The Hidden Costs of a Google Phone

 
 
By Don Reisinger  |  Posted 2009-11-30
 
 
 

10 Reasons Why a Google Phone Is a Bad Idea


Now that Android has taken its place as a viable alternative to the iPhone, rumors are swirling that Google is planning to release an Android-based smartphone. Already, some users are getting excited about the possibility of Google moving beyond the Web and software businesses to get into the mobile phone hardware market. But should they?

There's little debating that a Google Phone would significantly impact the mobile market. The device would be as hyped as the Apple iPhone. It could also bring several more users to the Android platform. But would it really be best for Google? And, in turn, would it be best for Android and its users? I just don't think so.

Here are 10 reasons why:

1. Google is a software provider

Perhaps the most obvious reason why Google shouldn't develop a Google Phone is that the company thrives on software development. Android is a great mobile operating system. Chrome is a fantastic browser. Even Google Docs adequately competes against Microsoft Office on several levels. Why should Google shift its focus for the sake of a short-lived success in the mobile-hardware space? It doesn't make sense.

2. What about the vendors?

Google needs to remember that it has partnered with several hardware vendors that rely upon the company's software to sell phones. If Google releases the Google Phone, it's not beyond the realm of possibility that some vendors would have a problem with that. The last thing they want is more competition-especially from the company they're acquiring software from.

3. What if the phone is a loser?

If Google releases the Google Phone, there's no doubt that it will be one of the most hyped phones of the year. But what if it fails? At that point, Android could be put on life support. Consumers who don't follow the tech business closely will think twice about buying a phone that has anything to do with Google. And in the process, both vendors and developers would lose. There's a lot of risk associated with the Google Phone.

4. Market dilution

A Google Phone would contribute to an even greater dilution of Android-based devices. When HTC was the only company releasing Android phones, some folks were hoping for more. But as time passes and more Android-based devices are hitting store shelves, when does enough become enough? Fewer, high-quality devices is far better than too many average Android smartphones. Google shouldn't contribute to market dilution.

The Hidden Costs of a Google Phone


5. The iPhone model is not best

Although Apple's approach with the iPhone has been successful, it's really not the best way to be doing business in the mobile market. Apple's success in the cell phone industry is the exception, not the norm. And to be forced to improve hardware while monitoring software just isn't ideal. It's costly. Google has made the right move by offering software to other vendors. Why change course now?

6. There are greater opportunities in operating systems

It's important for Google to remember that software offers the best business opportunities. It can continue to profit from the sale of each Android-based device, while improving its software to attract other vendors and consumers. There has always been big money in operating systems. That won't change any time soon.

7. Carrier confusion

Assuming Google releases a Google Phone, will it be available on multiple carriers or will it be exclusive to a single carrier? It's not an easy decision for Google to make. Apple has made the industry believe that being tied to a single carrier is the best idea. But as the Palm Pre and BlackBerry Storm have shown, it's not. And as a software provider, Google must maintain strong ties with multiple carriers. Entering into an exclusive deal (or eschewing a couple of carriers) just isn't an option. Why get muddied in carrier politics?

8. Does Google really need it?

I understand why Motorola wants to release an Android-based phone. But why would Google? The company is extremely successful. Its online business is booming; it's well on its way to releasing an operating system that could revolutionize the software market; and in the last few months, Android has started to take root in the mobile business. Things are going well for Google. Why chance it with a smartphone?

9. It's a slippery slope

Releasing a smartphone quickly turns into a slippery slope. Within 24 hours of the release, the company will receive reports that there are issues affecting its phones. From there, it will need to address them before they get out of hand. As time goes by, Google will need to continue dealing with those problems and keep track of what competing manufacturers are doing while it prepares for a follow-up device. When that phone is released, the clock starts all over again. Software is far more manageable, has a longer market cycle and can be controlled more effectively than hardware.

10. Hardware is an expensive game

Developing software is expensive. But after an operating system is developed, it requires iterative updates over several years to be improved. It's not so cost-intensive after the initial investment. But hardware is entirely different. If the Google Phone is successful, the search giant will undoubtedly enter into an "arms race" against the iPhone. And in the process, it will need to improve its software more rapidly, all while ensuring that the Google Phone itself stays a step ahead of the iPhone. That could significantly increase Google's cost basis, and, in turn, reduce its profit margins.

It's just not worth it.

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