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News Analysis: Forget about the Google Nexus One as a new Android smartphone, which BroadPoint AmTech analyst Ben Schachter summed up as evolutionary, rather than revolutionary.
The big news from Google’s Nexus One launch Jan. 5 was Google’s go-to-market strategy, which had analysts flapping their gums and flexing their typing fingers.
Google is selling the Nexus One, pictured here, through a new online Web store, which in typical simplistic Google fashion is located at www.google.com/phone.
Today, users can navigate to this site and choose to buy the phone for $529, popping in their own GSM network SIM card, or pay $179 for a Nexus One serviced by T-Mobile and its two-year contract.
Mario Queiroz, Google’s vice president of product management, touted the method as a new way for consumers to purchase a mobile phone. “The objective of Google’s new consumer channel is to provide an efficient way to link, to connect online users to selected Android devices.”
The point, Queiroz stressed, is simplicity, something that many will agree has been lacking in purchasing devices and wireless data plans to this point.
Ostensibly, Google is seeking to provide users with a one-stop shop for their smartphones, allowing users to log on to their Google account, pick a phone, pay via Google Checkout and wait for their phone to come in the mail. This isn’t much different from the way consumers log on to Amazon.com and buy books or other goods.
The move puzzled some analysts and pushed others to compare it to other efforts from Dell and, of course, Amazon.com. BroadPoint’s Schachter in a research note Jan. 7 said he sees parallels between Google’s go-to-market with the Nexus One and Amazon’s Kindle. However, he questioned why Google created an e-commerce site and branded the phone itself to sell it.
Gartner analyst Ken Dulaney may have the answer to Schachter’s question. Google’s online Web store is primarily about advertising, as Dulaney explained:
““It’s a bit like when Dell went into the online PC-selling business. We’ve now gotten to the point where I think people will buy phones online, potentially not sight unseen and I think Google is trying to copy that model. This will compete against retailers like Radio Shack, Best Buy and Wal-Mart who are selling phones in their stores. It also puts a little bit of heat on Amazon because Amazon has never really developed a phone business within their store.”And Google has never has been where Amazon is in terms of being an online retailer. Given that there has been about 1 billion phones sold in the world, this gives Google a reasonably good impetus to get into that marketplace and re-establish the store. If these people come to Google to look at the phones, that’s going to mean advertising revenue for Google, which is really what they’re about.”“
Forresters Golvin Shrugs Shoulders at Googles Web Store
Forrester Research analyst Charles Golvin didn’t see it that way and doesn’t see the big to-do others do over Google’s new Web store.
“What they announced from a retail perspective is not interesting. You can go to a lot of online retailers today, whether it’s the carrier themselves or Amazon or Best Buy Mobile, and choose between a phone at full rate and no commitment or a subsidized phone.
“It’s not a huge change there. The only thing they have that differentiates them is they have an exclusive on what’s going to be a pretty hot device. Isn’t this the same exact thing as what you get from the Apple store if you buy an iPhone directly from Apple?”
Today users in the United States, United Kingdom, Hong Kong and Singapore can buy the Nexus One from Google and get it serviced by T-Mobile. In the spring, Google is adding Verizon Wireless and Vodafone to its cast of supporting carriers.
In the future, one can easily envision Google offering several Android phones, with options to have them serviced by most or all of the carriers in the world who choose to participate.
Still, Golvin believes Google won’t put any Android device in its Web store, noting that it will be a flagship store for things that carry the Android banner the best.
“In the same way that you wonder about how applications rise to the top 20 in the featured list at the Apple App Store, how is it going to play out for Google’s partners on the OEM side for which devices make it into that lead promotional position because after all, as they pointed out themselves, they can buy a lot of traffic to that location?” Golvin said.
Again, this points to Dulaney’s comment that all of Google’s roads lead to advertising. It will be interesting to see how Google and its partners leverage Google’s Web store, but it may be awhile before we can see its impact.
In keeping with its practice of putting technology in front of the press, Google didn’t play up the money-making aspects of this store. Andy Rubin, vice president of engineering for Android, said that while Google may make some margin on unit sales of the Nexus One, profit is not the primary goal.
Analysts such as Sandeep Aggarwal from Collins Stewart believe the Nexus One and Web store are geared “to increase the attach rate of its products for the fast-growing mobile Internet markets in order to replicate its ‘Net ad dominance in mobile Internet as well.”