Do you think Google should buy the iRobot company? Why or why not?

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Do you think Google should buy the iRobot company? Why or why not?

Asked at Google over a year ago

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stashbag · Answer 1 · 2021-07-10T03:24:04+0000

Clarification

What is irobot - Devices which automatically clean the home. Smart / Wifi controlled.

Approach for this

Why may Google want to acquire iRobot
- Acquire new customers
- Access IP / Tech - No unique IP pirblau.
- Enter a new market
- Cross-sell / up-sell existing products
- Forestall competition

Look at the above, I dont think iRobot has any unique customers that Google already doesn’t have access to. Further their technology / IP isn’t super difficult to make. There are several companies making similar products. Entering a new market - home devices as well as cross selling / up selling Nest products could be one possible benefit. Also, expanding the portfolio of home products is something Google could offer to customers as Amazon is rapidly growing its in-home product portfolio. So it might be a competitive move.

Lets evaluate how such a deal may look like on a handful of dimensions

Market for these devices
- Competitive market. Several manufactures exist. No unique IP or large player. At the end of the day vacuum can be broken into luxury, mid-tier, basic. There are companies at each stage.
- Customers - iRobot doesn’t have unique customers that Google doesn’t already have or can’t be able to get. Most of their customers are affluent / tech-savvy folks, the same kind that would be google products’ adopters
- Entrants and customer, seller power - There is no dominant customer segment or manufacturer segment in this space
Company - iRobot strengths and weaknesses
- Brand name - Does have a brand but not that famous or isn’t a household brand globally.
- customer loyalty - Probably has loyal customers who like iRobot products but size of this segment is small
- distribution channels - Currently has distribution channels which could ben beneficial to Google
Synergies between the two companies
- There are no major synergies apart from getting access to iRobot’s distribution network to sell other Google home hardware. Google doesn’t have this and that could be one benefit. Beyond that the tech in iRobot isn't super valuable nor does it give access to new markets or customers.
Financial implications
- Lets look at this deal from the financial perspective. Assuming iRobot sells for a 2-3x revenue multiple with some premium for taking them private. Without getting into estimating the actual purchase price, my guess is it would be in the low single digit billions. At this price, seeing immediate ROI on that amount is challenging from purely selling devices. Perhaps data collected from iRobot devices could help with other services in the future but the other google home products could also provide that data pipe.
Recommendation
- Do Not Acquire iRobot: There is no tech that is unique, no upside of tapping into a new customer segment / gain new users and it is a nascent market with limited growth for now. Further what the company builds is being offered by several other companies so there isn’t any major difference between iRobot and the generic makers of similar device.
- If Google wants to play in this space they could do so by providing an interface to control such devices and becoming the hub for managing home automation through Google home / Assistant. That would give Google access to data that it needs and also ensure that they are compatible with several offerings thereby gaining more customers.

productmanager123 · Answer 2 · 2021-06-01T22:01:20+0000

Clarify: iRobot -- robot vacuums, floor cleaners. And it does for homes only, right? Assuming thats all iRobot does for now.

What is the motive here? Is Google planning to enter this market?

Lets first evaluate if this is a good market to target.

Market -- home cleaning, maintenance.

Market is HUGE. It maybe growing fast. It automates a chore. Very valuable need. You can sell one to every household.

Market growth potential is there → assuming low penentation of robot vacuum cleaners and people are moving to automation. Basically replace existing manual vacuum cleaners.

Competition -- there is competition, but its not like its zero sum game for robot vaccum cleaners. Market is growing.

How big can this be? 100M households in US. 5 year lifetime of vacuum cleaners. $300 pop. $50 yearly maintenance. yearly spend $550/5 = $110. TAM: $11B per year. Not a small market. If you can do 2 devices - then its $22B. But its not big in terms of Google’s oother markets - search, GCP, drievrless cars etc. $22B is really chump change for Google.

Does this market provide foothold for google to bigger market?

Bigger market is smar homes and connected homes. Google already does Nest, Google WiFi, Voice assistants. Not sure getting into appliances is key to win here. Instead of getting into smart appliances, partner with OEMs (smart lights, microwave, fridge, washing machine, ADT) to enbale google smart home features. Get into actaul appliances only if its a big market. For e.g, Nest is not just a camera, it actaully addresses a crtiicl need - security. With thermostat - its not teh heating system. Its your assistant to control heating. Similary become the assistant for other appliance to make them smart.

So No. They should NOT even enter the market.

If for whatever reason, the decision is made to ENTER the market - then its build vs buy. Again depends on why?

Building a robust product takes time - product, distribution, service, supplies ecosystem is effort. Is there technology which Google can use for otehr purposes? dont think so.

If the price is right, then google should buy.

hjc · Answer 3 · 2021-02-14T17:37:54+0000

A strategy for answering this Google product strategy question.

Normally there are a few purposes for an acquisition.

