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By Aidan Asbill, Securities Analyst 


Google is one of the biggest technology companies in the world but the company has surprisingly struggled when it comes to diversifying its revenue. In 2020, Google made 80% of its $190 Billion Revenue solely from advertising. Now the company is seeking to change that by expanding into the lucrative health care sector. With the outbreak of Covid-19, many services were forced to go online including basic health care services, such as medical checkups that would normally be performed in person. This growing demand for healthcare presented Google with an opportunity to expand into the health care sector and the company did just that with the announcement of their partnership with HCA health care ($HCA). HCA owns 186 hospitals and 2,000 ambulatory sites while boasting a strong $69 Billion market cap. With this partnership, Google is seeking to provide analytics-driven software that will track patient data and help nurses and doctors better serve their patients. Google can use this deal to expand into the healthcare industry and leverage their Google Cloud Healthcare API to gain access to healthcare professionals’ and patients’ data which can prove invaluable for the future of Google Health. 


The Rise of Google Health

Over the last 12 months, Google and their parent company Alphabet have rapidly expanded into the health care sector. Google continued to develop healthcare-related products and services this year, many related to the COVID-19 pandemic. In August last year, the company partnered with Harvard Global Health to develop the COVID-19 forecasts, which provided 13-day projections for hospitalizations and death rates across the United States. The forecast was made using Google Cloud which combined a novel time-series machine-learning approach and AI. In September, Google Health also committed $8.5 million to 31 organizations to help further AI and data about the Covid-19 outbreak. One of the biggest investments the company made was a $100 million investment into Amwell, which is a telehealth company. The investment was aimed at helping the company expand its offerings for providers, insurers, and patients. However, more importantly, Amwell will utilize Google’s Cloud API to showcase how effective it can be in the medical field. Google has also been busily expanded their machine learning with technology company Hologic ($HOLX) for use of cervical cancer diagnostic. The company also recently created an AI tool that can classify skin conditions. By uploading three pictures of the skin, the patient can get an evaluation of their condition based on analyzes from the AI tool that looks at over 250 variables in skin conditions. Google has also continued its massive partnership with Ascension, the second biggest healthcare system in the United States. Google began to roll out a new tool, called Care Studio, which allows clinicians to quickly find important data from their patients. The partnership had previously struck controversy when the company announced a massive collection of data from 2,600 hospitals and tens of millions of patients called Project Nightingale. The controversy happened when doctors and patients claimed they had not agreed to sign over their data. The two companies signed a HIPAA agreement and google executive Tariq Shaukat wrote that the project “cannot and will not combine with any Google consumer data.” This partnership is the biggest in the tech space, however, for a company with antitrust concerns, this may be difficult for Google to monetize without breaking privacy laws. Google Health has continued to innovate with its powerful AI-powered analytics. With that being said there are still concerns if the company will be able to properly monetize this technology.

Google’s Failure to Diversify Revenue

Despite Google’s great strides to diversify its revenue by getting into the healthcare sector, the company has failed to do so in the past. Google, unfortunately, hasn’t been able to successfully expand its revenue streams when compared to other big tech companies. Amazon ($AMZN) for example has successfully launched its AWS web services and Prime membership, which has contributed close to 20% of the company’s total revenue. Another competitor, Microsoft ($MSFT), has added companies like LinkedIn, Azure, and expanded its gaming portfolio, which has also more than 20% of its revenue. At the end of the day, Google has been unable to develop a new revenue stream, but they have a long history of trying to expand their revenue. Google has been a company at the forefront of innovation, but they have consistently been unable to get consumers interested in their products. One of these such products was google glasses, a futuristic smart wear product that would provide users with a display type interface, take photos, videos, and more. The product initially garnered a lot of attention but with a steep $1500 price tag and an unflattering design, Google discontinued sales of glasses in 2015 and would completely redesign the product. While newer iterations of Google glasses have shown some interesting use in surgeries and helping children with autism, the dreams of a wide use consumer product seem unlikely. By far Google’s biggest failed opportunity was their innovative service Google Ride Finder, which helped consumers find taxis, limos, and other transportation. While the service was still very simple, they were on to something great, but unfortunately shut down the service in 2009. Later that same year, Uber was founded and would go onto become a nearly $100 billion market cap company in 2021. While Google has not yet found much success diversifying its revenue in the past, the company may be able to change that with the great demand in the health care sector.

How that Can Change

Google’s parent company, Alphabet, has been trying to expand its revenue sources for many years and has recently honed in on the health care sector as a potential revenue growth source. Alphabet has slowly been building up its acquisitions in the healthcare industry by acquiring the health care companies Verily, Calico and DeepMind.Verily has recently partnered with Highmark Health in a deal where Highmark will utilize Verily’s digital care tools for use in its Living Health model for patients and doctors. Verily in large part has worked independently of Google when it comes to developing its digital health care tools some even thinking they are a direct rival to Google Health. However, in July 2020 Verily’s chief executive officer Andrew Conrad reportedly wanted to end the “rivalry” between the two companies and collaborate more closely. Verily has many interesting technologies including surgical robotics machines, spoons that help people with tremors, and even releasing sterile mosquitoes into the wild to reduce populations of ones that carry disease. If Google Health can combine their advance AI and analytic tools to help assist with Verily’s new technologies it may be a match made in heaven.

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Google Health will have a lot of competition when it comes to its personal health record services. In the United States, the electronic health records competition is very stiff with Epic and Cerner ($CERN) have an over 85% market share in 2019. With only, a 15% market share left Google will struggle to compete in the personal health record services and should instead focus its effort on developing new AI diagnostic tools. However, the United States health care spending has been consistently growing year after year, reaching $11,582 per person in 2019 for a total of $3.8 trillion. If Google can even get 1% of this revenue that would be $38 Billion a year, increasing Google revenue by a whopping 20%. 

Google Health’s Future

Google Health’s future centers around its core product, Care Studio, which seeks to allow easy access to patients’ files to medical professionals. Google and their partner Ascension have already been working closing to expand the Care Studio health care system across their hospitals. Even with concerns about Google compromising protected health data, the company should still be able to successfully launch the Care Studio across Ascensions health network. However, the company will struggle to expand its Care Studio outside of Ascension and there are also concerns about if Google can ethically monetize this data. Google Health also has a team working on their new Health Care AI that will focus on building software tools that will improve medical procedures and help doctors analyze patients’ conditions with algothorims based screenings for diabetes. Googles Health will also partner with Fitbit and Google Fit in order to manage regulatory, clinical, and equity issues within the company, as well as the Fitbit team.It will be interesting to see if Google and Alphabet can succeed with Google Health after multiple failures in the past to diversify their revenue. While Google was not able to find success in the past, timing is everything, and the need for healthcare is greater than ever. People are not only more health-conscious after the Covid-19 outbreak, but there are also still people who suffer long-term symptoms after getting Covid-19. With the average cost of healthcare increasing and more demand for healthcare-related services, it’s a great time for Google to carve out its own part of the market share. However, there will be questions concerning the safety of patient data and if Google can ethically monetize it.

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