Google is a basically a future company, which means they try to make future different than the past. Software is just a tool; a continuum to stone and iron tools etc.

In the next decade computing will extend in both directions, to physical and virtual realms. I.e. people will enter computer world and computers will enter our world. Google is trying to be a forerunner in this change. These are the next big form-factors.

Obviously their core competency is giving away the stuff for free and put ads on it.