years if not over a decade before many of their products became
lucrative, and a lot of those products cost a lot more maintain like YouTube. I mean,
it’s no surprise that storing billions of hours of videos for free is extremely expensive. And
that’s why it took Google 10 to 15 years before YouTube became a profitable venture. And what
about the Pixel? Google has been trying to break into the smartphone market since the beginning of
smartphones, yet they still don’t even control 1% of the global smartphone market. Not to mention,
Pixels aren’t sold with very big margins, so Google may very well be losing money with the
Pixel, but they refuse to give in. It’s the same thing with Google Fiber and Google+ and Google
Fi and Google Meets and Google’s enterprise cloud business and several other Google services. While
these never quite lived up to their expectations, Google has given them plenty of time and immense
resources to succeed. And it was only when there was absolutely no way forward that they finally
threw in the towel. The same, however, cannot be said about Stadia were they almost immediately
threw in the towel when they saw underwhelming performance. And one of the main reasons for this
was that they came in with extremely unrealistic expectations. To be honest, I don’t even think
they were aiming to overtake other streaming services like GeForce NOW which has 20 million
registered users. Just take look at how Sundar described Stadia. “With Google, your games will
be immediately discoverable by 2 billion people on a Chrome browser, Chromebook, Chromecast, Pixel
device. And we have plans to support more browsers and platforms over time.” Hearing that, it seems
that Google was hoping to create something on the scale of the Play Store or Android straight off
the bat just because Stadia was accessible by so many people. You don’t have to be a genius to see
how that’s a rather faulty line of reasoning. Just because Google could put in front of billions of
people doesn’t mean that billions of people would be interested. In reality, the cloud gaming market
is still very much a new industry that was only worth $1.25 billion in total in 2021. So, Stadia’s
estimated revenue of $76 million accounted for over 5% of this within just 2 years of launch.
Even if Stadia didn’t grow their marketshare and simply grew with market, their 5% share may have
been worth $2 billion worth of revenue by 2030. If they were able to grow to 20 or 25%, it may have
been worth closer to $10 billion worth of revenue resulting in a business worth tens of billions.
For perspective, that by itself would be a Fortune 500 company. But, Google wasn’t willing to stick
it out which brings me into their next pitfall which is that they couldn’t handle being early.
BEING EARLY IS HARD: People will often tell you that you’ve
wanna be early to a market. That’s how you get the first mover advantage and dominate your industry,
but ironically, Google has never done that ever. All of their most successful
products were either launched in line with market trends or extremely late. In fact,
Google was years if not decades late to search, email, and browsers. As such,
every industry they disrupted already had a massive audience. Even in the industries
that they Google failed like social media and video conferencing, they’ve
really never had a user issue, they’ve only had retention issues. With Google+ for example,
Google boasted 540 million users. Now, 90% of sessions didn’t even last 5 seconds but again,
that’s a retention issue, not a user issue. In basically every industry that Google has entered,
getting users was never really a problem for them because of their ubiquitous nature. All
Google had to do was convince these people that their solution was superior. Sometimes,
they succeeded in this, sometimes they didn’t, and they approached Stadia with this exact same
strategy. They created a world class solution and put it in front of people, but there was one major
difference. The cloud gaming market was yet to truly develop, meaning that there was no existing
audience to convince. Rather, it was up to Google to appeal to new users and create that market. And
it seems that this was not a journey that Google was especially excited to venture down because the
reality is that being early is usually way harder than being late, so they decided to pull the plug
in an extremely expensive manner. They promised to refund all Stadia hardware purchases made
through the Google Store, and all game and add-on content purchased through the Stadia store. This
resulted in refunds of up to $900 per person. Instead of spending all that money on refunds,
Google could have just kept Stadia alive and seen how far it took them. After all, it’s not like
the operating expenses of Stadia were really a concern for Google. Also, it’s not like the
cloud gaming market isn’t suddenly gonna stop growing without Google. It’ll continue to grow
into a substantial market and it’ll probabaly just be controlled Microsoft, Sony, Nvidia, and maybe
Nintendo. In the grand scheme of things, I guess it doesn’t matter because Google is so big at this
point that even another $20 billion in revenue from Stadia doesn’t even make a difference,
but that doesn’t change that what happened to Stadia was still quite a shame. And that is the
story of the time that Google killed a promising product simply due to unrealistic expectations
and a lack of patience and commitment. Unlike Google, someone who adamant on not giving up
on the gaming market despite terrible economics is Microsoft who just dived in even deeper with
their $70 billion acquisition of Activision Blizzard. Check out this video to learn more.