For access to a market
For the product
For the technology and talents
For taking out a threat

Let's take a closer look at iRobot and Google, then we can move on to discuss the pros and cons of such an acquisition. Then in the end, we can come up with a recommendation.

iRobot

Product:
- Offers AI-powered home cleaning robots for home owners
- A few product series, focusing on home usages
Competition
- Multiple competitors
Market Share
- Early stage in the market penetration, overall <10% in the US
Biz Model
- Consumer facing
- 1-time purchase
- Priced at O(100) to O(1000) range
User
- Tech-savvy user (early adopters)

Google

Strength:
- Ads monetization, huge income
- AI technology
- Nest and Home products focusing on home use cases
- Multiple other popular products such as Youtube, Map, Chrome, etc.
Weakness:
- 90% income coming from Ads and struggling to diversify its income
- Manufacturing, customer service, supply chain
Threat:
- Home products face competition from Alexa

This acquisition

Pros
- Opportunity to deep integrate with Home products and differentiate the home experience from Alexa
- Opportunity to distrupt this market by offering a subscription based biz model and
  - 10X the market penetration.
  - Access the market for commercial buildings and businesses.
  - Make Google's subscription biz model more appealing to consumers, diversify income
- Opportunity to provide a landing spot for Google's AI expertise with iRobot products and devise more innovative use cases
- Opportunity to use iRobot product to gain access to new data, such as commercial building layout, home size, etc, to jump start other use cases.
- Opportunity to further grow ads business with the newly gained user knowledge.
Cons
- Increase in the # of products to maintain for Google
- Burden on manufacturing, supply chain, customer service, support
- Competitor can easily replicate, by purchasing a similar company.

Recommendation

Overall, I think this acquisition makes logic sense, as it opens many doors for Google, into new biz-models, new markets and new experience. There is concern that competitor may copy, but Google's breadth of products and business gives it more benefit from such an move.

Bhuvan Puri · Answer 4 · 2023-01-04T17:34:17+0000

What is Google?

Google has primarily been a search engine that helps organize worlds information and present to users.

Google is dominant in search and generates most of it's revenue through Ads.

Google's business units:

Search
YouTube
Cloud
Wearables
Maps and Waze
Enterprise - Gmail, drive, photos, etc.

iRobot - it' a robotic company that build household products such as vacuum cleaner, air purifier, mops, etc. Roomba is their most famous product.

iRobot's mission - fostering invention, discovery and technological exploration in the pursuit of practical and valuable robot products for the home.

What is the objective of buying iRobot?

Increase Market Share and market access.
Increase the user's depth of engagement with google by acquiring the users.
Acquire user data and Learn about the user behavior in this market
Enter robotic home cleaning business.
Acquire top talent in robotics.
Obtain license, patents and products.
Diversify company's holdings.
Target company is a threat.
Pre-empt the competition from acquiring the company.

Gain from synergies, cost savings, cultural integration, expansion of distribution channels and customer base. Cross-sell products. Bundle iRobot with Google's synergetic products such as Nest etc.

Gain Tax advantage
Increase shareholder value

Structure:

I want to Analyze: Company, Customer, Competition, Collaborators, Context from both iRobot's and Google's perspectives.

Category	iRobot	Google Nest and home devices
Customer: Who are the customers? What benefit customers get from the product.	Customers: Benefits: Households with families Households with pets Robots that keep your house clean. You can set a timer when to trigger the cleaning. There is an app that can help you configure and personalize your cleaning. There is an integration with Voice assistants i.e. Alexa etc. These products save customer time so that they don't have to manually clean the surfaces etc. Convenience - With App and integration with voice assistant, these will help you	Customers: Tech savvy customer households. Households with other google devices such as phone etc. Benefit: Customers can listen to media conveniently Home security and peace of mind Plan their day.
Company:	What kind of shape iRobot is in? management? Product? Do they manufacture the robots in-house? If not, where are the products being manufactured? How much supplier power is there? What is the profitability and margins? What has been the trend for the past 3 years? Why are they selling the company? How is their Brand health? Does it seem positive? How much is it going to cost to buy the company? Are the customers and market share secure?	Can we build a solution in house? How long will it take? Is speed to market important? Does iRobot mission aligns with ours? What are googles long term goals? Are we overpaying for the company? Do we have enough cash? Any legal reason why we shouldn't acquire the company? How will the competition respond? In this case Amazon Alexa. Will the cultures mesh together? What are the customer benefit from this vertical integration?
Market	Who are the competitors? How big is the market? And what's the growth rate? Who has the lion share? How will the competitors respond to the acquisition?	Who are the competitors? Alexa What are we gaining from the acquisition? Manufacturing? Will the acquisition give us a uniqueness over the competitors? How would the competition respond to the acquisition?
Collaborators:	How are their relationship with the supplier of the raw material? Who are the software partners? Will we lose the partner integrations? How is the relationship with the users? Are there any service providers?	Will we get the suppliers with the deal? Will we retain the software integration partners? Will we retain the users and have an opportunity to upsell?
Context:	Are there any changes to social behavior and trend of the customer? i.e. are there any upcoming start ups with better solutions.	Are there any legal issues with the company? Are there any technological risks? i.e. outdated technology

Based on the Analysis do a pro and con of the acquisition:

Pros of Acquiring

Cons of Acquiring

1. Will add more products to the google home product suite. iRobot products are the products that customers know and love.
2. Will help google increase the user engagement with google products, and we can get even more data on user behavior to develop next set of smart home products.
3. Will give us a competitive advantage over Alexa, which is also builds popular smart home devices.
4. The smart home device market is growing and it is a faster way to acquire the market share than building it in house.
5. Gain the supply chain knowledge of manufacturing robots

1. From the tech perspective, google also has a superior tech in computer vision and machine learning which is already being used in their driverless effort, so there won't be anything new to gain.
2. Cultures may not mesh together since google is a big corporate company vs. Small iRobot tech company.
3. Tech might now integrate well in the short term and will take a long time before we can cross sell and bring iRobot products into Google ecosystem.

Recommendation:

Google should acquire iRobot because:

Will give google a competitive edge over Alexa
Help google to acquire market share fast.
Help google acquire the supply chain knowledge that it can use to manufacture more home smart products

SPD_2017 · Answer 5 · 2022-07-05T22:23:30+0000

Clarifying questions:

Do we want to focus on any specific part of the buy out such as financial, product or market share? Not really. let's focus on the overall business strategy.

I am going to look into iRobot as company and brainstorm a few choices that Google can make to recommend whether or not Google should buy this company.

Strength and weakness:

iRobot offers wifi controlled, smart robot that sweeps the floor and mops. The product comes with a mobile app that users can use to control the device using wifi.

iRobot is popular product as a smart home device and was early on to enter this market as a robotic vacuum cleaner so they do have a fare chunk of market share. They continue to improve their product and build new products. The customer retention is high. Once a user gets used to the robotic vacuum cleaner they rarely go back to a non-iRobot version.

iRobot offers multiple series of products which also requires physical manufacturing and support which can be a overhead for Google. However, iRobot does have a good track record and their return/exchange rates are quite low compared to their competitors in the industry.

This is a new industry for Google to enter into and the market share the iRobot already captures. So Google will have advantage to enter into the smart home cleaning device market if they go with iRobot.

Strategic choices:

Google already sells Google home speaker, Nest security cams, Nest Guard and NEST doorbell as smart home devicecs, adding iRobot to the portfolio and generate a constant stream of revenue is a win-win situation.

Google users believe in the privacy and security aspect of the smart home devices that Google offers today. This will help improve iRobot sales when backed up by Google's brandname which should result into increased revenue as well as customer satisfaction.

iRobot already uses Google APIs to offer wifi connectivity via Google Home, Google Assistance. These features can be enhanced further to offer scheduling of events based on the state of home that is tracked based on the acitivity in the area, time of the day and other factors.

Final Recommendation:

I strongly recommend Google to go ahead and buy iRobot to enter this new market of smart home cleaning devices.

Google can adapt iRobot's existing product portfolio as is to recognize the revenue as well as look towards enhancing the products/builing new products that offer technology as service in the form of connected devices.

Nicole2021 · Answer 6 · 2021-02-27T21:36:46+0000

Clarify

My understanding is that iRobot is a manufactuer of smart vacuums for home use. These vacuums can autonomously navigate a space and users can adjust settings on an accompanying app. Is that correct or do they have additional product lines that I should be aware of? [assume this is correct]
Do we have information on our goals for a potential purchase of iRobot? [up to me] Some goals we might consider could be:
- market share in the smart home category
- aquisition of new users into the google ecosytem
- lockout of Amazon or other competitor
- strategic aquistion of key technology

Analysis of potential aquisition goals:

Drive market share in smart home
1. Google has a strong presense in smart home products with Nest, including thermostats, google home, security cameras, doorbells, etc. Market trends point to an increase in connected devices in the future, and its fair to assume that the majority of homeowners, and perhaps even renters, own a vacuum. The livetime of a vaccumm is probably 15 years, and most people will likely be willing to purchse a smart vaccum for their next vacuum replacement
Aquistion of new users
1. The overlap between google users and iRobot users is likely pretty high, as iRobot users are likely fairly tech savvy. Aquision of new users into the G suite is therefore going to be unlikely simply via purchase of iRobot.
Lockout of Amazon or other competitors
1. One reason that companies sometimes purchase others is purely to lockout competitor. Amazon with it Ring and Alexa line of products has a strong market share in the smart home ecosystem. I don't think they a smart vacuum in their portfolio, but they could be considering aquistion of iRobot and that is important for us to consider. We didn't talk earlier about iRobot competitors, but there are other companies in the space like Shark.
Strategic aquision for underlying technology
1. iRobot likely has key capabilities in robotics that may be an asset to google. For example, their products move autonomously throughout spaces. AI is a key priority for google, and improvements in robotics suggest that the future with home robotic assistants that do much more than vaccuuming is a likely reality for the near future. While google has strong AI capabilities, I'm not aware of google's strength in robotics and the underslying people and capabilities may be worth the purchase vs. building out such capabilities in house.

Recommendation:

I recommend the iRobot aquisition due to a desire to increase market share in the smart home segment, the trends in increase adoption of connected devices, and the desire to aquire the underlying technology capabilities of robotics. Additional value may be created if we are able to lockout Amazon in having a smart vacuum product.